New investors bank on healthy post-pandemic recovery with £200m splurge on Gail’s Bakery chain

15-Sep-2021 - Last updated on 15-Sep-2021 at 11:05 GMT

Gail's Waste Not range repurposes unusused offcuts like dough, cheese or wonky fruit - which would otherwise go to landfill - into new creations. Pic: Gail's Bakery

US private equity firm Bain Capital is leading the acquisition of Bread Holdings – the parent company of the upmarket UK coffeehouse chain – with input from EBITDA Investments and entrepreneurs Henry McGovern and Steven K. Winegar.

The deal will bring continuity to the bakery group – which like the rest of the UK hospitality sector, is facing staffing shortages and supply constraints – and key management will remain in place. Current chairman Luke Johnson – one of Britain’s most prolific investors, having backed restaurant chains such as PizzaExpress, Giraffe and Strada for the past three decades – will retain a 15% stake. Johnson’s Risk Capital Partners (RCP) first invested in Gail’s in April 2011.

Customer-focused culture

“Gail’s is a premier brand in the growing craft bakery market. Its ability to supply high quality, fresh bakery products meals and drinks with a customer-focused culture drives Gail’s strong brand following, like-for-like growth and expanding bakery network,” said Sandro Patti, a director at Bain Capital Credit.

The London-based bakery was started by Yael (Gail) Mejia in the early 1990’s. In 2003, Tom Molnar and a few friends joined Mejia and grew the business organically, opening its first high street bakery in Hampstead in 2005. Over the next six years, the company opened another seven retail outlets to capitalise on a revitalised London food scene.

The investment by RCP in 2011 brought on board a new partner with the wherewithal to support further growth, especially in retail and property, spurring on its expansion to over 73 outlets, along with capabilities to serve the retail, hospitality and restaurant trades. Gail’s has also made investments into small craft bakeries in Manchester and Bath and has put its might behind the additive-free Bertinet bread brand and its Waste-Less Sourdough, made with porridge from surplus bread.

The £200m deal follows a sharp rebound in sales at Gail’s despite the pandemic’s impact on the foodservice industry. Revenues for the current fiscal year are expected to exceed pre-pandemic level to hit a record high in the 12 months to February 2022. Its revenues are £130m a year ‘based on current trading’, the company said.

The group plans to open six new sites before the end of the year and aims to double its estate over the next three years.

Broadening access to chef-made craft goods

This is Bain Capital’s third foray into food services in 18 months, following investments into US dessert company Dessert Holdings and Irish food producer Valeo Foods.

“Gail’s is an important acquisition in our growing portfolio of mid-market businesses in Europe,” added Patti.

“We are thrilled to partner with industry pioneers Luke Johnson, Henry McGovern, Steven K. Winegar and Tom Molnar to support the Gail’s Bakery and Bread Factory teams in achieving their goal of broadening access to high quality baked goods via new neighbourhood Gail’s.”

McGovern is the founder of AmRest Holdings SE, one of Europe’s leading foodservice companies, which, under his leadership, grew to more than 2,300 restaurants in 25 countries, with 55,000+ employees. Steven K. Winegar is the co-founder of Grupo Zena and the founder of Restauravia Grupo Empresarial (the latter was an owner of La Tagliatella – a successful Italian dine-in concept in Spain).

Staff appreciation

According to Bread Holdings, part of the proceeds from the £200m deal will be distributed to its 2,000-strong workforce in recognition of their contribution to the Group’s success.

“I want to thank our talented community of bakers, baristas, managers, leaders and support teams who have worked hard to be a leading voice for craft in the UK. Over the past 18 months, their focus and dedication have been especially impressive,” said Tom Molnar, co-founder and CEO.

“We believe that craft baking and craft principles are currently underrepresented in today’s food landscape and that society is better when we eat better. We are aligned with those in the sector – chefs and buyers – who are working hard to provide an alternative to industrialised food production and shift power back to chefs, bakers and others dedicated to quality.”

‘We know a winner when we see one’

Henry McGovern, a founding partner at EBITDA Investments, added, “We know a winner when we see one and Gail’s is such a business. I have followed it for years. Throughout the COVID-19 pandemic, its team continued to operate at the highest standards and to serve the public without failing.

“We are very pleased to be co-investing with Luke Johnson, who has been an investor in the company for over a decade, the management team led by its CEO Tom Molnar, and a leader in the world of private investments, Bain Capital Credit. With our combined knowledge and spirit of ‘anything is possible’, we look forward to growing this great brand.”