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| 3 minutes read

Foodservice growth conference: Cautious optimism in the face of inflationary pressures

As we hosted our 10th Foodservice Growth event, in partnership with EP Hospitality, it was refreshing to hear how Foodservice operators continue to innovate and grow despite the challenging economic outlook.

There was a sense of cautious optimism from our 100+ guests at the Queen Elizabeth II conference in Central London, as AlixPartners Managing Director, Graeme Smith, took to the stage to open the session – “caterers have reacted to large-scale disruptions through innovation, such as flexible offerings and enhanced digital tools.”

Graeme highlighted the financial indicators which supported the success of the industry, outperforming broader listed companies and retail hospitality in terms of share price performance this year - revenue for the UK catering sector is expected to exceed pre-pandemic levels next year. He also outlined how caterers have recently reported strong new business wins, although profitability margins are under pressure as costs continue to bite.

It was fascinating to see how the dial had changed from industry leaders in the 2022 AlixPartners/EP Hospitality Industry Survey:

  • Operators were much more optimistic around office attendance in the UK, compared to 2019 pre-pandemic results. The anticipation of 75-100% in office attendance rose +14% pts to 73% (vs. 59% in 2019) closely correlated to corporate activity such as B&I, sport and events.
  • Inevitably, cost inflation is now the main concern to the sector, ranking as the #1 challenge – up from #5 in 2021. Concerns around inflation have seemingly had an impact on the priority of initiatives, the biggest shift was in ESG – now ranked #4, down from #1 priority in 2021. Service innovation, health and wellness and digital now taking a priority.

For the majority of the caterers, the focus is now on growth and the early signs are that M&A will play a part in enabling operators to drive scale, cost savings, and gain market access.

We were then joined by various experts from Compass Group, Sodexo, The Litmus Partnership, Elior and The Genuine Dining Co, who shared their expert opinion and views of the current market.

Nigel Harris of Absolute Taste emphasised the entrepreneurialism and dynamism shown by caterers, sharing how his business pivoted from being an events-focused business to selling ready meals during the pandemic and also supplying red-zone Covid wards during the pandemic.

James Latham of Compass portrayed a powerful but sobering reality of the heightened food inflationary pressures we are seeing globally, as climate change, the Ukraine crisis and the pandemic have all caused food prices to soar.

However, he also underlined that it is still possible to grow despite the medium-term inflationary pressures through menu re-engineering, a focus on food waste to cut costs, more frequent discussions with clients on pricing. Clients will increasingly turn to caterers as the experts on how best to mitigate inflation and navigate the food supply-chain.

Finally, during the panel session showed several key trends were identified:

  • Julie Ennis from Sodexo highlighted the importance of service innovation across the business, including repurposing unused real estate for catering activities, and within the service offering with the opportunity to push plant forward menus and greater use of locally sourced ingredients.
  • Julia Edmonds from Elior explained the importance of ESG across the business as a fundamental to the approach to clients noting ”inflation, sustainability, and the labour crisis are top of the agenda when tendering”.
  • Vince Pearson from The Litmus Partnership spoke of the importance of operators being able to demonstrate the benefit from using technology effectively and ensuring it lives up to the promises made in the tendering process;
  • Chris Mitchell from The Genuine Dining Company struck an optimistic tone as his business has shown significant recent growth in the premium B&I market through a strong service proposition, despite the broader market challenges, noting that clients are looking to foodservice and hospitality provision to help in getting workers back into the office.

Key takeaways

Inflation was top of mind during the session and is expected to remain a feature of the market into the medium-term. However, Foodservice operators have shown numerous times over the years that they can innovate, be agile and thrive, even in challenging markets. Key focus areas include:

  • Working in partnership with clients to understand and manage inflationary pressures
  • Focusing on food waste, local ingredients, and plant forward menus to improve efficiencies and improve sustainability
  • Continuing to innovate in all aspects of operations and the customer experience with digital tools being important in this area
  • Building through M&A to utilise scale, cost savings and enter new market segments

If you would like to learn more about our findings or hear how you can navigate the disruptions impacting your business, please get in touch with Graeme or Azeem at AlixPartners.

Tags

event, food and beverage, trhl, trs, emea, united kingdom, english uk
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