Enterprise Panel - Wake up and smell the coffee

Britain’s biggest espresso maker started on a kitchen table and that’s just where its future might lie.

Order a skinny latte or a double-shot cappuccino, and there is a good chance that it will be made in one of Fracino’s caffeine machines.

The Birmingham company supplies many of the espresso machines used by Britain’s coffee companies and catering equipment suppliers.

Now the family-owned business is pondering whether it should launch into the big, lucrative, but risky, domestic market with it latest machine and how it might handle the move.

Fracino’s commercial director, Angela Maxwell, says: “The next thing for us is Cherub, which will be our smallest machine, retailing at about £675.

It’s designed for the catering sector, but we think that it’ll appeal to the domestic user who wants a smashing-looking machine and likes really good coffee. “We don’t yet really target the domestic market, although we supply people if we’re asked.

But Cherub could have the same appeal for sophisticated urbanites that the Aga cooker has for people in the country. “We know the marketing campaign we’d use to launch it – the magazines, newspapers, television food channels, but the main problem is how we would distribute it and how we would teach people to use it properly. “A lot of people buy espresso machines for their home, but are really disappointed with the results, and it’s mainly because they don’t know how to use them properly.

There’s an issue in training the public – something that the big stores won’t do.

So do we distribute by partnering with a big coffee chain, do we convince our distributors to open on Saturdays to serve domestic customers? We’re still considering it.” Fracino can trace its routes to the 1950s when Maxwell’s parents holidayed in Italy and were much taken with the country’s coffee.

So much so that her father Frank, an engineer, brought a machine back and promptly stripped it on the kitchen table.

Maxwell senior started importing Italian machines to serve the first coffee bar culture – think beatniks, mods, moptops and protest singers – that sprang up in Britain during the early 1960s.

However, the business became increasingly unhappy with the problems in sourcing parts and spares from Italian manufacturers and in 1964 Maxwell decided to start manufacturing his own as Fracino – cod-Italian for Frank’s Cappuccino.

Not only were Fracino’s new machines better engineered and more reliable than the Italian versions, but they were attuned to the British taste for milky drinks like latte and cappuccino.

They also made a nice cup of tea.

The business went through a downturn in the mid-70s, when 70 per cent of the market vanished as the public’s taste switched to instant and filter coffee, and survived to take advantage of the 90s coffee culture.

Fracino now makes 40 different products, from the machines to hand tampers, which push the coffee down, and chocolate dispensers for cappuccinos.

It also made the T-Bird for tea company Liptons, while its Rostilino coffee roaster earned the business a Millennium Product Award.

Fracino now has a turnover of about £2.5m and employs 22 people in Witton, Birmingham.

It is run on a day to day basis by Angela and her brother Adrian, the technical director and a former Rolls-Royce engineer.

About 70 per cent of Fracino’s business comes from supplying and maintaining machines for coffee firms that deal with the hotel and catering sector and high street independents – it does not supply major chains like Caffe Nero or Starbucks.

Fracino’s products are now exported as far afield as Denmark and Dubai, Russia and Thailand.

Angel Maxwell says: “An espresso machine isn’t a souped up kettle, it’s a piece of sophisticated engineering built around a high pressure boiler. “Our machines are the only ones in the world made entirely from stainless steel, which we source from Sheffield, and built on chassis, which make them very strong.

It’s all about quality, quality, quality.” The secret of a good cup of coffee is the pressure boiler.

Italian-style coffees get their distinctive tastes and crème tops because boiling water is forced through the granules at high pressure.

Fracino has avoided following other Midlands manufacturers that have moved production to cheaper factories overseas, partly because of branding issues and partly because of concern over maintaining quality.

Angela Maxwell says: “We haven’t outsourced production to India or China because they are geared up for the mass market, not bespoke products.

And despite what people might say, maintaining quality on products from China is a constant battle.

Because we’re using pressure boilers we have to maintain and check quality, which we can’t do from halfway around the world. “Keeping manufacturing in Britain also gives us flexibility in terms of customisation – for examlple we offer an option to make our machines in any colour so they fit in with corporate branding.

Our marketing niche is that we’re the only British manufacturer in this field and that’s recognised worldwide.” Maxwell adds: “Fracino has had a major part to play in encouraging the trend of coffee drinking in this country and turning it into a lifestyle luxury.” Clive Austin director, Catapult Venture Managers Before putting further pen to paper I must declare a personal bias here – I am a huge fan of great coffee and the machines that make it and would love to see Fracino expand.

At the strategic level, looking at diversifying into new, but related markets, feels like an appropriate thing for management to do.

If successful, it would add a second leg to the business, which would make it more stable and robust.

In looking at the question of launching a retail product, Fracino already seems to have a strong team in place with significant experience of serving the business market.

Perhaps now is the time to consider adding complementary skills to the mix in support of the planned expansion.

Personally I love the made in England, stainless steel, built-to-last ethos and appreciate that this comes at a price.

However, I think it is essential to do some market research to discover what is really important to the volume retail customer, where, how and why they buy and, crucially, how much they are prepared to pay.

The research should also support your planned marketing strategy.

Richard Beevers partner, Smith Cooper Fracino has built its business and reputation on supplying commercial users – the consumer market would present different challenges.

There are two principal potential routes to market.

Direct, using frapacino.com and other direct marketing methods such as targeted magazine advertising, or retail distribution through high street stockists such as John Lewis.

PR is vital in both cases.

Fracino should begin with market research.

Focus groups with target consumers to get them to try the Cherub and then listening to their views on why, if and how they would buy and use the machine.

Research is no guarantee of success, but it will help Fracino’s decision making and avoid silly and potentially expensive mistakes.

Retail buyers are particularly adept at assessing new products and giving starry-eyed new entrants a reality check.

Without prejudging the research I recommend Fracino takes a low-risk approach by selling exclusively through its website and mounting a PR campaign to educate the public in making great coffee at home and its heritage in café society.

Richard Jephcott chairman, Connect Midlands Isn’t it great to be asked to advise a British market leader who is also a British manufacturer? Being an avid coffee drinker who has not yet invested more than £30 on a coffee maker, I have been very impressed when friends roll out their Gaggia or Krups machines to produce quality coffee. For Fracino to diversify from Business to Business distribution to Business to Consumer is a big step.

The price puts the Cherub in competition with the upper end of the volume home electronics market, such as an LCD television, but not in the luxury market of Aga or Bang & Olufsen, where, based on the service offering, Fracino would like to position itself.

This suggests that Fracino has a couple of options for Cherub.

Bring the price down to compete with Gaggia and Krups and include the service differentiation via excellent DVD training and a helpdesk facility Or put the price up to £1,000 and set up a Birmingham store and training faculty; use advertising to attract consumers to the store and build a training-service business. If and when this works then consider franchising around the UK.