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Catering groups are going through lean times

by Ace Damon
Catering groups are going through lean times

IF SOME WORKERS, after months at home, reluctantly admit that they are missing their colleagues, few admit any desire for the office canteen. Companies that prepare meals for hospital workers, students and patients were hit by covid-19 with the same force as restaurants (usually) open to the public. As employees return to cafeterias, their prospects seem no less confused than those at other restaurants.

What the grub suppliers served lack customer enthusiasm makes up for in size. The four major food outsourcing companies – Compass Group in Great Britain, America Aramark and Sodexo and Elior in France – together serve perhaps 14 billion meals a year. Of the nearly US $ 300 billion spent on feeding workforces, student bodies and the like, approximately half is outsourced and half of that is for multinationals. Growth was stable, if not spectacular, before covid-19, aided by acquisitions of local rivals.

The blocks brought pain in the short term and uncertainty in the long term. In addition to offices, food stores, from schools to stadiums and conference centers, are closed. Some generally trusted wages dried up: hospital care declined when beds were released for coveted patients and visits prohibited. Even some prisoners, literally captive consumers, were released because of the pandemic. Compass, the largest of the four largest, said in May that half of its 600,000 employees were on leave.

Investors are also concerned about what happens next, which is why the suppliers’ share prices have not recovered with the rest of the stock market. Housework has slowed growth and it seems likely to continue after the pandemic. In factories, social detachment means a smaller workforce working longer shifts, with fewer mouths to feed. College students, who together with students consume a quarter of the meals served, can also stay away from campuses as online courses gain strength.

Due to the high fixed costs, the loss of some customers can damage margins (see the graph). Operating profits are already meager: about 36 cents per meal, or approximately $ 100 per location per day, in the case of Compass. Increasing expenses, such as hiring more employees to enforce more stringent cleaning protocols, will not help. Transferring costs to customers is complicated in a recession. A slower economy will weigh on consumers; very expensive stadium hot dogs are an easy luxury to relinquish a crisis, even after the return of live sports.

Suppliers hope that a recession will help them secure new customers. Companies that currently operate their own kitchens can cut costs by perhaps a fifth by outsourcing to professionals, who strive to explain that it is better to leave kitchens with new and complicated hygiene standards. The last recession, in 2008-09, saw a small increase in contracts.

Still, many employers can conclude that those employees who are still working can be sated with mass deliveries of food apps like Uber Eats. They were trying to have lunch, even before the pandemic. ■

This article appeared in the Business section of the print edition, under the title “Fatal diet”

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