CR and McLeish to take a bite out of England

24th March 2008

By William Lyons
www.scotsman.com

McLEISH Brothers, the fast-growing chain of New York-style delicatessens, is planning expansion into England in a bid to grow 10 times its size within five years.

Stanley Morrice, who took over the Dundee-based chain in 2006, has given the go-ahead for an enlargement understood to be worth around £11m that will see it open more than 100 stores in the UK by 2014.

The move comes on the back of an aggressive expansion drive in Scotland, where it plans to open 25 stores by the end of this year.

Morrice, who came up with the idea for the chain after visiting his cousin in New York, said the first phase would see the firm open a central kitchen in Birmingham where it can service the catchment areas of London and Manchester.

Morrice said: "It's an aggressive expansion. The response from the public has beaten all our expectations.

"We have ambitious plans to grow to at least 25 stores by the end of this year and have legally tied up new sites in the centre of Edinburgh, Aberdeen and Glasgow.

"By the end of 2008 we will be ready to move into England and we are already looking at creating a central hub in Birmingham."

Later this year Morrice will open a new headquarters in Dundee that will house around 30 office staff and an investment of up to £4m will provide state-of-the-art kitchens for 50 chefs and food preparation employees. The chefs produce their own meals range including Chinese, Indian, Italian, other European, traditional British and Scottish cuisine that is sold throughout the chain.

Morrice previously ran Aberness, which operated more than 120 convenience stores throughout Scotland, but became frustrated at being unable to compete with larger chains on ready-to-eat or take-home meals.

In 2006 he bought out McLeish, which then had just four stores in Dundee, Broughty Ferry and Glenrothes, and teaming up with John von Sprekelsen, former non-executive chairman of confectionery giant Thorntons, raised £5.5m of private equity to grow the chain.

As well as serving fresh food Morrice is also keen to grow its whisky portfolio and is planning to introduce his own label into the market very soon.

"We have been taken totally by surprise with the sales of our malt whisky," he said. "Later this year we will be bottling our own whisky which we plan to sell throughout the chain."

The firm has also signed a franchise deal with Coffee Republic that will see the coffee shops have an outlet in all its stores.

The news follows announcements of expansion plans from coffee shop chains including Costa and Scottish brand Beanscene. The latter wants to launch a further 25 outlets in Scotland over the next 18 months.

The coffee shop market is forecast to reach £691m by 2009. This has precipitated an influx of imitators from the high street. McDonald's has also been getting in on the act.

But branded food-focused players such as Pret A Manger and EAT have grown rapidly in recent years and are looming in the background waiting to snatch market share.

Allegra Strategies says these "food-focused" outlets are growing at 6.4% per year and they can certainly compete on price. A quick comparison shows that whereas a cup of coffee costs on average £2.20 at Caffè Nero and £2.19 at both Costa and Starbucks, it comes in at only £1.70 at EAT and £1.79 at Pret.