It was a month in which Marriott and Starwood announced a deal to create the world’s largest hotels group, France’s Groupe Le Duff outlined plans to expand in Africa and Chipotle was rocked by an e. coli outbreak.
Marriott makes move to create world’s largest hotel operator
In the middle of the month came news of a significant transaction in the hotel sector. Marriott International struck a deal to buy Starwood Hotels & Resorts, which if completed, will create the largest company in the industry.
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The combined business will have more than 5,500 hotels in over 100 markets. Marriott said it expects to “accelerate the growth” of Starwood’s brands, including Le Méridien and Four Points by Sheraton. Notably, however, Marriott forecast at least $200m in annual cost savings in the second full year after the deal is finalised.
It is unlikely food was one of the more important factors in the deal but suppliers into both businesses could see some sort of impact, either through the possibility of serving a larger estate or facing a customer of greater clout.
The sale of Yo Sushi another notable deal last month
UK-based Yo Sushi was the subject of a secondary buy-out, with Mayfair Equity Partners buying a controlling stake in the business from Quilvest Private Equity.
The Japanese fast-casual chain has been controlled by Quilvest since 2008, since when the operator’s net revenues have risen at a compound annual growth rate of 14%.
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By GlobalDataThe chain’s management will retain a minority shareholding and, following the transaction, the company will be led by executive chairman Robin Rowland. He said: “In Mayfair we’ve found the right partner to support Yo Sushi through its next stage of development. This presents us with significant further growth both in the UK and internationally.”
Yo Sushi has over 90 restaurants, most of which are in the UK, although it has moved into markets including Norway, Denmark, Saudi Arabia and the US.
Technomic’s David Henkes argues the foodservice sector has its attractions for buyers. “There’s a lot of acquisitions occurring in restaurants and foodservice, as especially private-equity money is looking for safe places to invest and restaurants right now are seen as a pretty good bet.
US chain Pizzeria Vetri gets surprise new owner
The takeover of a small, Philadelphia-based pizza chain perhaps would not normally make the headlines – but the identity of the buyer raised eyebrows.
US clothing retailer Urban Outfitters has decided to venture outside its market with a surprise investment in foodservice.
Urban Outfitters has seen a slowdown in traffic at its outlets and has turned to a sector where trends are more positive. “Spending on casual dining is expanding rapidly and we believe there is tremendous opportunity to expand the Pizzeria Vetri concept,” Urban Outfitters CEO Richard Hayne insisted.
Henkes says the fast-casual pizza segment in the US is growing and has attracted other notable investors, including a major US basketball star.
“LeBron James has ended his relationship with McDonald’s and took an ownership stake in Blaze Pizza. He’s given up guaranteed money from McDonald’s and a huge contract to invest in what’s right now a relatively small chain. He believes the upside is great enough and expects that investment and that chain to grow. I’m sure Urban Outfitters as well is trying to get into these fast-growing areas,” Henkes said.
However, he adds: “The challenge is, while it’s still a retail business, the restaurant business is a lot different than running a retail store. We saw that a lot ten, 15 years ago when supermarkets first get into fresh, prepared foods. There was a lot of waste and the profitability was horrible. Retailers trying to expand into other retail markets doesn’t always end well.”
Groupe Le Duff targets Africa
An interesting emerging-market move by an international foodservice business last month came from France’s Groupe Le Duff.
The company said it plans to open 30 of its Brioche Dorée restaurants in Africa, including in seven new markets – Cameroon, Congo, Cote d’Ivoire, Gabon, Ghana, Nigeria and the Democratic Republic of Congo.
Le Duff is working with African consumer goods distributor CFAO to open the outlets over a ten-year period. The Brioche Dorée outlets will open in fashion and toy stores, as well as malls and in Carrefour outlets.
Chipotle rocked by e. coli outbreak
The US fast-casual chain, which has enjoyed rapid expansion domestically and has started to open outlets internationally, has already been seeing its sales growth ease – and the business has been further shaken by an e.coli outbreak.
An update from the US Centers of Disease Control and Prevention on 20 November said 45 people had fallen sick after eating at Chipotle Mexican Grill restaurants in six different states. Sixteen had been hospitalised. The update sent Chipotle’s shares falling to an 18-month low.
Chipotle has been seen as one of the operators at the forefront of meeting demand in the US for more ethically-produced food. However, the outbreak is very likely to hit consumer confidence in the business, which comes at a time of slowing sales growth and rising competition.
