Exclusive – Tesco Hospitality sees full-year pre-tax profit break the £20m mark: Tesco’s 315-strong estate of in-store cafes posted a pre-tax profit of close to £21m in the year to 25 February 2024, Propel has learned. The business, which is overseen by ex-Mitchells & Butlers executive Adam Martin, posted pre-tax profit of £20,875,000, a 22% increase on the £16,324,000 reported in 2023. Turnover grew 16% to £114,737,000 (2023: £96,736,000). The company was established in May 2013 and operated 315 cafes at the end of the 52 weeks ended 25 February 2024 (2023: 312). Growth in its latest full-year compares favourably with its pre-covid performance in the year to 1 March 2020, when it also operated 315 sites and posted pre-tax profit of £12,367,000 and turnover of £86,909,000. Tesco currently has circa 500 hospitality businesses, with 322 being its own cafes and the remaining circa 180 operated with third party brands – these include around 150 Costa sites and “a lot of smaller partners we’re trialling and experimenting with, such as Creams”, Martin told Propel last October. Martin said the business was looking to open more cafes, but in terms of cafes versus concessions, “whoever is chucking out the best numbers wins”. He also said the business was working on rolling out smaller format locations for its own brand offering. He said: “We take a very pluralistic view. At the moment, we are performing extremely well, the investment returns are good and the profit is very attractive, so the business is very supportive and actively trying to find space in larger stores. The future in terms of cafes versus concessions will be down to who does the best job for customers and who makes the best financial proposition.” Martin said the current sales mix in Tesco cafes was 36% drinks and 63% food, and in the 2024 financial year, it sold £4m of lattes, £4m of pots of tea and £3m of breakfasts. He said: “The preconception that in-store dining is downmarket is plain wrong. That doesn’t mean it’s not value, but it’s value in terms of quality for price and service rather than how cheap can you make it, which is emphatically what we’re not.” He added. “We try to work with the Tesco brand when it makes sense for the customer but we’re not ideological about this. Where we have a brand affiliation that works well, we’ll use it, and about a third of the stuff we use in the cafes, you can buy in the shops.” Martin’s presentation at the Propel Multi-Club Conference last October is one of 100 videos from eight conferences in 2024 that are available to Premium Club members. Email kai.kirkman@propelinfo.com if you are a Premium member and would like this video. Premium Club members also get a 20% discount on tickets to all Propel events in 2025. A Premium Club subscription costs an annual sum of £495 plus VAT for operators and £595 plus VAT for suppliers. Companies can now have an unlimited number of people receive access to Premium Club for a year for £995 plus VAT – whether they are an operator or supplier. Email kai.kirkman@propelinfo.com today to sign up.

McDonald’s ditches diversity initiatives: McDonald’s has become the latest American business to scrap diversity initiatives after pressure from activists. The fast-food brand said it would no longer set “aspirational representation goals” and will end its requirement for suppliers to make a diversity, equity and inclusion (DEI) commitment. The policy change will apply worldwide. McDonald’s said it was an accomplishment that 30% of its US leaders come from “underrepresented groups.” It previously said it had aimed to reach 35% by the end of 2025. The Times reported that in an open letter to employees and franchise owners, the company – which has about 40,000 restaurants around the world, employing more than two million people – said it remained committed to inclusion and would continue to “embed inclusion practices” in its operations. The announcement comes days after Robby Starbuck, an activist devoted to attacking “woke” companies, warned McDonald’s he was preparing to publicise its DEI initiatives. In a private message on social media to Guillaume Huin, McDonald’s senior marketing director, Starbuck asked if he was considering any changes “to embrace corporate neutrality”. Starbuck, who has nearly 750,000 followers on X, said he wants companies to reflect the priorities of their conservative customers. McDonald’s said it was revising some diversity practices owing to a “shifting legal landscape” in the US. A Supreme Court ruling in June 2023 found it unconstitutional to consider race in university admissions, and companies believe the ruling would be likely to apply to their own hiring practices. McDonald’s said it was pausing participation in “external surveys”. It did not provide further details but other companies targeted by activists have removed themselves from rankings by the LGBT advocacy group Human Rights Campaign that seek to measure workplace inclusion. The restaurant brand said its diversity team would now be called its “global inclusion team”. In a statement on X after the McDonald’s announcement, Starbuck said: “Our campaigns are so effective that we’re getting the biggest companies on earth to change their policies without me even posting a story exposing their woke policies first. Companies can see that America wants sanity back. The era of wokeness is dying right in front of our eyes.”