Beanscene battles to avoid being a has-bean

The BBC reports that one of Scotland’s fastest growing coffee houses has gone into administration as bottom-line losses became unsustainable. Beanscene’s 14 shops are spread across Scotland from Ayr to the border town of Hawick to the old town in Leith.

The business has built a strong brand identity - I came across during my annual trip to the Edinburgh festival specialising in food, drink and live music and opening late in off-high street locations (where presumably the rents are lower). Free wireless internet access is provided in all stores to encourage bedouin entrepreneurs! And the chain has attempted to exploit economies of scope by providing a supper / jazz club atmosphere in the evenings - making use of existing facilities. Customers are even allowed to bring in their own off-licence alcohol!

So a strong brand and ambitious plans for expansion - so why has the business fallen into difficulties - this press release by Beanscene founder Gordon Richardson is revealing! (Note - he left the business four months ago!)

”“At the time of my departure in March, I had just overseen the completion of a £1.5m investment which set the company up fantastically to strengthen its Balance Sheet, open six new stores and to go forward and unlock the brand’s full potential. It is not yet clear what happened to that £1.5 m investment and I shall be taking up concerns I have about that with the Administrators at the earliest opportunity.” (The rest of the press release is available here)

The retail market for coffee in Edinburgh is a classic example of monopolistic competition - with literally dozens of coffee stores fighting it out for market share - each trying to persuade us through a mixture of price and non-price competition that their products deserve out custom.

The reality is probably that here is a business that has allowed its overhead costs to rise too quickly given the modest annual turnover of the business. I will be checking into Beanscene next week to enjoy the atmosphere - and to hope that a new buyer can be found.