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19/02/02 . Andrew Clark . Guardian . UK
McDonald's sells after £20m latte loss
McDonald's has called time on its disastrous foray into coffee bars by selling most of the Aroma chain to Caffe Nero after losing more than £20m on the venture in three years.
The American fast-food empire is selling 26 of its 35 Aroma outlets for less than £5.5m, having paid £10.5m for the chain two years ago and spent £17m attempting to revive its fortunes.
Caffe Nero said McDonalds had failed to keep a lid on costs at the chain, employing too many staff and paying extravagant prices for supplies.
Caffe Nero's chairman, Gerry Ford, said: "They just don't know how to buy very well. We run a tighter ship and have better margins.
"They had too many people and their materials could have been purchased for substantially less.
"But I'm not sure McDonald's put a lot of focus on this brand - it was a side thing for them." At the time of its purchase of Aroma, McDonald's said it hoped to turn the chain into a national, possibly international, phenomenon.
The outlets became occasional targets for anti-capitalist demonstrators targeting the fast food parent company.
McDonald's put Aroma up for sale in August last year but failed to find anyone willing to buy all 35 sites.
The other nine will be sold off individually.
A McDonald's spokeswoman yesterday said Aroma no longer fitted the group's "meal-occasion strategy". The group bought a stake last year in Pret A Manger, which it believes has more potential.
Caffe Nero intends to drop the brand, integrating Aroma outlets into its own 81-strong chain. The group announced a 12.5% fall in its half-year loss to £760,000 after taking a big hit on depreciation costs linked with its rapid expansion. Excluding depreciation, its earnings were £324,000. The shares rose 1.5p to 26.5p.
Many analysts believe the number of UK coffee chains is
unsustainable. Greg Feehely, of Old Mutual Securities, said:
"You need a magnifying glass to look at the profits of coffee
shops. They're trading on each others' doorsteps."