Gaucho, the Argentine steak chain known for protein-fuelled power lunches and cowhide banquettes, is hoping reinvention as a more socially responsible business will help it avoid the malaise sweeping through casual dining.
The restaurant group has a chequered history in and out of public markets. Launched in 1994, it had a brief stint on Aim, London’s junior market, five years before the BSE and foot-and-mouth crises hit consumer confidence in beef. It delisted in 2002 but returned to the stock market in 2007 and was again taken private in 2016 when Equistone Partners bought it for £100m.
Now Gaucho is recasting itself as carbon-neutral and socially responsible as it seeks to rebuild after being rescued from administration last year.
Martin Williams, chief executive, has pledged to offset all the carbon produced by the beef it serves by the end of 2022. “This will reposition us as an industry leader,” he said.
The 16-strong restaurant chain will serve wine on tap from plastic barrels — saving the import of 200kg of glass a week. It will offer vegan meal options and recruit ex-convicts and homeless people into its workforce.
Gaucho has suffered, along with many others in the industry, from problems including tougher competition, rising costs and falling customer numbers. It is also facing an increase in the number of people cutting out or reducing their consumption of meat.
Its sister chain, Cau, closed last year but Gaucho was saved by Investec and distressed debt specialist SC Lowy.
Deloitte, the group’s administrators, said that while the Gaucho chain was profitable, Cau had suffered due to “rapid overexpansion, poor site selection, onerous lease arrangements and a fundamentally poor guest proposition”.
In 2017, profits slumped by almost a third year-on-year but while revenues at Gaucho rose 2 per cent, at Cau they fell by almost a fifth.
Nigel Parson, an analyst at Canaccord Genuity, said that although Gaucho had a “good niche and good product”, competitors such as Hawksmoor had encroached on the market and Gaucho had lost its way.
Industry-wide pressure has hit many of its rivals. Celebrity chef Jamie Oliver shut the UK arm of his Italian chain in May despite ploughing £26m of his own money into the business, while his two Barbecoa steak restaurants also closed. Prezzo, Gourmet Burger Kitchen and Carluccio’s have shut sites, while the Peruvian-style chain Ceviche appointed administrators in October.
For Mr Williams the sector’s main weakness is forgotten values: hospitality and value for money. “When you open the door you smile and you give eye contact and you use names,” he said. “That’s just a basic principle of hospitality which has been lost over the years.”
But even though Mr Williams said the days when customers would “eat half a kilo [of beef] and be a caveman” are past, Gaucho’s new concept does not forget its carnivorous roots.
At Charlotte Street, the first restaurant in the new format, which opened this month, booths are designed to resemble the silhouettes of Argentine stable blocks and there is a “beef bar” where chefs show off steak tartare and carpaccio making skills.
Gaucho sells roughly 22 tonnes of Argentine beef each month — equivalent to around 11,000 tonnes of greenhouse gas emissions, according to a study published by the University of Oxford last year.
It is in talks with Cambridge and Michigan universities to calculate the carbon output of its beef. It aims to offset the entire amount by 2022 by planting trees and investing in green energy.
Without raising prices, the chain said it was using better quality ingredients in the hope that the resulting squeeze on margins would be offset by greater numbers of returning customers. Costs have been trimmed by using in-season ingredients and secondary cuts of meat. A steak tartare made with Wagyu beef knuckle was, Mr Williams claimed, “incredibly tasty”.
The revamped Gaucho will have a cinema club and co-working space to fill the restaurant out of dining hours. “You can come in for more than just a stiff meal,” Mr Williams said.
Graeme Smith, managing director at restructuring consultancy AlixPartners, warned that while some groups, such as café-cum-bar chain Loungers, have managed to make co-working profitable, it was still a challenge: “The concept that London is short of co-working space, given everything that has happened with WeWork, may be a little optimistic.”
Meanwhile, whatever the steak’s environmental impact, customers will still expect a quality cut. As Mr Parson pointed out: “You can have the most perfect carbon neutral policy but customers are not going to go back if the steak’s no good.”
Source: Thanks https://www.ft.com/content/659ace32-257f-11ea-9305-4234e74b0ef3