Smell The Coffee – Coping With Covid And A Company Turnaround

Accidents – so folklore has it – tend to happen in threes. Or to put it another way, from a purely subjective point of view, life’s vicissitudes often appear to run sequentially. You enjoy a period of stability and then a series of difficulties or crises arrive back-to-back. You solve one problem and another arises.   

Witness the recent history of  U.K. ethical coffee company, Pact Coffee. Established in 2012 by Stephen Rapoport, Pact launched as a subscription service, delivering high-quality coffee to its customers on a regular basis. After initial success, the company began to hit problems and in 2016 the money ran out. A new CEO was appointed and a turnaround plan was set in motion. In addition to its business-to-consumer offer, the company established a parallel business-to-business revenue stream selling to offices and the hospitality trade. The plan worked and Pact moved into profit at the end of 2017 and has stayed there ever since.  

And then came the COVID-19 crisis. Suddenly a business that had turned its fortunes around by reaching out to a new customer base was looking at a lockdown. Cafes, pubs, hotels and restaurants closed their doors, as did many places of work. Much of the business-to-business side of the market disappeared. Meanwhile, Pact was managing a global supply chain and a local workforce.    

So when I spoke to CEO, Paul Turton, I was keen to find out how a business copes when a turnaround is rapidly followed by an unforeseen global crisis that cuts to the heart of its new business plan. 

Why B2B?

As Turton explains, the purpose of the turnaround operation was to create a profitable and self-sustaining business. “It became apparent that we had to look beyond consumers and there was natural demand in the B2B market,” he says. “I came in to help with the pivot and build the channels.”  

However, with the U.K.  lockdown in force and likely to be extended for at least another three weeks at the very least, the company is now operating in a radically different market and its trading patterns have changed accordingly. “B2B is down in size, while the consumer side is seeing double-digit growth,” says Turton.

The Logic Of The Turnaround     

That in itself might be a vindication of a two-track strategy,  in which at least one revenue stream not only holds up but grows in the face of the crisis, making up – at least in part- for a downturn on the other side of the business. 

Turton acknowledges that the company has been fortunate. “We have been lucky in that people are drinking more coffee at home. And they are increasingly looking for speedy delivery,” he says.  

However, there is now a real challenge to the logic of the turnaround plan as implemented in 2016. So, in the longer term, the priority for the company is to ensure that when the COVID-19 crisis ends – or at least when the social distancing restrictions are lifted – the other side of the business will bounce back.

Keeping In Contact

There is some B2B activity. Not all offices are closed,  so there is scope to sell to company buyers. But as Turton acknowledges, “buying coffee is not a priority” for many businesses at the moment.  So Pact has undertaken to stay “sensitively” in touch with its customer base. Reminding them, for instance, that it is still roasting coffee and that supplies will be available after the crisis. “We are making it clear we are here to help,” adds Turton.  

Meanwhile, managers still have a company to run and sustain during the lockdown. Outside the roasting operation – which is deemed an essential service –  most staff are now working from home and the company is learning to manage its face-to-face conferences via video. “Google hangouts has been a lifeline,” says Turton.

Outcome Focused

The new reality has meant that Pact has had to become what Turton described at “outcome-focused” rather than tied to the structure of a conventional working day. Staff are also being encouraged to get fresh air and exercise, 

Ultimately, Pact – in common with most other businesses – will emerge from crisis into a new economic reality. Some customers on the B2B side may no longer be there and the consumer business could also be affected by the expected recession. But the decision to diversify revenue streams is undoubtedly helping the company to weather the Coronavirus storm, albeit in an unexpected way. And like many businesses, selling direct to consumers, online sales have been a lifeline at a time when offices,shops and cafes are closed. 

The challenge now is to look after staff and stay close to business customers for as long as the lockdown lasts.