Editor’s Note: In November 2018, Paradies Lagardère finalized its acquisition of Hojeij Branded Foods (HBF), a leading airport restaurateur in North America. Paradies Lagardère claims the acquisition creates the third-largest operator in the North American airport travel retail and restaurant industry, with total annual sales exceeding $1.2 billion. The two organizations’ existing food and beverage operations are being combined to create the new dining division of Paradies Lagardère.
The deal came on the heels of HBF’s purchase of Vino Volo in 2017, an acquisition that greatly expanded HBF’s breadth and influence in the North American airport concessions market. The latest deal pushes Paradies Lagardère, an airport retail heavyweight, into the food and beverage concessionaire big leagues. The dining division of Paradies Lagardère will operate in 42 airports with close to 100 brand partners and proprietary concepts, ranging from full service to fast casual to quick serve. The new operation will surpass $350 million annually in food and beverage sales, Paradies Lagardère says.
One month after the deal was finalized, AXN’s Carol Ward spoke with Gregg Paradies, president and CEO of Paradies Lagardère, and Regynald Washington, president, Paradies Lagardère Dining Division, to discuss the company’s plans going forward.
WARD: Now that the acquisition is finalized, Gregg, can you explain why Paradies Lagardère undertook this transaction and what it means for you going forward?
PARADIES: We started our dining division in 2011-2012, and we grew it from zero to approximately $100 million, all organically, one contract at a time. We were able to do that through the Paradies reputation for quality and service. This year, we completed our five-year strategic plan. Our goal was to grow our dining division to $500 million. Even though we had grown organically for many years to $100 million, we knew that in order to accelerate the growth, a strategic acquisition would make sense. Our parent company was very open and willing for us to explore options because it aligned with our global strategy as well.
That was a key part of our strategic plan because food service in airports is growing faster than retail. Also, airports are looking more and more for hybrid concepts that offer both retail and food in one space. And airports are putting out hybrid packages, including retail and restaurant units in one package. We knew in order to compete we needed to become a bigger player in food and beverage.
This opportunity with HBF / Vino Volo came earlier than we expected. Why HBF? We shared same goals: quality and service comes first, and as importantly, it was a very good cultural fit. We both live by the family culture. Our team members feel like they’re part of much more than just a company. LS [Travel Retail] and Paradies were a very good cultural fit in 2015, and that in turn lead a very successful integration. Now with HBF / Vino Volo and Paradies coming together, the cultural fit is ideal, and will lead to a very successful integration of the companies.
Another important factor was brands. Our brand portfolios complemented one another. Also, our commitment to people was important – we know that’s what fuels the engine. There’s a highly engaged workforce out there for HBF and Vino Volo just like there has been with Paradies Lagardère.
WARD: Regynald, would you like to weigh in on why Paradies Lagardère was a good fit for HBF?
WASHINGTON: Absolutely. HBF was owned 75 percent by Morgan-Stanley Private Equity, and private equity firms typically hold an investment for about five years. We were given a five-year plan, and we were able to reach that five year plan goal in three years. All of a sudden we were ready to move on and do something with another organization.
We’re based in Atlanta. Paradies is based in Atlanta. I have been a huge admirer of the Paradies organization for over 25 years. It’s really interesting to note that the Paradies folks are maniacs about quality, and so are we. The Paradies folks are maniacs about building beautiful facilities, and so are we. The Paradies folk have wonderful brands in their portfolio, and we have wonderful brands as well that complement their brands. We happen to really, really enjoy the culture of treating employees with respect and giving our employees a runway to grow their careers and to become better and to have more and more opportunity, and that’s a huge match. As we look around the industry at all of our competitors, I don’t think there could be a better partner, and we’re excited about it.
Both Paradies and HBF are maniacs about service and execution. That’s what we sleep, eat and breathe. HBF had explosive growth in the food and beverage business, just like Paradies. In 2010, we were at $27 million. We grew organically with the exception of one acquisition – the Vino Volo acquisition. We’re going to be at $195 million at the close of 2018, and with Vino Volo we’ll be at $250 million. Then adding the $100 million on the Paradies side [F&B only] we’re going to be north of $350 million.
WARD: Organizationally, can you can give me a sense of what the new company will look like?
PARADIES: The new dining division -Paradies Lagardère Dining Division – is a stand-alone division of Paradies Lagardère. Regynald is the president. He’ll be running this business very similarly to how he’s run the HBF business over the years as a stand-alone division. Of course, there will be shared services like financial services, but we want to make sure that the operational excellence of what HBF has executed over the years continues. The dining division consists of the former Paradies Lagardère food business, the Vino Volo business, and the HBF business.
WARD: Gregg, how does this acquisition better position Paradies Lagardère going forward?
PARADIES: From a strategy standpoint, we’re getting closer to our five year goal, to become a $500 million dollar dining division. That gives us greater size, greater scale, greater expertise, and additional world class brands to compete for any major contract in North America. It puts us on equal footing with the bigger players in the industry, but at the same time, it’s not just about being bigger, it’s about being better, and that’s what this positions us to do.
WARD: Given that F&B is generally growing at a more rapid pace than retail in airports, is there a shift on the retail side for Paradies Lagardère or is it full steam ahead?
PARADIES: To be clear, there’s not a move to de-emphasize retail. We will have a record year [2018] in our retail business. Most of our retail brands continue to perform very well, including some of our newer brands like Dylan’s Candy Bar and Spanx. Many of our national brands have performed much better than on the street, which is why they love airports. On proprietary brands, we have a new brand called The Runway, which is an athleisure brand. Our first store recently opened in Tampa and is performing well. The other area that is hot on the street and is now become more popular in the airports is pop-ups. Flexibility and nimbleness are critical, and we’ve been able to take advantage of a lot of local opportunities with pop-up retail units. Also, we’ve been very successful utilizing technology to enhance the customer experience.
Today we operate retail in more than 90 airports. Within those airports there are a lot of growth opportunities. We’re trying to accelerate the growth in retail and we have very successfully in the last several years.
WARD: Finally, can you look into your crystal ball and tell me how you see this partnership playing out over the next couple years as you fully integrate?
PARADIES: We are extremely bullish for the next two years. Once again, 2018 is going to be record year. Historically, Paradies has enjoyed 58 consecutive years of sales growth, and 58 consecutive years of profitability. We see that trend continuing, and really accelerating now with this acquisition. During the past year, we had a record number of RFP wins. We will be opening more than 100 new retail stores and restaurants during the next 12-18 months. We must continually improve and raise the bar every year in order to stay ahead of the competition.
WASHINGTON: We’re going to develop a world-class food and beverage organization that’s going to really benefit not only our landlords but the passengers. It’s going to create new standards and opportunities for our employees and management both. It is our plan to be the best-in-class and to offer a world class experience on a consistent basis, again and again and again, for the traveling passenger.
