Patisserie Valerie – not smelling so sweet


Nick settles an old score, and comments on a current business saga. 

Schadenfreude is the experience of pleasure, joy, or self-satisfaction that comes from learning of or witnessing the troubles, failures, or humiliation of another. It is one of four related emotions or concepts. Schadenfreude is a complex emotion, where rather than feeling sympathy towards someone's misfortune, it evokes joyful feelings that take pleasure from watching someone fail. This emotion is displayed more in children than in adults. However, adults also experience Schadenfreude, they are just better at concealing their expressions.

This perhaps over-long description is of a sentiment that may seem rather alien to a wine website. But in another distinction between the worlds of wine and food, it is a sentiment that has been widely mouthed, albeit silently, since the announcement yesterday that the UK chain of cafes Patisserie Valerie had finally gone into administration, having revealed that it was in severe financial difficulties last October due to a ‘black hole’ in its accounts.

This sentiment was felt principally at the role played by its chairman, Luke Johnson, whose fall has been silently gloated over by many in the hospitality industry.

There are several reasons for this. Envy at the amount of money Johnson has made in his career. Annoyance at the manner Johnson has pontificated in so many newspapers and magazines on the need for strict managerial competence in all aspects of any business that has allowed him the oxygen of publicity. Plus there are those, such as myself, who have longer-held grievances against Johnson.

My grievance and that of several other restaurant reviewers date back to 2004 when Johnson, then chairman of Signature Restaurants, in those days a company comprising The Ivy, Le Caprice and J Sheekey as well as Belgo and the Strada pizza chains, decided to have a go at all restaurant critics in print.

Johnson’s accusations towards us ranged from our being biased, envious and alcoholic to being corrupt and spiteful and revelling in the downfall of the places they criticise. I remember being on a radio programme with Johnson shortly after he had made these accusations and asking him precisely what he meant. He went quiet. Fay Maschler resolutely rebuffed him and his silly accusations in a put-down suitably entitled ‘Maschler Bites Back’ published in ES on Monday 22 November 2004, although anyone looking the article up must be warned that it comes with a portrait of Johnson with his trademark smirk.

My other professional objection to what Johnson has done lies in the destruction of an excellent trading name, one that I can still recall in its heyday. The original Patisserie Valerie was founded in the 1920s by a Belgian lady, Madame Valerie, on Frith Street, Soho. Then, following bomb damage, the cafe moved to Old Compton Street, which is where I first came across its charms in the 1970s. It was a beacon of distinction in an area full of sex shops.

In 1987 the Scalzo brothers bought the cafe from Madame Valerie’s family and grew the business to nine cafes. Then in 2006 Luke Johnson’s Risk Capital Partners bought a controlling share. Johnson went on the record as saying, ‘We have significant experience of rolling out successful food and drink concepts, including Pizza Express, Strada and Giraffe. Patisserie Valerie is a much-loved institution with tremendous heritage. We are confident there are many upscale locations across Britain's cities that would love the authentic pastries, cakes and savouries supplied by Patisserie Valerie’.

This statement contains several contradictions. Experience gained in rolling out pizza restaurants does not qualify anyone for the even more cut-throat business of serving cappuccinos, cakes and pastries. And how many upscale locations across Britain did Johnson anticipate would welcome Patisserie Valerie with open arms? At the time the chain crashed into administration there were branches in 155 different locations, including several in Debenhams, and the company also supplied J Sainsbury with a range of cakes. The company employed over 3,000 workers. The administrators, KPMG, confirmed yesterday the immediate closure of at least 70 of the chain’s stores.

There is also the question of timing and how 155 stores are to be supplied, two phenomena that may hold a silver lining for the British consumer. The previous decade has seen a burgeoning of independent coffee houses across the UK, small and serving cakes and sandwiches made either in-house or locally. This is in complete contrast to the master plan behind Patisserie Valerie’s strategy for growth that saw ‘central production kitchens’ (or CPUs – central production units – as they are known in the trade) at the heart of their expansion.

CPUs are now instrumental in the evolution of many restaurant chains today but it is in cakes and pastries that their influence is so blatantly obvious. The picture above was taken yesterday at Patisserie Valerie’s branch in St Pancras station. I find it difficult to believe a human hand was responsible for such uniform confections. Quite a contrast to the original cakes produced by Patisserie Valerie, n’est-ce pas?

So, if the company’s halving in size means that fewer of us will be tempted by these over-sweet, over-large confections, then possibly this will prove to be a good thing. Certainly, the whole saga which began last October with the company announcing a widespread ‘accounting fraud’ that resulted in £9.8 million in net debt rather than £28 million in cash seems to be far from resolved. The Financial Reporting Council is also looking into the accounting and the conduct of Grant Thornton, Patisserie Valerie’s previous auditor.

The Financial Times, which has followed this case assiduously (and used to publish a column on management by Johnson), had a  fascinating article yesterday written by Jonathan Eley in which he points out that the £20 million that Johnson made available to the company over the past six months may be precisely the amount he has made from it in his role as its chairman since 2006. On publicly available information, Johnson put roughly £26 million into the company but has taken £46 million out, before taxes and professional fee. Eley ended his article yesterday by saying, ‘The shares, suspended at 420p, have not traded since and are now almost certainly worthless. Investors who supported the emergency share issue, priced at 50p, are also unlikely to see any money returned to them.’