Abstract
A period of expansion appears to be coming to an end in the business and industry (B&I) catering sector, as a number of negative trends come to bear on the market. These include the dramatic rises in food prices and fears over the economy, which are forcing clients to look for ways to reduce their costs. Meanwhile, the number of outlets in the sector is beginning to fall after years of steady growth, as contractors begin to drop low-yield or unprofitable contracts. As a result, the total market should fall marginally in 2008 as it enters a period of consolidation, with contractors struggling to achieve the margins they once did.
Other trends notable in the industry include the drive by clients and contractors towards low- or nil-subsidy contracts, which suggests that caterers are boosting their commercial potential. According to the BHA, the total number of these contracts reached 713 in 2007, an increase of more than 20% year on year. However, they still only make up less than 5% of the total market. Caterers claim the key ingredients for the success of nil-subsidy agreements are sufficiently large head counts at the sites, and high levels of autonomy from the clients to run their services.
Meanwhile, the continuing rise of facilities management consortia is also helping the market to grow, and crucially is helping to redress the balance of power back towards contractors. The ultimate ambition of the large FM firms is to run the entire back-office operations for a client, of which catering would be only one embedded service.
Hypothesis: Can caterers make internal business and industry canteens profitable without large subsidies?
Main issues:
- Shifting business models
- Relationships with clients
- Changing consumer concerns/demands?
- Competition with the high street/roll of brands/foodservice companies taking on a more commercial edge as a result?
- Food costs and implications of rising commodity prices
- Employment issues.
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