Caterers face uncertain future with confidence

There are tough times ahead for contract catering, but the latest British Hospitality Association (BHA) Food and Service Management Survey shows an ultimately confident sector that can see both challenges and opportunities this year.

For many, 2009 looks set to be a year of feverish activity as they attempt to offset the loss of business volume - employers in the business and industry (B&I) sector especially are shedding jobs as the recession bites - against a surge in interest from clients looking to reduce costs by outsourcing "expensive" services such as catering.

Phil Hooper, chairman of the BHA's food and service management forum, struck an optimistic tone in his editorial comment in what is the 20th Food and Service Management Survey, sponsored by Nestlé Professional.

"Food service management [FSM] companies have the ability to adapt to changing economic circumstances," wrote Hooper. "They can bring particular strengths to the marketplace that are difficult - sometimes impossible - for the in-house caterer to provide."

One of these strengths appears to be the provision of soft services, something large players such as Hooper's employer, Sodexo, and Compass - with Eurest Services - have rushed to embrace in recent years.

The survey reveals that there were 3,148 catering contracts with soft services attached as of last year. Cleaning and domestic services remained by far the most popular, accounting for 1,241 deals.

Opportunities

Although the figure was slightly down on 2007, Peter Backman, managing director of food service consultancy Horizons, believes there are opportunities for traditional contract caterers to make inroads into facilities management - taking on more in the "hard services" area - to offset a stagnant core market.

"One area of expansion is to evolve beyond merely food services and into the area of true facilities management," he said. "This is not an easy road to take - not least because it is already well travelled - but companies that are flexible and service-orientated, as FSM companies certainly are, are well placed."

The industry as a whole prospered in 2008, with record turnover and meals served, the report shows. Turnover increased 3.9% to £4.1b (2007: £3.98b) and contractors served a record 1.62 billion meals, 1.2% up on 1.6 billion in 2007, despite a fall of 3.5% in the number of outlets to 16,983.

B&I business is still the biggest single category by some way, making up more than half of outlets and 3.3% up on 2007 with 8,719 outlets.

One of the largest and most enduring challenges, other than the economy, faced by caterers in all sectors last year was rampant food inflation, which the survey put at 8% in 2008.

Tim West, managing director of Lexington Catering, warned caterers to be careful about reducing the quality of meals through increasingly popular "menu re-engineering" as they battle to maintain profit margin.

Optimistic

However, Compass UK managing director Ian Elâ€'Mokadem summed up the generally optimistic tone of contributors when he said: "Provided we stay focused and work closely with our clients through tough times, the prospects are very good."

Number of outlets

Source: BHA

Types of catering contract (2008)

• Cost plus/management fee (the client is billed for the cost of the operation, plus a management fee)
  3,842 (2007: 4,855)
• Fixed price/performance guarantee (the client agrees a total subsidy and costs cannot rise above that figure)
  12,070 (2007: 12,035)
• Profit and loss/concession contracts (the client and the caterer share profit or loss) and total risk contracts (the caterer invests in the facility and earns all the revenue)
  1,071 (2007: 713)

Note - The figures illustrate the shift in food and service management towards fixed-price or profit-related contracts. Cost-plus contracts represented more than 60% of the market in 1994, but this has now declined to 22%. Nearly 80% of the FSM market is now commercially based.

Source: BHA