by Shane Henson — April 15, 2013—Apex Insight, an independent provider of research, analysis and consulting services covering business services markets in the U.K. and Europe, recently released a report providing a past-and-present snapshot of the contract catering industry within the United Kingdom. UK Contract Catering: Market Insight includes insights from interviews with contract catering services customers, profiles of the leading players within the industry, and growth forecasts for the market and its key drivers.
This market report describes how the industry was impacted by the economic downturn with the 2009 fall in employment, leading to fewer people in the workplace requiring to be fed. While outsourcing remains an important driver of market recovery and growth, its level, and hence impact on market growth, reportedly varies by sector. Business and industry is mature but there is more potential in other areas such as education, health care and local authorities, the report notes.
Although industry volumes have suffered in this environment, the Apex Insight study conducted for the report found that companies were able to increase prices. Above-inflation increases in food costs have been passed on to customers, who largely accept this and expect it to continue in future. Hence, margins have been stable across the industry, in spite of the economic downturn, the report explains.
Another interesting finding from the study is that catering has continued to converge with facilities management. Many of the leading catering companies now offer additional services, enabling them to increase revenue per contract—the key industry value driver—while leading FM groups and integrated service providers increasingly include catering as part of their bundled services offer.
According to the report, the largest operators are Compass and Sodexo. Both of these companies have continued to expand their service offer to include a wide range of non-catering services and are now major international operations with presence in many countries. However, the fastest-growing of the leading companies has been BaxterStorey. In contrast, it has retained its focus on U.K. catering, winning a series of high-profile contracts from incumbent competitors.
According to Apex Insight, the customers it interviewed split between those who are keen on the idea of catering being part of a bundled service and those who see value in keeping it separate. Some customers report it gives them cost savings and efficiency benefits, in particular from having a single point of contact for all services. However, others feel that an integrated provider, especially one that lacks the capabilities to self-deliver catering services, does not add enough value to justify its management fee, or that catering, being more important to staff morale than other services, is worth leaving to a specialist.
Apex Insight says that future growth in the contract catering market appears likely given the further potential for outsourcing. In setting out its forecast for the market, the report takes into account the different conditions in each of the main segments. For example, in the business and industry segment, changing workforce trends, such as increased part-time and home working, are reducing the impact of recovery in private sector employment levels. In education, demographic trends have led to an increase in school numbers, but some observers expect increases in student numbers to stall given recent changes in university funding. And in healthcare, demand for residential care continues to increase with an aging population, but funding of care remains a challenge.
