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Defence catering

26 July 2005

The market

According to this year's British Hospitality Association's Food and Service Management survey, last year contract caterers accounted for 520 Ministry of Defence outlets, serving 110 million meals.

They made up 2.9% of the contract catering market, it added. Since 2000, the number of outlets has been relatively static, dipping slightly in 2001 and 2002 but rising again from 2003.

The number of meals served by contract caterers has risen steadily, and now accounts for 6.9% of the market.

Like much of contract catering, defence contract catering is no longer solely food based, with contracts commonly encompassing areas such as waste management, bakery production, cleaning and laundry management.

The vast majority of the defence catering market is currently managed by the Ministry of Defence's Catering Group, which is part of the MoD's Defence Logistics Organisation.

The DCG is responsible for the quality, supply and types of meals prepared in the armed forces.

On the contract catering side, the main players are Sodexho Defence Services, Compass Group's ESS defence, offshore and remote division and Aramark's Combined Services Division

Growth prospects Despite being a relatively mature market, there is currently a buzz among caterers working within the sector.

This is because of the MoD's decision to overhaul its internal defence infrastructure, scrapping the existing system whereby contracts were awarded site by site and instead awarding 15-20 super "multi-activity" contracts over the next three to four years.

The idea is to end up with a smaller amount of larger contracts, with contracts often bundled across navy, army and airforce services and encompassing a much wider range of activities.

The first of these, announced in May 2005, was awarded to Aramark, a 10-year £20m a year contract covering 10 army barracks in Hampshire starting from October 2005. It is as yet Aramark's largest ever UK contract.

Sodexho is also due later this year to start a £290m catering and cleaning contract for 18,000 military and civilian staff in Aldershot and around Salisbury Plain, part of the MoD's £4b Allenby-Connaught PFI project.

Compass, meanwhile, is believed to be close to sealing an equally large contract in Scotland.

Avenance has also been targeting such contracts. Back in January 2005, new chief executive Mike Audis said that a key element of his strategy was the MACs, as they are known, and he had dedicated a seven-strong team to this area.

Another factor for optimism among caterers at the moment is the decision by the Navy, Army and Air Force Institute (NAAFI) to withdraw from domestic operations and concentrate on its overseas markets from September 2005.

This has left a potential gap in the market for contract caterers although, as a lot of what NAAFI did was leisure and retail orientated as well as catering, operators have been having to look at developing new service models.

It should also be remembered that defence contract catering is very much a global market, with potential for growth overseas. Sodexho Defence Services, for instance, operates with NATO, UN and US forces around the world.

Key trends
One reason the market is in flux are the two conflicting pressures within the defence contract catering market.

The first of these is the gradual reduction in size of the UK's armed forces, with the emphasis moving to smaller, more mobile rapid reaction forces, plus personnel whose tastes are more sophisticated and who want more than bully beef.

This has meant that, while there may be fewer mouths to feed, caterers have had to look at ways of making their operations more mobile and flexible. The days of the cumbersome field kitchen simply tagging along behind an army have long gone.

The other pressure is the expansion of overseas peace-keeping and other operations, most notably in Iraq and Afghanistan but also in places such as Sierra Leone.

This has meant caterers have had to look very closely at the logistics of operating in very different, often hostile, environments, what sorts of meals they are serving, how they are transported and served to the field of battle or operations and their longevity.

The quality and healthiness of meals (while still ensuring troops get the energy they need), how meals are prepared (whether by caterers or troops themselves) and how they are paid for have been other key issues facing the sector over the past few years.

One key change has been the MoD's introduction of its Pay-As-You-Dine initiative a couple of years ago, scrapping the fixed fee it used to pay to caterers that had led to suggestions there was little incentive to make meals attractive because the fewer meals soldiers ate, the more the caterer made.

The introduction of so-called "three-into-one" contracts, where contracts combine catering, leisure and retail, has also led to major changes. Caterers have had to re-examine the services they offer and either expand their capability or look to link up with new partners, says Jonathan Knight, head of management services at consultancy Tricon and former NAAFI catering director.

On healthier eating, in mid-2004 the DCG launched an overhaul of its operational ration packs to develop more diverse menus, including options such as chicken balti and rice.

Then in February 2005, the MoD began testing "variety" ration packs in an effort to make the food more varied and palatable, while still maintaining the capability to ship thousands of packs over long distances very quickly.

Future trends
As the way catering operates in the armed forces becomes more sophisticated, partly through pay-as-you-dine but also through better living accommodation, kitchenettes, better shops and other retail services, so catering services will have to adjust, argues Knight.

There is likely to be more of a focus on commercial brands that soldiers will recognise from home, more prepared meals, pizza deliveries and so on, while needing to ensure caterers continue to offer a diet that has the correct calorific and energy content.

"There is significant investment involved but there is also huge risk. Because your marketplace is fixed, it can disappear when you go to war," says Knight.

Contractors will need to continue to learn new skills, while at the same time becoming more specialist in what they do to be able to meet the changing demands of feeding modern, mobile forces, he predicts.

"With everything that is happening in the world these days there will continue to be armed forces that will need to be fed, and there will be more and more involvement of specialist contractors," says Knight.

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