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Food inflation hits school meals contract caterers

24 April 2008 by

School meals caterers are warning that they cannot continue to bear rising food prices, but are reluctant to break the £2 price barrier. Chris Druce reports

Food inflation is making headlines, with restaurateurs in particular worried about their already narrow profit margins taking a hit. But school meals catering, a sector also used to making the headlines - when Jamie Oliver comes to town anyway - is also beginning to feel the pain.

The school meals service in England spent some £350m on food last year, and as most meals eaten in the primary school sector are subsidised, food inflation - currently at 5% within contract catering, according to analyst firm Horizons - is fast becoming a problem.

Tony McKenna, managing director of Cater Link, which runs catering contracts in London boroughs Islington and Camden, said the manner in which many school contracts were operated was exacerbating the issue.

"Food inflation is a problem as many contractors will have the amount they can charge clients linked to the Retail Price Index (RPI)," he said. "With food inflation far above the RPI at present, caterers may have to go back to clients and renegotiate to take this into account."

No longer sustainable

Bill Graney, manager of Ealing school meals at Harrison Catering Services, agreed, pointing out that meal prices had already been fixed for the year with margins set accordingly. "Caterers can't fund this forever," he said. "There will come a point where it's no longer sustainable."

David Shailes, catering contract manager for Graney's client, Ealing Borough Council, warned that operators would have to find money from somewhere. "There's only a finite amount of money available," he said. "My fear is that training could be the first area to be trimmed if the Government doesn't come to the rescue."

Another concern for primary-level caterers already operating on tight margins is how much room they have to manoeuvre on price without direct intervention and support from the Government.

According to the Local Authority Caterers Association (LACA), the average selling price of a meal in primary schools last April (2007) was £1.64, with the labour cost of producing it £1.01.

Although the feeling about the level of uptake of primary school meals is that the worst is over, operators remain nervous about pricing themselves out of the market. The lowest priced primary meal was found to be £1.40 last year, with £1.95 the highest.

No one had yet broken the £2 barrier for school meals at primary level and no one wanted to be first to do so, fearing a backlash, warned Graney. "There's the psychological £2 barrier and the question of who's going to be first to break it and what effect that would have on sales," he said.

McKenna was more relaxed about breaking the barrier. "I think the public understand the issue and as long as we communicate clearly with parents they'll accept higher pricing," he said.

Food service consultant Chris Stern said that, with margins so thin in the state sector, contractors inevitably felt the pain of even small increases in costs. "Contractors are bearing the cost at present, which puts them back in the sort of position the Government promised they wouldn't be in when reform started," he said. "So I think there's a need for direct support."

But the Government has already coughed up £21m to support the continuing work of the School Food Trust, as well as providing a cash injection for The School Feast food excellence and skills training programme, on top of committing £240m to schools for the period 2009 to 2011, so there's a danger the coffers might be nearly empty.

Taking its destiny in its own hands, Shire Services, Shropshire's school meals service provider, has come up with an alternative way of managing rising food costs by switching to local sourcing. "We've found that going local has saved us money, around £70,000 on vegetables and fruit and 3p per egg," says general manager Janet Norton. "Admittedly it was a lot of work to get in place but we think we're now not only saving cash but receiving better quality."

Beverley Baker, head of commercial services at Surrey County Council, where she oversees the provision of 55,000 school meals each day at 380 schools, was in no doubt about what needs to be done to combat food inflation. "We have to address what parents are willing to pay for their food and where you put this as part of the journey the system is on," she said. "School meals have gone from a convenience to a welfare service and current government funding is not enough."

Read more on school meals at www.caterersearch.com/schoolmeals

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