Aegis Brands Inc. has signed a deal to sell its Bridgehead coffee business to Toronto’s Pilot Coffee Roasters for $3.5 million – the second time in four years the chain of Ottawa-based coffee houses has changed hands.
In addition to Bridgehead, Aegis Brands owns and operates St. Louis Bar and Grill and Wing City by St. Louis.
Aegis Brands chief executive Steven Pelton says the sale allows the company to build on the momentum of the St. Louis brand.
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“We know there is significant growth yet to be realized with this brand and we are focused on creating shareholder value with this great asset,” Pelton said in a statement.
Toronto-based Pilot Coffee Roasters is a specialty coffee roaster, online retailer, wholesaler and café operator. The sale is expected to close in the first quarter of 2024.
“With Bridgehead’s focus on organic coffee, it will strengthen even more our exceptional range of specialty coffee products and services to our customers across Canada,” Pilot Coffee CEO Bruce Miller said in a statement. “With both brands in the portfolio, it will bring the company to its continued goal of being Canada’s leader in specialty coffee.”
Aegis says proceeds from the deal will be used to reduce debt and for general working capital purposes.
The sale comes four years after Aegis acquired Bridgehead, which now operates 21 locations in the National Capital Region, from previous owner Tracey Clark. Clark bought the company from Oxfam Canada in the early 2000s and grew it into one of Ottawa’s best-known retail brands.
Aegis – whose former holdings also include the Second Cup coffee chain – planned to expand the brand into other markets, including the Greater Toronto Area.
But the COVID-19 pandemic dealt Bridgehead a heavy blow as lockdowns aimed at curbing the spread of the virus caused revenues to plummet, prompting Aegis to put its expansion plans on hold.
Bridgehead’s business began to perk up after COVID-19 restrictions eased, and its revenues in the third quarter of 2023 were up more than 20 per cent over the previous year.
Still, a prominent Ottawa retail analyst said the coffee industry is a “competitive market” and Aegis probably decided it could make more money by concentrating on its restaurant business.
“My educated guess is that the margins are better in the industry they’re staying in,” said Ian Lee, an associate professor at Carleton University’s Sprott School of Business.
“I’m guessing that they decided (the coffee business) was never going to become that profitable or that strong for them, and so they decided to take the money and re-allocate it.”
Lee said it “makes sense” for Bridgehead to join forces with a company that is focused solely on coffee, noting the retailers can now take advantage of market synergies and build on their combined knowledge of the business.
“I think there’s a better strategic fit there,” he explained.
– With additional reporting from the Canadian Press
