Storm in a Coffee Cup: is Pret at the forefront of a new subscription war?
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There’s a chance that if you, unlike me, are based outside of the UK, you won’t even have heard of Pret a Manger. The sandwich shop — which is ubiquitous here in London, where it has 273 outlets — is a British institution. But compared to its 447 shops on British soil, it has only a paltry 64 in the United States, 45 in France, and a smattering elsewhere across Europe and Asia. So if you’re not reading this blog from the comfort of an over-priced living room in London, there’s a good chance that you’ve missed the Pret phenomenon.
Poor you. Pret is a purveyor of overpriced sandwiches and even more overpriced coffee. As a high street coffee chain it is probably fractionally more sophisticated than Starbucks, but very much in that ballpark. Sandwiches — usually wrought on jaw-breaking sourdough — tend to cost a fiver, and coffee there is increasingly north of £3. It has become a punchline to jokes about inflation: “I wasn’t planning to re-mortgage the house, but then I got invited to lunch at Pret…”
Except that in 2021 Pret did something fairly unique for a food and drink company: it launched a subscription. Club Pret costs (at time of writing) £30 a month and entitles subscribers to 5 barista-made drinks (which essentially means any hot drink, plus iced variants) and 20% off the remaining menu items, including food. It is essentially a down payment on consumption for workers in central London: so long as you are purchasing roughly 10 coffees a month from Pret, you are going to save money with their offering. (10 coffees a month is, obviously, an insane amount of coffee to be buying from any specific retailer.)
Of course, the hope, for their part, is that coffee obsessives are drawn into the world of over-priced sandwiches and salads. Infrequent Pret drinkers have become inveterate Pret drinkers — and if you’re going into a branch 2 or 3 times a day for coffee, chances are you’ll also increase your intake of sandwiches, wraps or teeny-weeny portions of mac’n’cheese.
The basic principle is this: Pret has increased its prices out of whack with inflation, and to the point where no sane person would pay cover price. £3.80 for a flat white, for example, is a nonsense, even as cost of living has driven prices up across the board. But if I saw that price at Kaffeine — regarded as the best coffee shop in London by weird Australians who know about these things — I would have second thoughts, let alone at a chain where the coffee is made via a press of a button. What that price is, really, is a trap. Tourists visiting London (who constitute a significant percentage of Pret’s customer base) will pay it because they a) don’t know the market value of a cup of coffee in the UK, b) are bamboozled by exchange rates, and c) are on holiday, and therefore less likely to penny pinch. So, the theory works that you can price up most items and still retain that 30% customer base who are treating their disposable income like it’s really, really disposable.
The second function of the price increases is to push regular folk — like myself — towards the subscription. With a high street coffee shop, beverages are often perceived as a gateway drug for other high-margin offerings: sandwiches, soups, salads, juices, cookies…etc. Pret wants to sell more food, which means reinforcing the practice of walking through their doors, even if, in the short term, it impacts the sale of £3.80 flat whites. But there’s also the inertia impact with many subscriptions. How many people will sign up to Club Pret and actually only use it a couple of times a month? Or use it predominantly for food? At £30 a month, you’d have to be spending £150 on food before you started to see a return on investment from the 20% discount.
No, there will be a significant number of people who make a real-terms loss (before we even apply the question of excess visit — i.e. using Pret more than you otherwise would have — to that calculation). In order to mitigate this, many people engaged in a form of cartelisation, sharing their QR codes and amortising the cost of the subscription over 2, 3 or more people. The only weapons Pret utilised against this were the 5 drink cap (which, if you’re in a group of 3 or more could be prohibitive) and a 30-minute interval between purchases. Otherwise, the scheme was open to be gamed.
All that changed this week, when Pret announced new measures to curb account sharing. QR codes will now only be accessible via the Pret app, giving the company control over how often they refresh. Account sharing, which was once simple, would now be prohibitively hard. The flack began immediately on social media. “pret now requiring the QR code to be used through the app, which then requires authentication from my email AND phone in addition to multiple capachas [sic] and then not working??” one Twitter user wrote. “yeah no this is gonna be the thing that makes me snap.”
What Pret is doing is precisely in line with moves we’ve seen over the past several months from companies like Netflix, who have suddenly become aware of the impact that account sharing could have on their bottom line. Netflix introduced new measures to avoid accounts being used outside of specific households — it immediately gained about 6m new subscribers. And the subscriber growth has continued into the new year, with Netflix recording better than anticipated earnings, causing the stock to rise to a two-year high.
There are a couple of crucial differences between Netflix and Pret. Firstly, the price point: in the UK, Netflix starts at £7.99 pcm, whereas the Pret subscription is a flat rate of £30. Secondly, the subscription model has been hard-baked into Netflix from its early days, and there is basically no alternative in the world of streaming. Everyone uses the subscription model. Pret, meanwhile, is unique amongst British high street retailers for embracing subscription models. And, thirdly, exploitation of the system has been priced into the Pret subscription since Day One, whereas Netflix has a large userbase who have never even thought about account sharing.
So, Pret is vulnerable to its changes. Their thinking is that after a couple of years of the scheme, patrons are sufficiently hooked on the offer that they can start to strangulate the provision. What are your other options? No other chain offers a similar service, and reverting to a pay-per-item system is going to leave you out of pocket. Under this logic, there is quite a lot of latitude for reducing the generosity of the offer. After all, coffee is mildly addictive: after two years getting tanked on 5 espressos a day, you are unlikely to go cold turkey.
The bigger question is how Pret customers structure their internal cartels. Will it now fall on the ringleader to shoulder the financial burden alone? That is what Pret is hoping, but a change like this could disrupt how these subscriptions are being funded. The last thing the company wants is any interruption to the subscription. If most of these multi-person accounts are essentially an alpha gifting a beta (or two) out of mere generosity, then fine. But what if they’re accounts that have a group chat and a Monzo split set-up? Do those accounts restructure or cancel?
The Pret subscription has been a canary in the coal mine of the way that the economy is heading. It’s been an undoubted consumer success. While take-up seemed a little slow at first, you will now see well over 50% of Pret patrons using a Club Pret subscription. The subscription appeals both to white collar office workers, and blue-collar labourers. The fact is that 5 coffees a day, over the course of a month, means roughly 150 drinks. Split over the £30? That’s about 20p a drink. There is simply no other value like that in central London. And so, the subscriber base has grown and grown, and that’s all good news for Pret while it maintains a monopoly on this system. But success begets imitators, and just as Netflix’s recent woes were largely initiated by the emergence of a galaxy of similarly-priced competitors (Prime, Disney+, AppleTV etc), so too will Pret be braced for its rivals to attempt a similar model.
Unless they don’t. And if they don’t, it will represent a blow for the subscriptionification of everything. I wrote last year about the financial issues caused by the subscription era, in a piece which has gone on to be my most-read of all time. My main concerns in that piece were journalism (and porn), but that was before I became a Club Pret subscriber myself. When I joined Pret’s subscription service in late-2023, I started to think more widely about the implications of this world in which content and product are paid for in advance. It is, after all, how we pay for electricity or phone data or high-speed internet or insurance or, you know, rent. We agree a fee and then keep paying it indefinitely, and keep receiving the product as a result.
The difference, of course, is the impact of inertia. If I paid my monthly electricity bill but then had to go to a shop and take home a basket of electricity, I’d probably end up living in a colder house. The Club Pret subscription — like my Beer52 addiction or Cineworld Unlimited account — is based off the fundamental premise that a significant percentage of subscribers will basically forget that they’re subscriber, or, at the very least, forget to unsubscribe. Month after month will roll around and people who ought, in pure financial terms, to leave the scheme, will stay on. That’s free money, straight to the company. That’s the impact that inertia has — and it’s a major part of the subscription economy. If, with all that going for it, Pret starts to restrict its subscription offering, and no rival emerges in the space, then it probably suggests that, from a pure “pennies and pounds” perspective, the model doesn’t work for goods in the same way that it does for services.
The changes announced to the Pret scheme offer another opportunity for consumers to vote with their feet. Pret, as a company, is already taking the piss out of its customer based, inflating prices significantly beyond what would be reasonable in a rational marketplace. They have also employed a scorched earth approach to coffee shop retailing in London, often opening two or three branches within a few hundred yards of each other. The impact has been to salt the earth for competitors. So not only have they introduced a pricing structure that is a slap in the face to consumers, they’ve also created an ecosystem where non-Pret coffee shops struggle to survive. Now that they’ve got a popular subscription scheme, it is time for them to start squeezing their subscriber base. First come measures, like today’s, which cauterise the ability to exploit the service. Next come the price rises and the multi-tier system (trust me: soon enough it’ll be £30 a month for Tier 1 coffees like Americanos, £35 a month for Tier 2 including flat whites and iced coffees, and £40 a month for access to all hot/cold drinks, including hot chocolates and juice coolers).
If these changes result in an increase, rather than a decrease, in Pret’s subscriber base, then I’d almost be inclined to give up on my hope that the age of subscription might be drawing to a close. Punters have huge power over Pret; especially compared with the power they wield over Netflix. Perhaps Pret will discover that for many of the people who have, in the past year or so, become loyal customers, the subscription, even via a syndicate, represented an otherwise financially improbable chance to become Pret customers. Perhaps these syndicates will have to revert to a pre-Club Pret world, rather than finding ways of adjusting to the new Club Pret reality.
Or maybe Pret will push a bunch of people who can barely afford it into purchasing individual subscriptions. They can keep flogging over-priced coffee to tourists, keep selling over-priced sandwiches (don’t kid yourself, even with a 20% discount they’re still over-priced) to choice-starved office drones. Maybe, in the end, inertia always wins out over collective action, and subscriptions keep getting more ubiquitous, even while they become more restrictive, worse value, and continue to insult consumers right to their faces.
