Foodservice in focus: Optimism and opportunity despite disruptive headwinds

Nearly 200 guests from across the Foodservice sector gathered at RIBA in London for the 12^th Annual Foodservice event, kindly hosted by Compass, in partnership with EP Business in Hospitality. 

While the sector is in very healthy shape compared with broader UK hospitality and retail sectors, operators continue to face market disruptions that they will need to navigate as we move into 2025.

Graeme Smith, Partner and Managing Director at AlixPartners, began the presentations, reflecting on how the provision of food and hospitality is becoming increasingly costly and complex, driving the continued growth in outsourcing to succeed. Graeme remarked that, while sector profitability has recovered, challenges do remain due to the upcoming increase in employment costs announced in the recent UK Budget. 

Graeme reflected that the larger global caterers (Compass, Sodexo, Aramark, and Elior) are showing positive share price performance, forecasting growth and a step up in profitability, while the broader UK Foodservice industry has also recovered beyond pre-COVID levels. These strong indicators highlight the continued resilience of the industry. 

Graeme highlighted the importance of technology and innovation in the sector, which is being used to drive interactions with the customer, develop operational efficiencies, automation, or data interpretation and analysis via generative AI. He also commented how the strength of the sector is leading to the use of M&A to address strategic priorities, capability gaps, and build scale – anecdotally evidenced by healthy valuations and transaction appetite.

Bill Toner, CEO of CH&CO, provided an insight to his successful record as a dealmaker in the Foodservice sector, highlighting the importance of relationships and focusing on what can be achieved together in driving successful outcomes in M&A. Bill reflected that quite often there was not a “masterplan” behind success, and that it was about being entrepreneurial and, at times, fortunate with timing. 

Kirsty Adams, Talent, Learning, and Diversity & Inclusion Director, Compass Group UK & Ireland, flagged how important it is for the industry to create a talent pool and connect with the younger generation. Kirsty noted that the Foodservice industry is facing an aging workforce but has opportunities as the industry has “barrierless entry” for employment, which perfectly positions the sector to solve many of the challenges facing the UK. Kirsty also mentioned the importance of connecting with the local community and acting as a pipeline for younger people to find a pathway into the catering industry.

Greg Lawson – CEO, Smart Group Ltd, focused on how difficult it is to drive scale in the events sector due to the sporadic nature of trading, which leads to difficulties in developing longer term partnerships with suppliers and staff. He also mentioned how important creativity is in providing catering services that clients can buy into and appreciate. Greg commented how the UK is moving towards experiential events, including the increased demand for conference events. Consistent with the message from Kirsty Adams, he flagged staffing issues and attracting more young people to the industry as key concerns. This enthusiasm could once again be harnessed though, as seen with milestone events in the past. 

Azeem Ahmed, Director at AlixPartners, moderated a panel session with independent operators including Renier Oberholzer (Regional MD of Thomas Franks), Ian Crabtree (MD of Accent Catering), Jeremy Alderton (MD of Palmer & Howells) and Francois Gautreux (MD of Bespoke Food).

Key topics covered included:

• How innovation and superior service is critical for independent companies to compete with larger Foodservice companies and to support the increasing demand from customers
• The importance of agility, to pivot your business to react to market changes
• The demand for quality food provision in independent schools is likely to increase with the rise of VAT in private school education, which will lead to challenges as well as opportunities – acting as a key partner to provide an elevated offering
• Partnering with clients to find creative solutions in overcoming pricing pressures and “sweating” available assets and event spaces more regularly
• The importance of using technology to drive efficiencies, allowing caterers to focus on food quality and improved nutrition

Finally, Graeme closed the session by highlighting that the Foodservice industry has rebounded strongly since 2019, with education caterers featuring prominently in the list of leading caterers by topline growth. 
 

Key takeaways

In summary, Foodservice operators are confident heading into 2025, due to the continued outsourcing trend, despite the challenges brought on by food inflation and the Autumn UK Budget. Operators are seizing opportunities to innovate and use technology to drive cost efficiencies, while M&A activity is also firmly on the agenda to drive deeper penetration of sectors, further expansion, and technological gains. 

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.