Contractors poised for steady growth in 2005

17 March 2005
Contractors poised for steady growth in 2005

The UK contract catering market is primed for growth after a challenging but positive 2004, according to the British Hospitality Association's Food and Service Management Industry report published last week.

Last year catering companies managed to serve 1.6 billion meals and increase turnover by 3% to £3.89b despite growing competition, spiralling costs, falling subsidies and fewer outlets (down by 1.9%).

Although the number of staff employed in the industry fell by 2.1%, the report, based on a survey of the UK's top 21 catering companies, viewed this as an indication of increased productivity.

While sectors such as state healthcare and education remained tricky, others, including leisure, which now accounts for 13% of the meals market, and higher education, were shown to be on the up.

Other key growth areas highlighted in the report included non-catering outsourcing contracts and residential care homes. Twice as many catering companies in 2004 compared with the previous year provided ancillary services that were not part of a catering contract. And although residential care home contracts tend to require heavy investment in the early stages, "The market will undoubtedly rocket over the next three to five years," according to Adrian Stokes, head of catering consultancy firm ASA.

Trends such as the move towards healthy-option dishes and light "grab'n'go" meals - respectively accounting for 50% and 60% of the meals sold in 2004, according to the report - have been well documented. Operators are being forced to learn lessons from high-street retailers, training staff to become sellers as well as servers and embracing brands and commercial formats such as kiosks.

According to leading figures in the industry, retail techniques are the future. "It will be the ability of contractors to drive throughput and spend per head through adopting retailing techniques that will be the key to growth over the next decade," said Compass chief executive Mike Bailey.
His view was reinforced by Avenance chief executive Tim West, who said: "The ability to charge near-commercial prices is enabling operators to maintain margins in the face of reducing subsidies."

Also in vogue last year were fixed-price risk-taking contracts, accounting for more than two-thirds (72.2%) of existing contracts.
Obstacles for the future identified by the report included the ongoing struggle against staff and skills shortages, red tape, "unrealistic" reductions in catering subsidies by clients, and, perhaps most topically, the issue of what Bailey describes as "chronic underinvestment" in catering facilities in schools and hospitals.

Overall, the outlook for the year seems positive, however, with steady growth anticipated for most sectors.

"There is going to be a steady improvement in standards, profits and turnover this year," said Stokes. "2004 was tough but we're going to come out of it in 2005, no doubt about it."

UK contract catering market 2004

Turnover was up 3% over 2003, to £3.89b.

Number of outlets operated by food service management companies fell from 18,386 (2003) to 18,028.

Number of employees was down from 260,411 (2003) to 256,272.

Labour costs were up 3% to £1.75b.

Instances of support services provided as a non-catering contract more than doubled to 935, while the number forming part of a catering contract fell.

Catering companies had an interest in 40 Private Finance Initiative contracts.

The Caterer Breakfast Briefing Email

Start the working day with The Caterer’s free breakfast briefing email

Sign Up and manage your preferences below

Check mark icon
Thank you

You have successfully signed up for the Caterer Breakfast Briefing Email and will hear from us soon!

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.


Ad Blocker detected

We have noticed you are using an adblocker and – although we support freedom of choice – we would like to ask you to enable ads on our site. They are an important revenue source which supports free access of our website's content, especially during the COVID-19 crisis.

trade tracker pixel tracking