While the First World War (1914-1918) stifled the growth of the hospitality industry as a whole (with particular restrictions on food service due to the implementation of restrictions such as rationing), industrial catering had been impacted extremely positively. Forced to take responsibility for the distribution of food and rations to its constituents, government had to consider the nutritional and dietary requirements of the nation. The sustenance of millions of service personnel as well as the general public was arduously planned and coordinated. By 1916, David Lloyd George has assumed role of British Prime Minister, and in an effort to rationalise the task, he empowered employers to become partly accountable for the nourishment of employees, applying great pressure on them to provide at least one hot meal per day to employees.
Supplying almost a million meals a day, with nearly 1000 industrial canteens in operation nearing the latter part of 1918, the popularity of canteens suffered a massive decline immediately after the war as employers tried to recoup the losses they had incurred during the recent time of economic uncertainty.
By the late 1920’s and throughout to the 1930’s, the population’s standard of living had increased, and people’s habits for eating outside the home had developed. It was around this time that employers began to recognise the value of canteens and their contribution to job satisfaction and productivity.
The Second World War (commencing around 1939) lead to a predictable decrease in the profitability of luxury hotels and restaurants, however it was the catalyst for an unprecedented increase in mass feeding. Unlike after the First World War, the expansion in the sector did not decline at the end of the Second World War. Labours election resulted in the implementation of institutional catering in schools and hospitals, and the vast number of industrial and staff canteens (approx. 25,000 by 1945) ensured that catering for employees would continue. From this, industrial catering contractors developed around the 1950’s, such as Smallmans, Sutcliffes, Bateman’s, and Midland (to name just a few). These companies, being some of the first in their field, dominated the market for a number of decades until the 1990’s when the infectious trend for global consolidation adorned mission statements throughout the UK and the rest of the world.
More recently, the leading companies in the UK contract catering market are all divisions of international foodservice businesses. The four current market leaders in the UK are Compass, Sodexho, Aramark and Avenance (lior).
The genesis of Compass stretches back to 1941, when Factory Canteens was established, however the name Compass came into existence in 1987, following a £160m buy-out of the Contract Services division of Grand Metropolitan (www.compasss.com, 2001). Since 1987, organic growth coupled with various acquisitions, has transformed the company from what was essentially a UK operation to a multinational business. In 2000, the group had 250,000 employees in over 80 countries (Keynote, 2001) with international revenues well in excess of £8b (www.caterer.com, 2001). In spring 2000, Compass merged with the hospitality businesses of Granada to form one of the largest catering companies in the UK (Granada Compass). At the end of 2000, the Compass business was demerged from Granada Compass resulting in Compass having ownership of all of Granada’s hospitality outlets, leaving Granada to concentrate solely on the media side of their business. Compass then set about disposing of the hotel portfolio that Granada had accumulated, so as to concentrate on facilities management and food service.
Sodexho’s UK roots stretch back as far as the aforementioned Peter Merchant and John Gardner. The French company acquired Gardner Merchant in 1995, with 2000 seeing the company renamed as part of the Sodexho Alliance. With a worldwide employment of 286, 000 and sales of £7.4b it is a major competitor.
Aramark LTD, a subsidiary of the US based Aramark Corporation, is the third largest contract caterer in the UK, and though a new joint venture with Campbell Bewley, is now the largest operator in the Republic of Ireland. Based in Philadelphia USA, it is a leading supplier of various contracted services including food and supplies, uniforms and work wear, childcare, facilities management etc. to the business, education, healthcare, and prison sectors. Around 66% of the companies UK sales however are generated from catering contracts. With a European turnover of £720m expected to double within the next year as a result of major acquisition plans (Keynote, 2001).
Avenance is the UK division of lior, the largest contract caterer in France and the third largest in Europe. lior introduced the name Avenance to the UK in 2000, and its subsidiary companies Brian Smith, High Table and Catering & Allied, which had retained their original names following acquisition, now operate under this brand (www.caterer.com, 2001). In June 2000, another independent UK caterer, Nelson Hind, became part of the lior group and expanded the groups’ geographical coverage in the UK by infiltrating the Scottish market (Keynote, 2001).
A strong trend seems to be consolidation of the global contract catering industry with the leading players aiming to increase their worldwide presence across a range of contract catering sectors. In the UK medium sized businesses are targets for buy-outs while other independents are merging to form stronger businesses. Contrary to predictions, consolidation in the industry has not been accompanied by widespread rationalisation of business. Instead the purchasing companies have generally allowed the acquired businesses to continue as discrete companies – particularly as most of these companies are established names in the industry, with a good reputation and loyal clients.
Something also worth considering though, is that although major market leaders exist, local caterers can often win lucrative contracts. A growing trend among potential clients is to turn to smaller or local companies in preference to the perceived impersonal service that they might obtain from larger caterers (Keynote, 2001).
As mentioned earlier, contract catering is going through a stage of unparalleled growth. The recent period of economic stability has helped contract catering sales, although weaknesses in the manufacturing sector have led to some downturn in demand as staff restaurants and other outlets close. Consumer trends towards lighter lunches and increasingly healthy foods leads to rationalisation as less and less cooked meals are required (Keynote, 2001).
One key factor that has affected the contract catering market is that of changes to legislate and regulatory modifications. In 1999, the minimum wage increased labour costs, especially for companies who relied heavily on student and casual employees. It could be suggested that this is in part responsible for the reduction of number of employees in the industry between 1999/2000. While other sector of the hospitality and catering industry sustained similar levels of employment, the contract catering industry lost over 8,000 employees in this period (www.caterer.com). Other pieces of legislation that have been introduced include the Part Time Workers Regulations (2000) and the Working Time Directive (1998) which provide part time employees with the same rights as full time employees and stipulate that employees are not obliged to work more than 48 hours per week respectively.
Other pieces of legislation include a plethora of food safety, food production, and other food related regulations. Although on the surface additional guidelines may seem to adversely affect the workload of the contract caterer, they can also act positively. The vast increase in standards has pushed many establishments and businesses where catering is non-core (such as schools where their core activity is education, not food production) to look towards the professionals in the industry to provide the services productively and cost effectively. Also Compulsive Competitive Tendering has been implemented recently forcing many public sector organisations to look to outsource.
In terms of employment, the workforce trends of the UK contract catering industry seem to vary slightly from that of the overall hospitality and catering industry.
(Sourced from HtF Labour Market Review 2000)
(Sourced from HtF Labour Market Review, 2000)
The above table illustrates the dissected workforce in terms of sex and type of employment. We can see that as of 2000, the total workforce stood at 129,000 including management with 66% of employee’s female which is in line with the overall average of the hospitality industry. 59 % of employees are employed on a full time basis, which is the largest proportion of full time staff in all the hospitality sectors. The age profile in the sector is also generally older than the industry as a whole (HtF Labour Market Review, 2000). A survey of employers conducted in 1999 by the HtF revealed that almost 70% of respondents had recruited casual/seasonal staff within the previous 12 months. This has been attributed to seasonality, the rise of one off contracts such as outdoor events, and also as a “fill-in” for long-term illness, maternity leave, or other external factors.
In an attempt to successfully gain more contracts in the mid 1990’s, contract caterers made drastic efforts to reduce the labour intensity of the contract catering industry. This can be demonstrated by the fact that the average number of staff working per unit reduced from 8.7 in 1989 to 6.7 in 1996 (BHA, 1999). This reduction is also considered to be an effect of the recession that Britain faced in the early 1990’s. In this time the rate at which outlets were acquired/opened began to rapidly decrease as many factories and business closed canteens in favour of more profitable investments. This has been considered as one of the most notable declines in the industry in recent history, however it was quick to recover with number of outlets and profit margins soon on the increase. Number of outlets continued to rise until the late 1990’s where 1997 saw a brief reduction in number of outlets, which the BHA considers was a result of consolidation within the financial industry such as banks etc (BHA, 1999).
An issue that has troubled the hospitality and catering industry as a whole for many years has been that of skills gaps and shortages. A HtF survey of contract catering employers revealed that 39% of respondents had experienced hard to fill vacancies in the 12 months prior to the survey, the highest proportion in the industry. The survey revealed that the greatest problems appeared to be in filling casual/seasonal vacancies. 28% had also experienced problems with some full time and part time permanent positions.
In 2000, a survey of contract catering outlets in Northern Ireland (by M. Wilson et al) indicated 15 competencies essential for contract catering employees and management. The competencies came from a range of managerial and operative activities from human resource management to food hygiene control. The report concluded that serious skill shortages existed in the contract catering industry with much emphasis on food hygiene management, leading to the neglect of many other organisational and team skills. It concluded that the only answer is to recruit employees that were keen to participate in an in house training programme that was tailored to the outlet, rather than simply not hiring as a result of lack of qualifications.
The aforementioned HtF survey identified the main reasons for hard to fill vacancies were a general lack of applicants, a lack of required qualifications, or a lack of applicants with an interest in the work.
