NZAX & MEDIA RELEASE NOVEMBER 2017 COOKS GLOBAL FOODS SECOND QUARTER 2018 OPERATING METRICS COOKS STORE REFURBISHMENT PROGRAMME DELIVERING RESULTS “These quarterly results show our branding efforts are gaining traction,” says Cooks Executive Chairman Keith Jackson. “The new and refurbished stores emphasise Esquires Organic and Fairtrade credentials, within a quirky and up-to-date brand livery. Coupled with Cooks global supply and back office systems, the Esquires brand adds up to a proposition that is resonating for customers and driving improvements in transaction volumes and values across the network. “Store network growth has been slower than in previous A GROWING quarters. In the year to September we opened 14 new stores. CONTRIBUTION KEITH JACKSON However, these gains were offset by the closure of 11 stores, OF NEW AND Executive Chairman including five stores in China and four stores in the Middle East. REFURBISHED ESQUIRES COFFEE STORES IS DRIVING MIDDLE EAST the Esquires Coffee brand in China, Hong A STRONG UPLIFT Kong, Macau and Taiwan. The Chinese- IN PERFORMANCE “The Middle East business is undergoing based investment entity will be the AT COOKS GLOBAL a reconfiguration to better position the majority shareholder in the new venture, FOODS COFFEE stores for evening sales, when cafes in the which is targeted for settlement at the end NETWORK. region typically transact as much as 60% of this financial year. of their business. During the evenings, food and particularly sweet food becomes UK, IRELAND increasingly important to maintaining sales Constant currency momentum. “The UK and Ireland, which together network store sales1 represent 67.8% of total network sales, - a leading indicator “We are starting to see the benefits. Net continue to lead the network, posting of the revenue Cooks store numbers in the region were flat sales increases for the three months expects to generate with the closure of four under-performing to September 2017 of 26% and 17% from design fees for new stores offset by the opening of four new respectively compared to the same three- and refurbished stores stores, all of which are performing well. As month period a year ago. and recurring revenues, a result, store sales for the three-month such as royalties, coffee period were 12% ahead of the same period “The UK has benefitted from six additional product and other retail a year ago. Transaction volumes have also stores and the ongoing refurbishment sales – were $10.7 million shown strong improvements. programme. Underscoring the strength in the three months to of the Esquires brand and service offer, September. The result “We expect these efforts to gain financial performance in the Irish business represents an increase momentum as the Middle East transitions improved despite static store numbers. of 13.2% on the same to a new ownership structure. As period a year ago and an announced in September, Cooks and its “The extent of the improvement in 8.1% increase on the $9.9 Saudi Arabian partner Anasia Foods are Ireland and the UK was masked by the million achieved in the working towards the establishment of numbers of stores awaiting rebranding three months to June. a 50:50 joint venture to be the master and refurbishment, which represent 36% franchisee for the Middle East, North and 40% respectively of the total in each Cooks has achieved Africa and West Asia. We are targeting country. the growth despite a the settlement of the JV by the end of this modest uplift in store financial year. “Stores that have been rebranded and numbers to 92 from refurbished have continued to deliver 89 a year earlier and CHINA improvement in sales long after their down on the 93 stores revitalisation. Indeed, sales of the stores operating at the end of “In China store closures were higher in the UK that underwent a rebrand in the June quarter. In the than normal due to a sharp escalation 2017 are up 35.33% for the six months to three months to the end of rents and employment costs in some September when compared to the same of September, Cooks areas. At the same time the transition period a year ago. opened three new stores of the business to a new joint venture in the UK, but these arrangement has led to a refocusing “Transaction volumes are up across the were offset by one on those stores best suited to the global network reflecting the increase in closure in that country new venture’s intention to pursue the stores that benefit from the new brand as well as the closure of development of cafes featuring an livery and the improved food offering. This a store each in Canada, expanded food service offer.” is also reflected in the transaction values the Middle East and across the network, which are up 4.4% on China. The new venture is expected to see Cooks the same three-month period last year to and a Chinese-based investment entity $9.23. together owning the master franchise for 1 Prior year figures are converted at the same exchange rate as current year to eliminate any exchange fluctuation effect. For the definition of all terms please see the last page of this release. SAME STORE SALES CRUX AND GROUNDED GAIN MOMENTUM “The network has delivered a strong same-store sales result, Cooks supply businesses – Crux Products and Scarborough with sales for the three months up 3.3% on the same period Fair are building momentum. Crux, which is facilitating trade last year at $8.6 million. A strong performance in the UK and between New Zealand and China, in the second quarter alone Ireland was offset by weakness in the Middle East. shipped 9 containers of products, including water, squash, beer and wine. “Cooks is performing well,” Mr Jackson said. “We continue to believe that we will reach 140 stores by the end of the financial Meanwhile, Scarborough Fair’s new coffee brand ‘Grounded’ year, although as we indicated at the end of the first quarter which was launched to replace Scarborough Fair’s coffee and during our annual meeting in August, the achievement products, is striking a chord with consumers. The brand, of this goal is dependent on other development initiatives. which is certified 100% Fairtrade and Organic, is climate Meanwhile, we remain on track to achieve our goal of neutral and is now selling more than twice the amount the transitioning to breakeven by the end of the current financial old Scarborough fair products sold in Countdown. The year.” products are also listed in selected New World and Pak ‘n Save supermarkets. DESIGN DRIVING IMPROVING STORE PERFORMANCE. Good design is helping to drive a significant uplift in sales at legacy Esquires Coffee stores and ensure new stores in the network offer customers an experience that is at the forefront of café culture. The Esquires stores in Doncaster in South Yorkshire and Ambleside in the picturesque Lakes District in North West England demonstrate the potential. The stores, which were respectively refurbished in the new livery in November 2016 and January 2017, are now among the top performers in the global Esquires network. Quarterly sales at the Ambleside store are now 71% ahead of where they were a year ago, while transaction volumes and average transaction values are up by around 36% and 26% respectively. Meanwhile the Doncaster store has seen sales increase by 39% while transaction volumes and average transaction values have risen by around 6% and 33% respectively. The cafes’ enhanced food offer has been a major contributor to the growth. Indeed Ambleside’ has grown food sales by 148% and Doncaster has lifted food sales by 55%. This trend is not an isolated case. Indeed, on a sales-per-square meter basis, rebranded stores in the UK are some 30% ahead of the stores awaiting a rebrand. “Cook’s branding and design expertise are core to our proposition. This coupled with our ability to select great locations and committed franchisees, our ability to identify and effectively implement new trends in café service and culture, our back office systems and our understanding of retail technologies add up to a strong offer for franchisees and importantly Cooks shareholders,” says Cooks Executive Chairman Keith Jackson. AMBLESIDE DONCASTER UK UK BEFORE AFTER BEFORE AFTER The refurbishment programme across the UK is informed by Cooks’ determination to deliver a ‘third wave’ artisanal and local coffee experience, replacing the older Esquires format that drew heavily on the ‘second wave’ approach of all stores looking the same. In Ambleside, the store draws its inspiration from the heritage of tramping – or rambling as it is called in the UK – with the walls adorned with maps and tramping equipment. However, all stores remain true to the Esquires Organic & Fairtrade brand livery, deploying a fashionable mid-century colour palate, quirky artisanal typefaces and frequent references to sustainability, including the use of wooden signs and textured crockery. In line with the evolution of third-wave coffee, the stores offer a significantly expanded food offer with an emphasis on fresh, less processed and sustainably-sourced natural ingredients that reflect a growing focus on health and well-being. This change alone is responsible for much of the uplift in financial performance, with food sales rising 147.8% in Ambleside and 54.6% in Doncaster compared to the same period a year ago. Of the UK’s 31 stores, around 12 still sport the old Esquires livery. The company is working closely with franchisees to complete the programme of rebranding that delivers attractive returns for franchisees as well as Cooks. ESQUIRES COFFEE OPERATING