1. CONTRACT CATERING A Report On The Sector By Six Market Analysts: Geoff Carr, Leigh-Ann Jones, Hannah Pitt, Louise Sainsbury, Timothy Wilkinson, & Lindsey White

2. INTRODUCTION Contract Catering Contract Catering Analytical Review Analytical Review Balanced Report of the Sector Balanced Report of the Sector Current & Future State Current & Future State Introduction

3. MARKET DEFINITION ‘An individual or company who in recognition of financial reward will undertake to administer, control and direct a specified catering operation within the guidelines stipulated by the [client] company’ ‘An individual or company who in recognition of financial reward will undertake to administer, control and direct a specified catering operation within the guidelines stipulated by the [client] company’ Cotes, 1971 Market Definition

4. MARKET SECTORS Market Segmentation Source: BHA UK Contract Catering Survey 2001

5. Dogs Oil Rigs Welfare Cash Cow Business & Industry Education (Schools) Problem Education (University) Healthcare M.O.D. Public (Dept Stores / Other)Stars Market Share Low HIGH Low Growth Problem Healthcare M.O.D. Stars Education (University) Public (Dept Stores / Other) CONTRACT CATERING BCG Market Segmentation

6. MARKET TRENDS Branded outlets increasingly important Branded outlets increasingly important Trends interrupted by Foot & Mouth & Sept 11 th Trends interrupted by Foot & Mouth & Sept 11 th Support services Support services – Maintenance – Cleaning – Gardening Market Trends Source: Mintel 12/2000 “Market Size & Trends”

7. INDUSTRY SECTOR LIFE CYCLES Healthcare Oil Rigs Education (Universities) Business & Industry Reason: Saturated MarketReason:Unsaturated, High Growth Reason: Still growing though already established Reason:Fall in sales & outlets Market Trends

8. MARKET TRENDS (£M at 2000 prices) Market Trends Source: Caterer.com 27 th July 2001 Industry Reports Contract Catering

9. CONSUMER TRENDS Higher expectancy of quality Higher expectancy of quality Expectancy of value for money Expectancy of value for money Shorter meal breaks - snacking Shorter meal breaks - snacking Shift work increase - when should the canteen be open Shift work increase - when should the canteen be open Demand a higher range of products including: Demand a higher range of products including: – Established brands – Organic – Ethnic Market Trends

10. THE MARKET PLACE Oligopoly Oligopoly – Compass – Sodexho Three others Three others – Initial, Aramark, Avanance 3500 ‘Small Business’ 3500 ‘Small Business’ Competitive Structure Source: Mintel 2000 “Summary of Key Report Findings”

11. MARKET LEADERS Sodexho Sodexho Compass Compass – Branding – Price Setters – Diversification Three other ‘Large Companies’ Three other ‘Large Companies’ 3500 Small Companies 3500 Small Companies Competitive Structure

12. SODEXHO A world leading multinational company UK Head Office Kenley, Surrey UK & Ireland Business & Industry largest market Clients include: – Merrill Lynch – BAE Systems Result of merger between Gardener Merchant and French company Sodexho Alliance Sales Turnover £6.5billion (2000) Sodexho Prestige is leading leisure company. Competitive Structure Source: Sodexho Vision For The Management Team

13. ARAMARK UK 1 Of The Next ‘Big 3’ 1 Of The Next ‘Big 3’ Reading UK Reading UK World Leader In Managed Services World Leader In Managed Services £4.47 Billion Turnover Worldwide (2000) £4.47 Billion Turnover Worldwide (2000) Clients Include: Clients Include: – BP International – Conoco – Barclaycard Partnership Contracts Partnership Contracts Competitive Structure Source: www.berkeley-scott.co.uk

14. HALLIDAY CATERING SERVICES One of 3,500 Smaller Contract Caterers One of 3,500 Smaller Contract Caterers Wokingham UK Wokingham UK Leading Privately Owned Contract Catering Company Leading Privately Owned Contract Catering Company £16.5 Million Turnover £16.5 Million Turnover Clients Include: Clients Include: – British Aerospace – Oracle Competitive Structure Source: www.berkeley-scott.co.uk

15. MARKET FORCES CONTRACT CATERING & IN HOUSE CATERING CLIENTS / CUSTOMERS GOVERNMENT & BUSINESSES FOOD & BEVERAGE SUPPLIERS STAFF AGENCIES EQUIPMENT SUPPLIERS Competitive Structure OTHER FOOD OUTLETS RETAIL OUTLETS SMALL BUSINESSES EATING FROM HOME VENDING OTHER COMPANIES Create Deals Big 2 Smaller Companies Acquisitions Low Barriers, CCT/BV Contracts Granted To New Entrants ‘’Tender’’ Contract Giver CCT/BV Clients Own Substitutes Substitutes Can Buy From Suppliers OwnershipConsumer Free Choice

16. TRENDS IN CONTRACT TYPE Cost Plus Cost Plus Fixed Price / Cost Fixed Price / Cost Performance Guarantee Performance Guarantee Nil Subsidy Nil Subsidy Partnership Partnership Concession Concession Industry Background Source: Mintel 12/2000 “Market Size & Trends”

17. INDUSTRY HISTORY (80’s) Decline in Industrial / Institutional Decline in Industrial / Institutional – 1980 Education Act – Demise of Manufacturing – Increased unemployment (Recession) Industry Background Adapted from: Mintel 12/2000 “Market Background”

18. INDUSTRY HISTORY (90’s) Increase in Institutional / Industrial Increase in Institutional / Industrial – Overall growth in late 90’s – Rise in numbers in further education – Higher demand in health / welfare markets More Recent More Recent – Compass / Granada – High emphasis on aggressive acquisition – Expansion into support services Industry Background Adapted from: Mintel 12/2000 “Market Background”

19. EMPLOYMENT Steady Decline Steady Decline – Whole of Hospitality Industry – Maintained steady proportion of 12% throughout 97-99 Increase in full time Increase in full time Industry Background Source: Labour Market Review, Hospitality Training Foundation 2000

20. LEGISLATION Staff Staff – National Minimum Wage (99) – Working Time Directive (98) – Paternity Leave (99), Part Time Workers (00) Food Food – Genetically Modified Foods – Food Hygiene Tendering Tendering – Competitive Compulsory Tendering – Best Value Industry Background Adapted from: Mintel 12/2000 “Market Background”, “Summary of Key Report Findings” & www.gov.uk

21. Political Introduction of CCT / BV Introduction of CCT / BV Food Hygiene Regulations Food Hygiene Regulations Other Food Regulations Other Food Regulations Staff Regulations Staff Regulations P.D.I P.D.I Effect of the Euro Effect of the Euro Effect of the Recession Effect of the Recession Growth possibilities in right economic climate Growth possibilities in right economic climate Economic ENVIRONMENTAL ISSUES Industry Analysis

22. Social Organic foods Organic foods Branding Branding Value for money Value for money Life style changes Life style changes Concern about diet Concern about diet Increase flexibility in Cook / freeze and Cook chill processes Increase flexibility in Cook / freeze and Cook chill processes Cashless systems Cashless systems Loyalty schemes Loyalty schemes Technological Industry Analysis ENVIRONMENTAL ISSUES

23. STAKEHOLDERS Customers Customers Client Client Key Players Key Players Shareholders Shareholders Government Government Owners Owners Staff Staff Suppliers Suppliers Community Community Industry Analysis

24. SWOT ANALYSIS STRENGTHS Expansion into support services. Expansion into support services. A continually expanding industry within the UK A continually expanding industry within the UK Recent trends towards the famous-names foods franchising sector Recent trends towards the famous-names foods franchising sector Moves towards outsourcing non-core activities, to minimise cost and maximise efficiency. Moves towards outsourcing non-core activities, to minimise cost and maximise efficiency. New consumer tastes and adventurous eating patterns and food tastes. New consumer tastes and adventurous eating patterns and food tastes. Industry Analysis

25. SWOT ANALYSIS WEAKNESSES Poor consumer research within the market. Poor consumer research within the market. Health conscious image overlooked by branded fast food products Health conscious image overlooked by branded fast food products Over crowded dining areas & long queues make uncomfortable atmospheres. Over crowded dining areas & long queues make uncomfortable atmospheres. Market entry is relatively hard. Market entry is relatively hard. Tightening of health and safety regulations. Tightening of health and safety regulations. Limited business marketing & development for smaller companies. Limited business marketing & development for smaller companies. “Grazing” “Grazing” Industry Analysis

26. OPPORTUNITIES Emphasis on fresh foods Emphasis on fresh foods Growth of leisure facilities & number or visitors Growth of leisure facilities & number or visitors Expansion into prison management Expansion into prison management New technologies New technologies Less than half of school children eat school meals Less than half of school children eat school meals Ability of the sector to adapt to the preoccupation of customers. Ability of the sector to adapt to the preoccupation of customers. Broadening of consumer tastes, i.e. ethnic Broadening of consumer tastes, i.e. ethnic Diversification of methods of distribution i.e. “Drive Thru’s” and mobile units. Diversification of methods of distribution i.e. “Drive Thru’s” and mobile units. Many sectors yet to be exploited. Many sectors yet to be exploited. Larger customer base for key players due to globalisation. Larger customer base for key players due to globalisation. SWOT ANALYSIS Industry Analysis

27. SWOT ANALYSIS THREATS Leading companies in industry have grown by acquisition. Leading companies in industry have grown by acquisition. Increased ready meals Increased ready meals Flexible working hours Flexible working hours Health & Dietary Issues Health & Dietary Issues The increasing number of small food retail operations i.e. sandwich shops. The increasing number of small food retail operations i.e. sandwich shops. Closure of Client Companies. Closure of Client Companies. Movements toward vending operations. Movements toward vending operations. Minimum wage requirements Minimum wage requirements Move from Sterling to Euro Move from Sterling to Euro Decreasing subsidy on meals Decreasing subsidy on meals

28. THE GLOBAL MARKET Expansion – Viable Expansion – ViableSodexho – 1999 - 17% UK, 17% Europe – Change of name Mergers, Acquisitions, Strategic Alliances Mergers, Acquisitions, Strategic Alliances – Current UK companies operate in over 70 countries Major Potential Growth Major Potential Growth – Latin America – Asia – Africa Global Market

29. ONE YEAR FORECAST Compass & Sodexho to continue with aggressive acquisition policies Compass & Sodexho to continue with aggressive acquisition policies Less sub-contracting from main two Less sub-contracting from main two Little growth in Business & Industry Little growth in Business & Industry Growth in Catering for the Public sector Growth in Catering for the Public sector Economic slowdown = growth slowdown Economic slowdown = growth slowdown Branded Outlet expansion (continued trend) Branded Outlet expansion (continued trend) Interest rates low Interest rates low Tax increases likely Tax increases likely Future Forecasts

30. FIVE YEAR FORECAST Compass & Sodexho continue to grow Compass & Sodexho continue to grow Less competition Less competition Less sub contracting Less sub contracting Main growth in public sector Main growth in public sector Economic slowdown Economic slowdown Continued branded expansion Continued branded expansion Tax increases Tax increases Less small companies (recession) Less small companies (recession) Future Forecasts

31. SOURCES OF INFORMATION British Hospitality: UK Contract Catering Survey 2001, BHA, London Caterer.com: Industry Reports – Contract Catering 27 th July 2001 Cuomo G & Vignal M, 1998, Gruppo Massone – Acquisition Venture into the UK, British Food Journal 100/2 pp.65-75 Labour Market Review, Hospitality Training Foundation 2000 Sodexho: Vision for the Management Team, Spring 2001 Wilson M et al, 2001, Contract Catering: a positional paper, International Journal of Hospitality Management, 20/2 pp.201-218 Wilson M et al, 1997, The UK Contract Catering Sector of the Hospitality Industry, Facilities, 15/7/8 pp.177-186 Sources

32. SOURCES OF INFORMATION Mintel Report Code 12/2000: – “Summary Of Key Report Findings” – “Market Background” – “Market Size & Trends” – “Market Segmentation” – “The Supply Structure” – “The Future” – “Forecast” www.gov.uk www.berkeley-scott.co.uk/jobseeker_help/careers_catering.htm Sources

33. THANK YOU ANY QUESTIONS?