CONTRACT CATERING
A Report On The Sector By Six Market Analysts:
Geoff Carr, Leigh-Ann Jones,
Hannah Pitt, Louise Sainsbury, Timothy Wilkinson,
& Lindsey White
INTRODUCTION

Contract Catering

Analytical Review

Balanced Report of the Sector

Current & Future State
Introduction
MARKET DEFINITION

‘An individual or company who in
recognition of financial reward will
undertake to administer, control and direct
a specified catering operation within the
guidelines stipulated by the [client]
company’
• Cotes, 1971
Market Definition
MARKET SECTORS
Business & Industry
Healthcare
Education
Local Authority
M.O.D.
Oil Rigs
Catering for the Public
2000
1998
1996
1994
1992
0%
20%
40%
60%
80%
100%
Source: BHA UK Contract
Catering Survey 2001
Market Segmentation
CONTRACT CATERING BCG
HIGH
Market Share
Stars
Education (University)
Public (Dept Stores / Other)
Growth
Cash Cow
Business & Industry
Education (Schools)
Low
Low
Problem
Education (University)
Healthcare
M.O.D.
Public (Dept Stores / Other)
Dogs
Oil Rigs
Welfare
Market Segmentation
MARKET TRENDS


Branded outlets
increasingly important
Trends interrupted by
Foot & Mouth & Sept
11th
Support services
– Maintenance
– Cleaning
– Gardening
3000
2500
2000
Outlets

Number Of High Street &
In House Brands
1500
1000
500
0
95
96
97
98
99
Year
High Street Brands
In House Brands Source: Mintel 12/2000
“Market Size & Trends”
Market Trends
INDUSTRY SECTOR LIFE CYCLES
Business &
Industry
Reason: Saturated Market
Healthcare
Reason: Still growing
though already established
Education
(Universities)
Reason:Unsaturated, High
Growth
Oil Rigs
Reason:Fall in sales & outlets
Market Trends
MARKET TRENDS
(£M at 2000 prices)
Value (£M at 2000
prices)
3500
UK Contract Catering Market, 95 - 2000
3000
2500
2000
1500
1000
500
0
95
96
97
Year
98
99
00
Source: Caterer.com 27th July
2001 Industry Reports
Contract Catering
Market Trends
CONSUMER TRENDS





Higher expectancy of quality
Expectancy of value for money
Shorter meal breaks - snacking
Shift work increase - when should the canteen be
open
Demand a higher range of products including:
– Established brands
– Organic
– Ethnic
Market Trends
THE MARKET PLACE
Compass / Sodexho
3 500 Small Companies
Aramark UK, Initial & Avanance
13%
8%

Oligopoly
– Compass
– Sodexho

Three others
79%
– Initial, Aramark, Avanance

3500 ‘Small Business’
Source: Mintel 2000 “Summary
of Key Report Findings”
Competitive Structure
MARKET LEADERS

Sodexho

Compass
– Branding
– Price Setters
– Diversification

Three other ‘Large Companies’

3500 Small Companies
Competitive Structure
SODEXHO

A world leading multinational company
 UK Head Office Kenley, Surrey
 UK & Ireland Business & Industry largest market
 Clients include:
– Merrill Lynch
– BAE Systems

Result of merger between Gardener Merchant and
French company Sodexho Alliance
 Sales Turnover £6.5billion (2000)

Sodexho Prestige is leading leisure company.
Source: Sodexho Vision For The Management Team
Competitive Structure
ARAMARK UK
1 Of The Next ‘Big 3’
 Reading UK
 World Leader In Managed Services
 £4.47 Billion Turnover Worldwide (2000)
 Clients Include:

– BP International
– Conoco
– Barclaycard

Partnership Contracts
Source: www.berkeley-scott.co.uk
Competitive Structure
HALLIDAY CATERING SERVICES
One of 3,500 Smaller Contract Caterers
 Wokingham UK
 Leading Privately Owned Contract
Catering Company
 £16.5 Million Turnover
 Clients Include:

– British Aerospace
– Oracle
Source: www.berkeley-scott.co.uk
Competitive Structure
MARKET FORCES
OTHER
COMPANIES
Contracts Granted To New
Entrants
Create Deals
Acquisitions
Low Barriers,
CCT/BV
Smaller
FOOD & BEVERAGE
SUPPLIERS
STAFF AGENCIES
EQUIPMENT SUPPLIERS
‘’Tender’’
Companies
Big 2
CONTRACT
CATERING
&
IN HOUSE
CATERING
Ownership
Substitutes Can
Buy From Suppliers
CLIENTS / CUSTOMERS
Contract
Giver
CCT/BV
GOVERNMENT &
BUSINESSES
Consumer Free
Choice
OTHER FOOD OUTLETS
Clients Own
Substitutes
RETAIL OUTLETS
SMALL BUSINESSES
EATING FROM HOME
VENDING
Competitive Structure
TRENDS IN CONTRACT TYPE

Cost Plus
 Fixed Price / Cost
 Performance Guarantee

Nil Subsidy
 Partnership
 Concession
TRENDS IN CONTRACT TYPE (main three)
10000
8000
6000
95
99
4000
2000
0
Cost Plus
Fixed Price
Performance
Guarantee
Source: Mintel 12/2000
“Market Size & Trends”
Industry Background
INDUSTRY HISTORY (80’s)

Decline in Industrial / Institutional
– 1980 Education Act
– Demise of Manufacturing
– Increased unemployment (Recession)
Adapted from: Mintel 12/2000
“Market Background”
Industry Background
INDUSTRY HISTORY (90’s)

Increase in Institutional / Industrial
– Overall growth in late 90’s
– Rise in numbers in further education
– Higher demand in health / welfare markets

More Recent
– Compass / Granada
– High emphasis on aggressive acquisition
– Expansion into support services
Adapted from: Mintel 12/2000
“Market Background”
Industry Background
EMPLOYMENT

Steady Decline
Restaurants
41%
Hotels
21%
– Whole of Hospitality
Industry
– Maintained steady
proportion of 12%
throughout 97-99

Increase in full time
Contract
Catering
12%
Pubs, Clubs
and Bars
26%
Source: Labour Market Review,
Hospitality Training Foundation 2000
Industry Background

Staff
LEGISLATION
– National Minimum Wage (99)
– Working Time Directive (98)
– Paternity Leave (99), Part Time Workers (00)

Food
– Genetically Modified Foods
– Food Hygiene

Tendering
– Competitive Compulsory Tendering
– Best Value
Adapted from: Mintel 12/2000 “Market
Background”, “Summary of Key
Report Findings” & www.gov.uk
Industry Background
ENVIRONMENTAL ISSUES
Political
Economic


Introduction of CCT /
BV
 Food Hygiene
Regulations
 Other Food
Regulations
 Staff Regulations
P.D.I
 Effect of the Euro
 Effect of the
Recession
 Growth possibilities
in right economic
climate
Industry Analysis
ENVIRONMENTAL ISSUES
Social
Technological






Organic foods
Branding
Value for money
Life style changes
Concern about diet
Increase flexibility in
Cook / freeze and
Cook chill processes
 Cashless systems
 Loyalty schemes
Industry Analysis
STAKEHOLDERS
Customers
 Client
 Key Players
 Shareholders
 Government

Owners
 Staff
 Suppliers
 Community

Industry Analysis
SWOT ANALYSIS
STRENGTHS
 Expansion into support services.

A continually expanding industry within the UK

Recent trends towards the famous-names foods
franchising sector

Moves towards outsourcing non-core activities,
to minimise cost and maximise efficiency.

New consumer tastes and adventurous eating
patterns and food tastes.
Industry Analysis
SWOT ANALYSIS
WEAKNESSES
 Poor consumer research within the market.

Health conscious image overlooked by branded
fast food products

Over crowded dining areas & long queues make
uncomfortable atmospheres.

Market entry is relatively hard.

Tightening of health and safety regulations.

Limited business marketing & development for
smaller companies.

“Grazing”
Industry Analysis
OPPORTUNITIES SWOT ANALYSIS
 Emphasis on fresh foods
 Growth of leisure facilities & number or visitors
 Expansion into prison management
 New technologies
 Less than half of school children eat school meals
 Ability of the sector to adapt to the preoccupation
of customers.
 Broadening of consumer tastes, i.e. ethnic
 Diversification of methods of distribution i.e. “Drive
Thru’s” and mobile units.
 Many sectors yet to be exploited.
 Larger customer base for key players due to
globalisation.
Industry Analysis
SWOT ANALYSIS
THREATS
 Leading companies in industry have grown by
acquisition.
 Increased ready meals
 Flexible working hours
 Health & Dietary Issues
 The increasing number of small food retail
operations i.e. sandwich shops.
 Closure of Client Companies.
 Movements toward vending operations.
 Minimum wage requirements
 Move from Sterling to Euro
 Decreasing subsidy on meals
Industry Analysis
THE GLOBAL MARKET

Expansion – Viable
Sodexho
– 1999 - 17% UK, 17% Europe
– Change of name

Mergers, Acquisitions, Strategic Alliances
– Current UK companies operate in over 70 countries

Major Potential Growth
– Latin America
– Asia
– Africa
Global Market
ONE YEAR FORECAST

Compass & Sodexho to continue with aggressive
acquisition policies

Less sub-contracting from main two

Little growth in Business & Industry

Growth in Catering for the Public sector

Economic slowdown = growth slowdown

Branded Outlet expansion (continued trend)

Interest rates low

Tax increases likely
Future Forecasts
FIVE YEAR FORECAST








Compass & Sodexho continue to grow
Less competition
Less sub contracting
Main growth in public sector
Economic slowdown
Continued branded expansion
Tax increases
Less small companies (recession)
Future Forecasts
SOURCES OF INFORMATION

British Hospitality: UK Contract Catering Survey 2001, BHA,
London
 Caterer.com: Industry Reports – Contract Catering 27th July
2001
 Cuomo G & Vignal M, 1998, Gruppo Massone – Acquisition
Venture into the UK, British Food Journal 100/2 pp.65-75
 Labour Market Review, Hospitality Training Foundation 2000
 Sodexho: Vision for the Management Team, Spring 2001
 Wilson M et al, 2001, Contract Catering: a positional paper,
International Journal of Hospitality Management, 20/2
pp.201-218
 Wilson M et al, 1997, The UK Contract Catering Sector of
the Hospitality Industry, Facilities, 15/7/8 pp.177-186
Sources
SOURCES OF INFORMATION

Mintel Report Code 12/2000:
– “Summary Of Key Report Findings”
– “Market Background”
– “Market Size & Trends”
– “Market Segmentation”
– “The Supply Structure”
– “The Future”
– “Forecast”

www.gov.uk
 www.berkeley-scott.co.uk/jobseeker_help/careers_catering.htm
Sources
THANK YOU
ANY QUESTIONS?