One of the top managers of X5 Group, Igor Pletnev, who planned to invest in the development of the Belarusian network of budget coffee shops Hotfix in the Russian Federation, decided to go out of business. Experts believe that the company failed to compete with Cofix, which is developing a similar format. Market participants, where the number of players has grown in recent years, are waiting for consolidation in the near future, primarily through acquisitions.
Top manager of X5 Group (Pyaterochka, Perekrestok, Chizhik chains) Igor Pletnev left the founders of Hotfix Group of Companies LLC and Hotfix LLC, Russian structures of the Hotfix coffee house chain created in Belarus. This follows from the data of the Unified State Register of Legal Entities. According to SPARK-Interfax, since 2021, Mr. Pletnev has owned 37.5% of Hotfix Group of Companies, in February 2023, an entrepreneur from Voronezh, Yury Svistov, received such a share in the company. Another 40% belongs to the society itself. Co-founders of the network Sergey Goverdovsky and Andrey Babakaev retained 12.5% and 10% respectively in Hotfix Group.
Igor Pletnev has been working in senior positions in Russian retail for over 16 years. He held the positions of development director of Pyaterochka, led the launch of the 5Post logistics operator at X5, and headed Dixy Group of Companies. In January 2023, the top manager returned to X5 to oversee new business development projects. Mr. Pletnev declined to comment.
Hotfix, according to its own data, manages more than 20 points in Belarus and less than ten in Russia, including Moscow, Moscow region and Voronezh. Develops coffee houses with fixed prices – for 80 rubles. and for 160 rubles. As stated in the presentation of the network, it was planned to open 100 outlets by the end of 2023. The director of the Hotfix Group of Companies, Eduard Golov, declined to comment.
Probably, the reason for the exit of one of the founders of Hotfix is an unsuccessful attempt to scale the business so far, suggests Sergey Rumyantsev, founder of One Price Coffee.
Hotfix tried to increase the number of outlets through a franchise, knows Alexey Vanchugov, managing partner of Vanchugov & Partners. But the minimum threshold for opening own outlets, which would contribute to the wide distribution of the affiliate program, has not been reached, the expert adds.
Hotfix copied the concept, right down to the appearance of points of sale, of a network of a similar format existing in Russia – Cofix, notes Mr. Vanchugov. But at Cofix, according to him, the business works due to well-built relationships with suppliers and logisticians, a large number of outlets and brand recognition. In his opinion, in order for the Hotfix brand to be successful in Russia, the chain needed to open a large number of points in the shortest possible time. Meanwhile, in large cities, there is high competition in the coffee shop market, which complicates the search for a good location for points of sale, says Franshiza.ru expert Anna Rozhdestvenskaya.
At the same time, the format of budget coffee houses with a fixed cost of products has taken root in the country, says Alexey Vanchugov. This is a ready-made business model where one product, in this case inexpensive coffee, generates traffic, and business margins are provided by related products – snacks and desserts, he explains. Interest in opening coffee houses on the part of businessmen is quite stable and at the beginning of 2023 it already exceeded the same indicator in 2022 by 7%, Anna Rozhdestvenskaya calculated.
Blazhei Bernard Reiss, CEO of Cofix in Russia, in an interview with Afisha Daily in September 2019:
“Cofix will not take root only on the moon – there is low traffic.”
At the same time, since the beginning of the year, traffic in chain coffee shops began to fall. According to Mikhail Vasiliev, head of research and consulting at Focus Technologies, in January-March, Moscow budget-friendly coffee houses with a basic level of service lost 33% of visitors year-on-year, but due to an increase in the average check by 28%, their revenue fell by 16%.
Buying coffee is a daily consumer action, but if austerity is needed, they are ready to give up this drink in the first place, the expert said. Now there is turbulence in the market, therefore, Sergey Rumyantsev predicts, in the next one and a half to two years the market will be enlarged: big players will absorb small businesses.