New Times,
New Thinking.

  1. Business
19 July 2024

Pret a Manger’s “free coffee” was never going to last

Free coffee? As if!

By Will Dunn

There is no such thing as a free lunch, nor is there any such thing as a free coffee, least of all at Pret a Manger, where the Club Pret subscription introduced in 2020 has been radically rewritten. Subscribers (who are currently able to redeem up to five drinks a day and a 20 per cent discount on food for the £30 subscription) have until September to fill their boots with iced mochas. The deal then becomes half-price drinks for £10 a month, which could cost the heaviest users more than £200 a month. And then, into the pumpkin-spiced lattes of autumn will splash the salt tears of the jilted consumer.

The change was announced in a letter from Clare Clough that admitted the subscription offer was “too good to be true”. Clough wafted a cut-price (but at £1.99, not exactly free) croissant as compensation; it crumbled beneath the anguished memes of the caffeine dependent.

To be fair to Clare, it is rare for a retailer to admit that they’ve been reeling you in with a loss leader. All consumer offers, from the middle aisle of Lidl to the complimentary rooms in Las Vegas hotels, are too good to be true. That is very much the point, and in recent decades the bait-and-switch model has taken over. Games consoles and coffee machines have always been sold at a loss, because they buy the company a returning consumer. The free delivery for your online order is a gateway to a recurring payment that could continue for years.

The apotheosis of the bait-and-switch economy may have been Uber, which effectively paid its customers to switch away from traditional cabs, losing an average of 58 cents per ride over several billion rides per year, until so many independent cab firms had gone out of business (or become Uber drivers) that there was little competition and prices could safely be re-hiked.

For Pret, the subscription model for coffee was a brilliant solution to a serious problem: hybrid working. Pret’s 439 locations are overwhelming located near city-centre offices; more than half are in London. With the nation’s office workers going in two or three days a week, Pret faced a reduction in revenue of 40 to 60 per cent. In the low-margin world of “fast-casual” restaurants, this would have been a disaster. The subscription model aimed to compensate for this by persuading the same people to come to Pret more often, and it appears to have worked. By this time last year it was being used 1.25 million times per month.

The subscription also insulated Pret’s most loyal customers from the steep price rises in some of its other products. Offer someone a “free” Feelin’ Peachy Fruit Cooler and they might hand over six pounds for a cheese sandwich.

However, the subscription was also a bet on inflation. Because it involved selling more coffee at a lower price per cup, it made Pret more exposed to the spiralling cost of energy and coffee itself (not to mention wages and rents). This meant the subscription itself had to be hiked even faster than the cost of a flat white. Since the subscription was launched in September 2020, the prices of coffee and hot drinks, as recorded in the Office of National Statistics’ basket of goods, have risen 28.4 per cent. The Pret subscription has risen by 50 per cent over the same period.

Give a gift subscription to the New Statesman this Christmas from just £49

In doing so, Pret may have pushed its subscribers to get more from the service, perhaps by using it to pick up coffees for other people – most people don’t drink five coffees a day – putting still more cost pressure on one side of a deal that was already a loss leader.

Most significant, however, is that the problem the Pret subscription was designed to solve – office workers staying at home – is being solved by others. The first wave of return-to-office policies were controversial but they are increasingly being adopted by large companies. The construction giant Laing O’Rourke has told all of the office workers in its 8,000 employees to attend five days a week, while Boots has made the same demand of its nearly 4,000 admin staff. Tube stations in the City of London are as busy as they were before the pandemic.

When Club Pret launched in 2020, the talk was of a new settlement, an improved post-pandemic world. “We have been through too much frustration and hardship just to settle for the status quo and to think that life can go on as before the plague”, we were told by Boris Johnson, as we sipped our sort-of-free coffees and worked at the kitchen table. As it turns out, the status is exactly what we are settling for, hurrying to and from the office on a train that could easily have arrived from 2019, nursing our flat whites at £4.50 a go.

Content from our partners
When partnerships pay off
Breaking down barriers for the next generation
How to tackle economic inactivity