Contract caterers upbeat in the face of downturn

15 January 2009 by
Contract caterers upbeat in the face of downturn

As the economy reels from a wave of business collapses Janet Harmer speaks to the leading players in the contract catering industry and finds a high degree of optimism as they face the year ahead

With all the doom and gloom pervading the hospitality sector it is easy to forget that many operators are relishing the challenges of 2009. Contract caterers, perhaps more than any other part of the industry, believe they are well set to cope with the demands that the year is going to bring.

After all, said Trevor Jones, commercial director at Charlton House, caterers are used to coping with falling budgets while at the same time facing the challenge of rising client expectations. "Contractors will have to be ever more resourceful and innovative to find cost-effective ways of showing potential clients that smaller budgets don't necessarily have to mean lower quality," he said.

Cost control

With this in mind, Charlton House will be placing greater emphasis on cost control, while aiming to boost sales through innovation, creative marketing and offering customers more value for money, Jones said.

"We will work hand in hand with clients to help them solve any problems they may be experiencing," said Jones. "Trust is a huge factor, and the contractors who follow their promises through and deliver what has been agreed will continue to be the winners."

Phil Hooper, corporate affairs director of Sodexo, agreed that clients will be increasingly demanding, meaning caterers have to deliver on both cost and quality. "Cost, added value and innovation are the factors which will be critical in securing new contracts," he said.

For Simon Titchener, managing director of ISS Eaton, contract caterers have got to offer a service that competes with the high street and offers a lower price for the client.

He predicted there would be a growing trend for clients to push for low- or nil-subsidy contracts, which, according to the British Hospitality Association, increased by 20% year-on-year in 2007. "I believe new contracts will be keen to reduce subsidies as businesses try to retain ultimate control of cost," he said.

According to Ian El-Mokadem, group managing director of Compass UK & Ireland, financial security will be vital for both clients and contractors. "Clients are likely to favour companies that are prepared to take commercial risk and put forward capital," he said. "Demonstrating true consumer insight is also very important as the battle for consumer spend will be tougher than ever."

When it comes to the tendering process, most of the leading players believe the number of tenders will remain steady, but El-Mokadem suggested there could actually be more. "The number of tenders may increase as companies outsource for the first time or seek to get better value," he said.

For his part, Jones believes two different approaches to tendering will balance each other out. "A challenging economy will force some companies to look at tendering as a means of reducing costs," he said. "But others will decide that it is not worth the risk of changing contractor and will work with them to find cost-saving initiatives."

As far as BaxterStorey chief executive Alastair Storey is concerned, the sophistication of purchasing in the business and industry sector means that it is unlikely there will be a knee-jerk reaction to the economic climate.

Tender buttons

"Clients will want to achieve savings without adversely affecting services, and in the first instance they turn to existing incumbents," he said, but warned that a lack of response to this demand will see tender buttons being pushed.

BaxterStorey intends to offer clients best-value services by implementing initiatives aimed at growing sales around profitable areas such as hot drinks, Storey revealed.

"We're also engaging chefs and customers on the issues of credit crunch cooking and, vitally, we'll continue to invest heavily in our teams - we want them to be best placed to meet the demands ahead," he said.

Looking ahead to prospects for the year, the senior executives contacted by Caterer were bullish - but for different reasons.

Jones said Charlton House has a "strong balance sheet" with reserves in place to ensure it can overcome many of the problems it will face.

ISS Eaton will benefit from being part of a large facilities organisation, ISS UK, combining the integrated service offered by the parent company with the independence of the caterer, according to Titchener.

Likewise, Hooper believes Sodexo's position as a global provider of food, facilities management services, service vouchers and cards will help reduce difficulties experienced in any one economy.

With reports of hospitality operators going into administration, suspending shares or breaking covenants coming in almost daily, these sentiments will be a welcome boost to the industry ahead of what is going to be one of the toughest years on record.

Contract catering predictions for 2009 >>

Belt-tightening puts the squeeze on contractors >>

Business and industry market in decline as caterers and clients look to costs >>

Read more news on contract catering here >>

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