Contract caterer Aramark is known for quietly getting on with things, but planned redundancies, leaked letters to suppliers and contract losses have seen it hit the headlines for all the wrong reasons of late. Chief executive Andrew Main tells Janie Stamford what's been going on and how the company is positioning itself for future growth
You have been at the helm for six-and-a-half years. What are your main achievements?
I would say bringing the focus on the consumer to the fore. I came back from the US and recognised that the client relationship, where we'd historically focused, continued to be critical but we had to recognise how the high street had changed and how our customers were being presented with way more choice.
This focus has served us well, over the last three years in particular, where subsidies have reduced and we're living a lot more out of the till.
How has the business grown under your leadership?
The proportion of our revenues that come from our operations as opposed to client subsidies has increased dramatically. Customer cash sales drive a significant proportion of our business, which is effectively the same as industrial retail. It's a very big change.
Subsidies are never going to come back. Clients are looking for more. For many there is no cost of service now and contracts are based on our ability to attract sufficient numbers of customers on a regular basis.
Do you think that shift is forcing contract caterers in general to work a lot harder?
Definitely. It comes down to creating value for clients and engaging employees. I think we've become more efficient at delivering great service day after day. Doing an average job isn't good enough because we have two very clear areas of competition: the high street and people bringing in their lunch from home. If we can provide value for money that beats a packed lunch, that's a measure of success.
Every supermarket chain's area of growth is the high street - the small Metro, Local, Express stores. Customers looking for value and being prepared to look at options coupled with sophisticated and aggressive competition means that the consumer is forcing us that way, irrespective of the industry.
Tell me about your recently announced plans to reshape field operations
We undertook our largest ever research programme with our clients over the last three months, as a part of a much larger global piece. We found that there was a client desire to see Aramark actively challenge the status quo and bring fresh thinking to their business.
As a result, we've introduced a team of client relationship executives into the business that will work with the operations teams to support the creation of value for its clients while delivering on day-to-day operations.
The company also established sector specialists in order to have people that are intimately knowledgeable about things that are primary in those sectors.
What else did the research reveal?
It helped us to establish our three primary goals, of which improved client relationship is the first. The second is around employee engagement.
For the last two years we've partnered with an organisation called Gallup, which says that there are certain aspects of employment that have a real ability to move the needle. These include staff feeling valued by their employer, being recognised for their efforts and having the opportunity to learn and grow. This research has formed a basis on which to continuously improve the levels of engagement.
The third goal is to improve operating efficiency. We've spent the last year working on a project called One Best Way, which examined ways in which duplicate processes could be standardised across the corporation.
We found that 80% of what the company does on the frontline is common, regardless of the sector. To address that, the company recognised that if individuals focused on operations regionally rather than by sector, it would have a significant impact on quality of work life. They could then focus on delivering consistency to, and spend more time with, a number of clients in a number of markets by reducing travel time.
You also said that a number of jobs will be cut or modified as a result of the restructure. How will that pan out?
Five months ago, I asked a team of around 15 senior managers to collaborate and take a fresh look at our structure. They came back after two months with a recommendation that at the outset we would not have anticipated. It has resulted in a much more balanced organisation with less layers of management and much more clarity around roles and responsibility.
We anticipate that over several months there'll be 50 or so positions that may no longer be required. Where possible we will look to incorporate individuals elsewhere in the business, either in new roles or existing positions that may become open through natural staff turnover.
What do you see as the key economic challenges for the year ahead?
We've seen a couple of waves of economic challenges over the last three years. The first wave hit in late 2008, early 2009, when the private sector was keen to take cost out so in many cases the subsidies disappeared very quickly.
Then there was a bit of a lull before the public sector phase kicked in, which we're still working through. Different strands of the public sector are moving at different paces so, for example, the defence market will embark on some significant change in the next two years whereas the healthcare has been in that phase for the last 24 months already.
At the client level, that challenge will continue. The marketplace is extremely competitive in terms of price and in order to compete effectively we've got to have an efficient organisation.
You recently reported a 95% contract retention rate for 2011. How was that achieved?
Retention rate is one of the key metrics that we measure and 2011 was a record year. Customer cash sales is another key measure and last year we saw low double digit, like-for-like customer cash sales growth.
We've seen some terrific situations where clients have renewed contracts without going to market. But then we've had clients like BP which did and they've just renewed us for the next five years.
What was the rate of new business wins?
We had a few very notable wins, but we've always been less open about shouting about them, relative to others in the market, because we're always sensitive to our clients' views in that respect. We've seen some growth in the B&I space and offshore space, while defence and healthcare were pretty quiet.
Aramark has also lost some major accounts of late, such as Goldman Sachs which you walked away from. Was that a difficult decision?
Incredibly difficult. I've been in the industry a long time and I hate to walk away from any business but the conclusion of both parties was that we were in a situation where we were unable to achieve our goals while at the same time deliver on the expectations of the client.
We spent an intensive period last year working collaboratively to figure out whether there was a way forward that could work for both parties but reluctantly we came to the conclusion that it wasn't going to be possible. The issues were quite simply that it was a P&L account and, therefore, we were living out of the till. It was very difficult to get the economics to work given the structural nature of the Goldman Sachs estate.
Has last year's purchasing strategy, in which you sent suppliers a letter calling for 12% price cuts, been successful?
If we could do it again, it wouldn't have gone out in the way that it did. It slipped through the net with just a touch of over-eagerness because it was part of a number of steps that were close to being undertaken and it wasn't screened properly.
It's fair to say that a number of suppliers engaged with us positively as a result; they welcomed the opportunity to talk with us. But we would have preferred to have had a different communication to trigger that. The message wasn't constructed in a way that got the intention across but a good outcome nonetheless.
slash vat, boost business
"I am very supportive of it. The rise of VAT to 20% has been detrimental for business. It's unfortunate that the government thinks they need to focus on it to close some of the deficit. Hopefully it's a temporary measure and we'll see it stepped back again."
Andrew Main on Caterer and Hotelkeeper's Slash Vat, Boost Business campaign