Catering Outsourcing Surges Globally as Food Prices Rise and Complexity Grows
By Dimitri Rhodes and Lucie Barbier
Global Growth in Catering Outsourcing
July 21 (Reuters) - Global catering groups are increasingly finding growth from hospitals, schools and businesses outsourcing food and facilities services for the first time, opening up a large pool of potential customers beyond the industry's traditional contract battles.
Key Players and Market Dynamics
Outsourcing specialists such as Compass Group, Sodexo and Aramark have benefited as organisations seek outside help managing food purchasing, labour shortages and increasingly complex operations.
Market leader Compass said on Tuesday that around half of its new contract wins come from organisations outsourcing catering and facilities management for the first time.
First-time-outsourcing customers accounted for 51% of new business signed in the six months to March, up from 45% three years ago.
Drivers of Outsourcing Growth
"The increase in first-time outsourcing is partly linked to inflation," Compass told Reuters, adding that rising operational complexity and more demanding client requirements were also driving the trend.
Caterers use their scale to negotiate prices, manage supply chains and deploy data to adapt menus and purchasing decisions more efficiently than many self-operated cafeterias.
"This is true all of the time, but it becomes more dramatic during periods of rapid price increases," Morningstar analyst Ben Slupecki told Reuters.
Competitive Landscape
Rivals are seeing similar trends.
Sodexo Chief Executive Thierry Delaporte told Reuters last week that roughly half of the French group's contract wins come from first-time outsourcing customers.
"There is a global trend towards first-time outsourcing," Delaporte said.
U.S. peer Aramark has also described first-time-outsourcing opportunities as running above historical levels.
Sector Opportunities and Market Share
Healthcare and Education Sectors
HEALTHCARE AND EDUCATION
Industry executives see healthcare and education as among the biggest opportunities for future growth because outsourcing remains less established in those sectors than in corporate workplaces, sports venues and other mature markets.
A Sodexo spokesperson said healthcare and education are expected to be the company's fastest-growing segments, while Compass highlighted both sectors as major first-time-outsourcing opportunities in investor materials published in May.
"Just the education segment in America is a massive opportunity for us," Delaporte told investors this month.
Market Expansion and Competition
The shift provides a medium-term growth opportunity for the industry's largest players because it expands the market rather than forcing them to compete solely for one another's customers.
The world's four largest caterers -- Compass, Sodexo, Aramark and Elior -- still account for less than 30% of the global contract catering market, according to analyst estimates.
"I do not think this is an endless gravy train," Slupecki said, warning that competition between major providers is likely to intensify in the next five to ten years as the pool of first-time outsourcing customers gradually shrinks.
Reporting Credits
(Reporting by Dimitri Rhodes and Lucie Barbier in Gdansk, additional reporting by Yamini Kalia in Bengaluru; Editing by Matt Scuffham)
