EasyFood: next item on Stelios Haji-Ioannou's menu

EasyFood: next item on Stelios Haji-Ioannou's menu

The ground floor of an empty life insurance office in Croydon seems an unlikely setting for the first of what could be a new chain of food stores, but it is here that easyJet billionaire Stelios Haji-Ioannou is planning to test his latest venture – a super-cheap grocery outlet to be branded easyFoodstore.

Haji-Ioannou has bought the freehold to the old MetLife office block opposite East Croydon station. It will house various existing easy-branded ventures: the top floors will be an easyHotel, the middle floors will offer short-term office space and perhaps a gym. But the ground floor is reserved for the first branch of his ultra-budget grocery store, to open this autumn. If it succeeds, the entrepreneur could turn it into a national chain.

The aim is to sell basic grocery items, such as tinnned and dried food and washing powder, at rock-bottom prices: lower even than the so-called hard discounters Aldi and Lidl that have thrived in hard-times Britain.

News of the venture leaked out earlier than Haji-Ioannou wanted and so, he said, he can only give a broad outline of what the business will be like. There will be 50 to 100 items on the shelves, with no fresh or frozen food apart from, possibly, bread and eggs.

He is not going into partnership with a big retailer and he does not claim any great innovation. He will source non-branded goods from wholesalers.

"There is no business plan. I don't know what the shop will look like. If you ask me to rank the risks, the biggest is that nobody turns up. It's a freehold property so I can afford to experiment for a year or longer," he said on the phone from Monaco.

Haji-Ioannou said the idea came from two sources: his Food from the Heart project in Cyprus and the growth of food banks in the UK.

Food from the Heart hands out cheese and salami sandwiches to Cyprus's needy people at lunchtime. The pilot site in Limassol has given out more than 7,800 snacks in a month. Haji-Ioannou plans to extend it to more sites on the bailed-out island.

"In simple terms, I realised that food is the most fundamental need for a person. In difficult economic times, people's priorities change and they might be willing to do something that secures for them the lowest possible weekly food bill."

EasyFoodstore will be a kind of non-convenience store. It will open, he says, maybe six hours a day, five days a week, to keep costs and prices down.

"Food from the Heart is open two hours a day, five days a week but that hasn't made it unpopular. Are people saying 'I'm not coming back because I've had enough halloumi'? We haven't had any evidence that is how they think."

But easyFoodstore will not be a charitable venture. The billionaire thinks he can make money while providing cheaper food. "There is a place and a time for philanthropy and there is only so much money you can give away. If you are going to make it more scalable than that you have to find a commercial formula."

Croydon is not one of London's poorest boroughs but it has pockets of extreme poverty and its town centre has boarded-up shops, a branch of pawnbroker Albermarle & Bond and other signs of austerity UK. Less than a mile from Haji-Ioannou's building, on an industrial estate, is Croydon's own food bank, in the Praise Baptist church.

Grace Saah, the church's administrator, said: "You don't have to go far in Croydon to see what is going on. There is a lot of homelessness, people begging for money and you see a lot of single-parent families. With changes in benefits, many people are suffering."

At a busy lunchtime session, people pick up food donated by the public, sometimes just for themselves and sometimes for their family.

Will easyFoodstore fill a gap in the market for people struggling in Croydon?

"Yes and no," said Saah. "Those that come to us don't have a great deal but there are people who slip through the net because of pride and things like that, and they will take whatever they can."

Adam Phillips is 18 and has filled his backpack with cereal, frankfurters, tinned fruit and other staples from the food bank. He is there because his benefit has been cut off temporarily.

When he has money, he shops at Asda, Poundland and 99p stores.

Phillips said the idea of EasyFoodstore sounded "good – because I'm always looking for cheaper places to go". But he pointed out that the supermarkets have their budget ranges. "How cheap is he going to sell it?"

Bill Grimsey, a veteran retailer, thinks Stelios will struggle: "Stelios's formula when he went into the airline business worked extremely well because none of the big boys had anything to compare with it or the competency to do it. But that competency exists at Aldi, Lidl and in a specialised form at Iceland. Where do you get the buying strength from to get prices down? The barriers are huge and I don't think he's going to make it."

Haji-Ioannou argues his ability to buy property gives him a key advantage. He already holds the cheaply bought freehold of the Croydon building so the shop does not need to be that profitable to give him a healthy return.

"One of the reasons I'm interested in retail is because it's the only sector in the UK that is depressed. Retail shops are empty and there must be bargains in retail property."

Chris Mould, chief executive of the Trussell Trust, which sets up and backs food banks nationally, argues that basic food could be cheaper in Britain. He cites Uswitch figures from 2011 that showed the UK was the most expensive country in Europe for a basket of staples.

"What that tells us is that there is room for something to happen. We want to see the industry in general do everything it can to provide nutritionally balanced food at lower prices."

For Haji-Ioannou, easyFoodstore is a hunch that may or may not pay off – another in a line of ventures he has tried since making his fortune with easyJet.

"Luckily I have enough resources so I can do a simple experiment like this. If we don't make a lot of money, but we help people put food on the table, that is fine."