He founded and built what became one of Wales’ most successful coffee shop businesses and now entrepreneur James Shapland is back with his latest venture, Coffi Lab.
Mr Shapland, who headed up independent coffee shop brand Coffee#1 before it was sold to SA Brain & Co in 2010 in a multi-million-pound deal, already has four Coffi Lab venues trading and is confident that his new business can get to 50 shops in five years’ time, employing up to 700 staff.
Coffi Lab – the Welsh word for coffee and Lab a reference to Labradors and its chosen charity, Guide Dogs UK – saw its first venue open in Monmouth last year.
Since then it has added Abergavenny, Marlborough in Wiltshire, and its latest addition, a former NatWest bank in High Street, Llandaff, Cardiff – just yards from where Mr Shapland was educated, the Cathedral School.
The entrepreneur believes there is a gap in the market for quality coffee in suburban neighbourhoods of cities and in towns – leaving brands such as Starbucks, Costa Coffee and Caffe Nero to fight it out in fiercely contested city-centre locations.
Coffi Lab, whose shops open early on Sundays when many independents and cafes are closed, is targeting a wide demographic, from dog walkers attracted to its dog-friendly policy, to retirees, schoolchildren and those looking to work remotely.
It recently opened its fifth shop, in the Whitchurch area of Cardiff, where it is also investing in a group HQ with its own boardroom.
Having set up Coffee#1 in 2000 with the backing of his dad and investor David Jones, Mr Shapland expanded it to 15 venues across south Wales and the west of England, before SA Brain & Co came calling a decade later – although it subsequently sold a majority stake in the business to Caffe Nero in 2019.
Mr Shapland, chief executive of Coffi Lab, said: “We had achieved an awful lot and we were very proud to have built it to a place where we had received an approach from Brains. Everyone had seen how Whitbread had acquired Costa and it was a nice way for them [Brains] to diversify while retaining hospitality and economies of scale. For me it was special to keep it in Wales within a respected heritage and iconic brand, which Brains was at the time.
" So I met their executive team and knew they would ‘look after our baby’. They then grew it at a clip and then obviously they exited to Caffe Nero. We had an approach from a private equity house, but again for us it was important to maintain that Welshness.”
Following the deal Mr Shapland was prevented from opening any rival coffee shops for five years within a radius of several hundred miles – a covenant that is not unusual in deals of this nature.
He recalled: “I didn’t think at the time that I would get back into coffee shops again. I just fancied a break so I travelled extensively and did courses in Columbia Business School and Stanford on entrepreneurship. I have always been fascinated by entrepreneurship and wanted to keep my finger on the pulse and meet like-minded individuals.”
Around the time of the Brexit referendum he explored setting up a new sourdough pizza concept, but found himself being lured back into the world of coffee.
He said: “As I came back more regularly I could see these little neighbourhoods in the 10 years I had been away and it didn’t feel as though they had developed in terms of the coffee offer as much as I assumed they would have.
“So, I would walk Pontcanna [Cardiff suburb] and ask myself on a Sunday morning where could you go for a cup of coffee in a large, clean environment, and it really just boiled down to Coffee#1. There were lots of independent operators who would typically close on a Sunday and a Monday. So, I could see the appetite for neighbourhood premium coffee had never been stronger.”
Coffi Lab has been self-funded to date. Mr Shapland said: “They are each generating surplus cash and it is very much my baby. Depending on the scale that we roll out, could we then look to private equity to accelerate that? We will consider that at the time, but at the moment we have control and there is no debt.”
Coffi Lab is not acquiring the buildings it trades from, but operates under a leasehold model.
Mr Shapland said:“We were fortunate this time last year to get ahead of the curve with landlords that were being quite pragmatic on the terms they were prepared to offer. So, we managed to get four or five under offer in the depths of lockdown with everyone sitting on their hands with confidence so low.
“The quality of fitouts means we will be spending in excess of £250,000 on each unit. Once they see the model for sites [landlords] they can see how the value of their buildings is going to improve and they get comfort given our track record.”
On the growth trajectory he said: “The objective is 50 shops in five years. Number five is opening in Whitchurch at the old Cancer Research Wales building later this month. In Cardiff we are also going into Rhiwbina in the old Coral bookmaker building in April or May time. We have got one in Llanishen, which is the old Lloyds Bank. We are also looking at a unit for the summer in Bristol. It feels as though we can do 10 per year.”
It has also agreed terms for a shop in Chepstow.
On Coffi Labs’ canine-friendly policy Mr Shapland said: “I have two Fox-Red Labradors, Dylan and Bryn. My dad died last year and he was incredibly close to Dylan and we talked in his final days about this concept and if through it we could support a cause that was close to our hearts, which was Guide Dogs.”
Its backing for Guide Dogs UK includes giving the charity all gross revenues from the first day of any new shop. To date this has raised more than £16,000. It also offers hand-made dog biscuits baked exclusively for Coffi Lab. Profits from each sale are also donated to the charity,
On financial projections Mr Shapland said: “At 50 shops you would be looking at revenues of £30m and hoping to push £6m to £7m of Ebitda.
“On that basis, and with that volume, your gross margins can push 75%, depending of course on what happens with VAT as we have been given a bit of cushion at the moment.
“We currently employ 65, but with 50 shops we will be looking at 600 to 700 people.”
As for going further he added: “I am really enjoying it at the moment, but if you were to extrapolate what we are seeing now from four upwards you would be looking at 100 in 10 years, if I am still hungry and ambitious enough.”
He said there is potential for Coffi Lab to diversify by moving into roasting its own coffee, as well as dog-related merchandise. It has a single-origin coffee from El Salvador and transparency in knowing what farmers are being paid per kilo.
Describing himself as agnostic politically, he believes there is a thriving entrepreneurial community in south Wales.
He added: “I can say, speaking of my own journey with Coffee#1 and now Coffi Lab, that the work Professor Dylan Jones-Evans has done in promoting entrepreneurship through the Wales Fast Growth 50 initiative and the Start-Up Awards is inspiring.
“I followed the Fast Growth 50 when I was building Coffee#1 and it is lovely to see the level of recognition it provides. As a judge for the Start Up Awards the talent I have been able to meet and the networking is off the charts.
“What Dylan has done in promoting, supporting and cheerleading for Welsh entrepreneurship has been amazing. He has worked his socks off. I lived in Bristol for 10 years when I was growing Coffee#1 and it doesn’t feel like it has the same ecosystem. NatWest are also doing great things for small businesses with their accelerator hub in Cardiff. So, it feels like there is a positive sense of community with everyone willing to support and exchange ideas.”
Mr Shapland said that in three years’ time he hopes that Coffi Lab could be in the top 10 of the Wales Fast Growth 50, which ranks the fastest-growing indigenous firms on revenue growth over the previous two years.
