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Graeme Smith
Partner & Managing Director, EMEA Leader, Risk Advisory
London
2022 marked the 10th Anniversary of AlixPartners’ Foodservice Growth event and, 12 months on, there continued to be a host of disruptive trends and market opportunities to digest at our 11th annual gathering, kindly hosted by Compass at London’s Queen Elizabeth II Conference Centre in partnership with EP Business in Hospitality.
Opening the morning’s agenda, Graeme Smith, AlixPartners Partner and Managing Director, reflected on the recent market disruption that has challenged the sector to respond to at a time when demand is on the rise, as increasing numbers of workers return to offices and the economy continues to recover post-COVID.
Graeme highlighted that this disruption had driven a growing trend in outsourcing to caterers and the return of M&A in what has proved a resilient sector despite macroeconomic financial constraints. He outlined that margins were forecast to recover in 2024 as volumes grow and inflation strategies bear fruit, albeit with continued challenges in the labour market.
These trends were highlighted in the 2023 AlixPartners/EP Business in Hospitality 2023 industry survey, with a number of pertinent data points, including:
- Optimism from Business and Industry caterers, with 65% of respondents predicting the continued return to the office at higher volumes in 2024 compared to this year (and none predicting lower levels).
- Access to Talent, ESG, and supply chain are the top three challenges facing the industry as we move into 2024.
- Food quality and cost-to-serve ranked as the most important factor in winning new work, with relationships a close second. Operational excellence and building trusted relationships remain paramount.
- M&A activity for the foodservice sector has proven resilient and returned to the levels observed in 2019, driven by a range of M&A themes, in contrast to the reduction in global M&A activity.
- The return of Private Equity to support businesses in this space, such as THI Investments with Impact Food Group.
In concluding, Graeme pointed to a positive recovery in the market – including renewed M&A opportunities – but noted that clients are likely to re-focus on cost now that we are back to more business as usual, requiring caterers to innovate and evolve their proposition to increase their attractiveness and value in client delivery.
We were delighted to be joined by a suite of industry leaders and experts afterwards for further insights and discussion:
Julie Ennis, Sodexo’s CEO Corporate Services UK & Ireland and Country President Ireland, outlined the trends that she felt were permeating across the foodservice industry globally. Flexibility was becoming key, from not only a food choices perspective but also in the evolving “workplace first” approach taken by companies and clients to improve office-based community feeling. Personalisation is critical for people looking to make healthier choices or be effectively catered to for their specific dietary needs. As with many industries, CSR is also an urgent issue that must be applied to more sustainable food production, while digital remains vital as an enabler for caterers to become better connected with clients and guests as well as leverage data more effectively to improve offerings.
Jon Davies, Managing Director, Levy UK & Ireland – Sustainability, continued the theme of sustainability in foodservice, with an enlightening – and alarming – picture of the current devastation being caused by climate change. He emphasised how collaboration across the foodservice industry was needed to reach alignment on the important issues, acting as a stronger, unified voice, when starting conversations with policymakers. Company-focused solutions presented included deep knowledge of the provenance of supply chains and encouraging suppliers to perform “Life Cycle Assessments”, alongside open sharing of industry best practice and government lobbying to press for positive change.
AlixPartners’ Catherine Brien, Partner and Managing Director and Artificial Intelligence expert, drove home the criticality of this technology in foodservice, while demystifying the ‘hype engine’ surrounding AI and how it can be practically applied to the sector. A ruthless focus on finding where the value lies in AI for businesses was key, monitoring and controlling the risks in tandem when looking for benefits that could be realised in areas such as menu planning, demand forecasting to limit cost and food waste, and labour scheduling.
Finally, during the panel discussion featuring Houston & Hawkes, Social Pantry, Pinch, Savore, Thomas & Tate, and Eat Social, the belief was shared that there has been a reset of the start-up cycle and the opportunity was significant for new companies to disrupt the industry. With much consolidation in the market, white space would become clear where new, smaller businesses with fresh ideas could capture on those areas of demand. Quality, personality, and relationships were highlighted as key success factors in securing new business and, while cost is always important, value and a high-quality product delivered at a reasonable price is what stands out to clients and guests.
Key takeaways
In summary, there was an air of optimism at this year’s event. Foodservice operators should be buoyed by the positive forecasts, revival of M&A activity in the sector, and the huge opportunities that exist for the forward-thinking companies that can successfully combine effective management of cost, quality, operational excellence, and digital innovation in a hyper-competitive market.
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.
