Marketing

Aramark yet to square cost-cutting agenda with Avoca’s credentials


Aramark and Avoca were always something of an odd match. The US property, retail and services group and the darling of Ireland’s foodie scene. At its core, Aramark was a mass caterer and a facilities manager; Avoca was a niche food and retail business. Aramark ran direct-provision centres, among other things; Avoca won awards for its sourdough bread.

So when the US company acquired Avoca from the Pratt family for a reported €64 million in 2015, many wondered if the Avoca brand would suffer, not least because Aramark had a reputation for cost cutting. Both sides promised it wouldn’t.

Six years on and that pledge looks increasingly shaky. Aramark has presided over a mass exit of Avoca staff while people close to the business say standards have slipped under the new owners.

Most of Avoca’s original management team has left, including the company’s two executive chefs Leylie Hayes (who penned the popular Avoca cookbooks) and Mark McGillicuddy; its executive manager Teresa Byrne; the head of food buying Elaine O’Conner; the head of retail buying Mandy Haslett; and Avoca’s innovation chef Andrea Carydias.

About 51 managers, assistant managers and other senior staff across the group’s 14 stores have also been let go. Most received the minimum statutory redundancy payout of two weeks’ salary per year of service, some with more than 20 years of service. Many of those taken on since are said to be young. Many are understood to be on minimum-wage contracts.

Prior to Covid, Avoca had a workforce of just over 1,000 across its network of branches, the head office in Kilmacanogue, Co Wicklow, and the group’s central production unit in Bray, Co Wicklow.

Covid impact

When contacted, the company said the current headcount was just under 1,000. “Avoca, like many businesses in the retail sector, was significantly impacted as a result of the Covid-19 pandemic,” it said.

“In order to safeguard the future of the Avoca business and create efficiencies across many departments, a process of restructuring affected less than 6 per cent of the workforce across head office and store management level,” it said.

The company also rejected the claim than most of the new hires were young and on minimum wage. “To claim that the majority of staff taken on are young and on minimum wage is categorically untrue,” it said.

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“Avoca has a robust always-on recruitment process and endeavours to hire a creative, diverse and skilled workforce across all areas of the business.”

All bar two of Avoca’s 14 outlets have now reopened – stores in Avoca village, Co Wicklow, and Moll’s Gap, Co Kerry, which rely on a tourist footfall, remain shuttered.

Several staff members told The Irish Times, however, that they had little contact from management while furloughed and were effectively left in the dark about their employment status. They also claim they were offered less favourable jobs elsewhere within the Aramark group under the company’s restructuring plan, which prompted them to leave.

“At Avoca, we have always prided ourselves in our strong internal communications with our colleagues,” the company said. “In fact, since the start of the pandemic we have utilised a wide variety of channels and formats to ensure our employees were kept up to date on operations,” the company said.

Several ex-staff also claimed Avoca’s traditionally high standards have suffered under Aramark. They say much of group’s baked offerings – breads, pastries, cakes – are being made off-site or brought in from elsewhere and are not as fresh when they hit the shelves.

They also claim Avoca’s fresh fruit and vegetable produce, which used to be sourced directly from growers where possible, is now being acquired from other sources to cut costs. A recent posting on the Greystones Open Forum on Facebook about quality in Avoca’s Kilmacanogue store elicited 149 comments, the majority of them negative.

“In terms of sourcing, preparation and freshness of food – Avoca’s standards have remained of the highest quality and nothing has changed in how the brand source and prepare quality fresh food,” the company said.

“In fact, Avoca and Aramark remain committed to innovation, buying Irish and buying local. Avoca prides itself on using the freshest ingredients and finest quality produce.”

Pretax loss

In it latest set of accounts Aramark Holdings Ireland reported a pretax loss of €60 million for the 12 months to the end of October last year while noting it had reduced staff numbers by 653. It doesn’t break out numbers for Avoca.

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Aramark, a New York Stock Exchange-listed multinational with an annual turnover for 2019 of $16 billion (€14.2 billion), employs roughly 4,500 people here, making it one of the State’s largest private-sector employers. It holds catering contracts with Croke Park, University Hospital Galway and three direct-provision centres.

In a statement accompanying the accounts, Aramark’s directors said: “The business has maintained a strong focus on cash generation and this was achieved through contract renegotiations to reflect the difficult trading environment, continued discipline in terms of costs and by availing of various government support schemes”.

In its last full-year under the Pratt family, Avoca reported sales of €59 million while generating a net profit of €2.2 million. That’s a relatively low level of profit for the size of turnover, less than 4 per cent.

In the absence of financial data for Avoca, it’s not clear how the business has performed under Aramark or how badly it has been hit by Covid.

One industry observer said the Pratt family sacrificed profit to ensure top-line sales and the company’s premium brand. In contrast, he said Aramark was squeezing the bottom line to increase profits, possibly in advance of a sale.

Tara O’Neill, Avoca’s former chief executive, is understood to have co-ordinated the sale of the business last year to a group of UK investors with Simon and Amanda Pratt – the son and daughter of Avoca’s original founders and its former managing director and head designer – involved but the deal collapsed when Covid hit. O’Neill left the business a short time later.

The president and chief executive of Aramark Northern Europe, Frank Gleeson, who is also the president of Irish employers’ group Ibec, said in a recent interview with The Irish Times that the US-listed business had the funds to expand the Avoca brand and had the ambition to internationalise it.

Prior to Covid, the US company had opened three new Avoca outlets in Dunboyne, Dublin Airport and Ballsbridge. But there is speculation now that it wants to offload the business.

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‘Exciting growth opportunities’

Aramark insists it is committed to the Avoca business.“Avoca has some very exciting growth opportunities which will announced in the near future which Aramark has fully supported and invested in,” the company said. “Both Aramark and Avoca are excited about the many years of growth and investment ahead.”

The UK was always seen as the logical next step for the company – Simon Pratt said the business was looking at opening an outlet on the outskirts of London back in 2017 – but Brexit and now Covid appear to have stalled that process for the time being.

Avoca – founded 50 years ago in an old mill in Co Wicklow – has been one of the great Irish success stories. Avoca Handweavers – as it was known originally – cut a swathe through retail here. It was never cheap but it cultivated a strong reputation for quality food and for hand-crafted fabrics. It was voted Ireland’s Store of the Year in 2013 and selected by trade magazine Retail Week as one of the 100 most inspirational stores in the world.

Now others are following suit. Dunnes Stores, which tried at one stage to buy Avoca, is opening food halls and stores that bear a remarkable similarity to the original Avoca model.

Dunnes has also taken over the retail arm of craft butcher James Whelan, formerly Avoca’s in-house butcher – it is still in some Avoca stores. It has also bought a site adjacent to the Avoca’s “Salt” outlet in Monkstown – Avoca’s cash cow – and has secured planning permission for a food retail unit there.

Avoca is still a leading player in food retail here. But the sector has become fiercely competitive with budget brands battling for market share at one end and an increasing array of the upmarket retailers and artisan food brands popping up at the other.

Aramark’s cost-cutting agenda and Avoca’s high-end credentials is a circle that still needs to be squared.



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