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Why EAT Is Looking Tasty to Pret A Manger

Jenna Ammann headshotWords by Jenna Ammann
Investment & Markets
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Pret A Manger, the United Kingdom-based sandwich shop chain, earlier this week acquired its competitor EAT. This move will facilitate the expansion of Pret’s vegetarian locations, branded as Veggie Prets. At a time when many restaurant chains in London are struggling amid economic uncertainty from Brexit, vegetarian offerings may help food companies draw in different customers. We explore the drivers of Pret’s expansion into vegetarianism and the predicted effects of this acquisition on eateries across the U.K.

The unexpected success of Veggie Prets

Pret A Manger started experimenting with Veggie Pret popups in 2016. The company initially expected the idea to be short-lived and to generate a loss, but the success of the first location led the company to continue transitioning additional locations into Veggie Prets. There are now three locations in London and one in Manchester, with plans to expand vegetarian offerings at Prets in the U.S. and Hong Kong.

The plant-based dining trend is promising for restaurants looking to increase profits with a wider customer base. Beyond Meat, the California startup that offers meat alternatives, had what most industry analysts describe as a successful initial public offering. Shares have increased 219 percent over their initial $25 offering price. The company’s valuation is over 22 times Wall Street’s predicted sales for 2019, a figure that reflects the potential for meat alternatives to gain traction within the global protein market. Vegetarianism is now mainstream, and companies that cater to changing consumer tastes should find success in the long term. Pret A Manger’s expansion of Veggie Prets comes at the perfect time for the company to establish a lead in this growing market.

A deal benefitting both parties

This deal benefits both Pret and EAT. Acquiring EAT increases Pret’s market share in an industry that is saturated by other quick eateries and delivery apps like Deliveroo. Additionally, using EAT’s established locations to continue expanding Veggie Prets would give Pret a lead in the fast-growing vegan movement in the U.K. In 2016 there were an estimated 540,000 vegans in the U.K. — ten years ago there were only 150,000. 

This deal simultaneously benefits EAT’s owners by relieving a struggling business off their hands. EAT has been for sale since February, when its private equity owner Horizon Capital appointed a corporate advisory firm to offload the business. EAT was in financial trouble; declining sales at its locations led to a reported $21.8 million loss last year. According to the Financial Times, the price tag for EAT was around $76 million. This tactic of acquiring a smaller competitor was considerably less costly to Pret than undertaking organic growth with building out locations on its own.

With Pret A Manger on the move to become a dominant competitor in vegetarian quick eateries, it can be expected that more chains will follow. Consumers following a plant-based diet now have a variety of food choices, whereas several years ago their options were slim for eating out. Restaurants that haven’t already joined the wave may soon be faced with the dilemma of if you can’t beat ‘em, join ‘em.

Image credits: Pret A Manger/Facebook

Jenna Ammann headshotJenna Ammann

Jenna Ammann is a student finishing her senior year studying Corporate Finance and Hospitality at UMass Amherst. She has a focus on investigating environmentally and financially sustainable food service business models. Jenna is from Westport, Massachusetts.

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