Church expanding coffee network

  • 2011-05-11
  • By Matt Garrick

TO GO: Darius Vezelis, cafe buff and coordinator of the Specialty Coffee Association of Europe, believes the implementation of international players on to the Lithuanian coffee scene will open up the industry.

VILNIUS - Australian coffee mega-franchise Gloria Jeans, a company chaired by the millionaire elder of a popular corporate Christian church in the country, Nabi Saleh, has eyes on Vilnius, searching for prospective franchisees to open stores and begin servicing Lithuanian customers. Representatives for Gloria Jeans were in Vilnius for the ‘Brand 4 Baltic’ conference at the end of April, which brought together a selection of foreign companies looking to the future to invest in the Baltic region.
Business analysts and competitors have stated that if Gloria Jeans, which currently operates over 1,000 stores worldwide, do find their way into the Lithuanian marketplace, it could mean a boon for the country’s growing coffee industry.

“It brings more competition to the market and also a wider understanding of the coffee business,” said coordinator of the Specialty Coffee Association of Europe, Darius Vezelis, talking about the implementation of international players onto the Lithuanian scene. “On the other hand, it is important to know how serious their intentions are, because opening one store is not enough. Here in Lithuania, there are already several strong players in the market. Even after McCafe opened, [the McDonald’s coffee outlet on Gedimino Street] I hear it did not hurt the local players.”

Management from local franchise Vero Cafe, which now has ten outlets nationwide, shrugged off speculation they were worried by the development. “International players will give some kick for locals to improve their service,” relayed marketing manager for the company, Alex Abraskevicius. “Vero Cafe has it own way of developing its business. And we are different with our view to business.”

Director of the Lithuanian Franchise Center, Severin Zhilinski, has said the timing is right for the Australian firm to stake their claim in the Baltic region, as the region’s previously marginalized coffee industry begins to move into the mainstream.
“More and more people are becoming brand sensitive,” he told The Baltic Times. “The coffee market in the region is still developing. I believe more concepts will appear, both local and global. Research suggests the market is not yet saturated.”
For prospective franchisees looking at investing into Gloria Jeans, a franchise purchase could also mean money in the pocket for the Australian corporate church, Hillsong. Potential business operators weighing up running a local store have been warned by ex-franchisees to be wary, though. “It quickly became obvious to us once we were operational in our store, once we did some investigating; most of the major suppliers we were obliged to use as part of our franchise agreement were companies that were owned by members of the church,” said a former Melbourne-based franchisee under the pseudonym ‘Bazza,’ during an interview in 2008 with independent Australian media company G’day World.

“We hadn’t just bought into a coffee franchise; we had bought something altogether a bit different,” he said. “We were encouraged [by management] as franchisees… on our day off to attend mass at the church,” he claimed on the program, which attracted over half a million listeners per month.

Jirah, the Australian-owned parent company of the coffee giant, has also been alleged to have used company profits to support the church. “We know for a fact, that out of the profit that company makes, the directors themselves are tithing 10 percent of everything back to the church. So it is in their best interest, and in that way in the church’s best interest, to run the Gloria Jeans franchise as profitably as possible, and in our experience, and the experience of the franchisees we’ve spoken to, it’s to the detriment of the franchisee,” alleged ‘Bazza.’
The sustainability and survivability of an international coffee company opening in Lithuania is also at question, as Latvian company Double Coffee proved recently.

“Double Coffee had the first mover advantage in Vilnius [in 2005], opening six stores. It has since closed at least five of the stores,” said coffee industry expert and director of Vilnius-based management solutions company Delta, Al Kris.
 “The sustainability of their business model was always a question,” he said. “The economic downturn put the nail in the coffin. They couldn’t keep up with the rents and overhead, and patrons started to flock to Coffee Inn, and to a lessor extent Vero Cafe. And their prices were cheaper.”

Pricing policy was an important factor for Gloria Jeans to be aware of in order to survive in Vilnius, projected Zhilinski. “If it is working in the Ukraine, it may work here,” he suggested, referring to Gloria Jeans pricing at a store opened in Lviv, in the Ukraine last year.

“What they need to be aware of is that only a small number of Lithuanians are willing to pay Starbucks or Double Coffee prices for a cup of coffee,” said Kris. “People in Vilnius will give Gloria Jeans a try because it’s new, but they may not come back if there isn’t a good fit and they don’t feel they’re getting value for their money. If Gloria Jeans brands itself as an ‘exclusive’ coffee store, it may face the same fate as Double Coffee,” he explained.

“Latvian cafes, Double Coffee have closed all of their cafes in Vilnius, Lithuania from this spring,” marketing manager for Double Coffee, Ilona Jarosa, told The Baltic Times. She would not give further comment, but said the company still had stores in Latvia, Russia and Belarus in operation.

“The problem with Double Coffee was not the concept, it was the management,” was how Zhilinski equated the company falling by the wayside in Vilnius, discounting any major lapses affecting the local coffee industry as a whole.