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Contract Catering

- UK, January 2017

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v 101013 Single

Table of Contents Contract Catering UK, January 2017

© Mintel Group Ltd. All rights reserved. iii

INTRODUCTION ..................................................................................................................................... 7

Definition ......................................................................................................................................... 7 Abbreviations .................................................................................................................................. 7

EXECUTIVE SUMMARY ......................................................................................................................... 8

The market ...................................................................................................................................... 8 Contract catering market nears £4 billion in 2016 ............................................................................................... 8 Figure 1: UK market for contract catering, £ million, 2012-21 ............................................................................. 8

Market environment by sector ......................................................................................................... 9 Business and industry ........................................................................................................................................ 9 Schools............................................................................................................................................................... 9 Healthcare .......................................................................................................................................................... 9 Prisons ............................................................................................................................................................... 9 Defence .............................................................................................................................................................. 9 Remote sites ...................................................................................................................................................... 9

Market drivers ................................................................................................................................. 9 National economy and British population ............................................................................................................ 9 Brexit ................................................................................................................................................................ 10 Growing concern around food waste ................................................................................................................ 10 Introduction of the National Living Wage .......................................................................................................... 10 Demand for healthier options is affecting consumer decision making ............................................................... 10

Companies .................................................................................................................................... 10 The consumer ............................................................................................................................... 10

More than half of consumers have access to workplace catering facilities........................................................ 10 Figure 2: Available workplace facilities, July 2016 ............................................................................................ 11

Buying lunch out of the home ....................................................................................................... 11 Figure 3: Frequency of buying lunch to eat out-of-home, for an everyday occasion, by age, July 2016 ............ 12

A fifth usually spend at least £6 on everyday lunches out-of-home ............................................. 12 Figure 4: Approximate spend on a lunch out of home on an everyday occasion, July 2016 ............................. 13

What we think................................................................................................................................ 13

ISSUES AND INSIGHTS ....................................................................................................................... 14

The continued need to demonstrate value for money .................................................................. 14 The facts ........................................................................................................................................................... 14 The implications................................................................................................................................................ 14

Need to tap into younger demographic ......................................................................................... 14 The facts ........................................................................................................................................................... 14 The implications................................................................................................................................................ 15

The potential role of technology .................................................................................................... 15 The facts ........................................................................................................................................................... 15 The implications................................................................................................................................................ 15

MARKET SIZE AND FORECAST ......................................................................................................... 16

Key points ..................................................................................................................................... 16 Market performance ...................................................................................................................... 16

Food service management ............................................................................................................................... 16 Figure 5: UK Consumer expenditure on catering, £ billion, 2005-15 ................................................................. 16

Contract catering ........................................................................................................................... 17 Figure 6: UK contract catering market size, £ million, % change, 2012-21 ....................................................... 17

Growth expected to continue into 2017 and beyond .................................................................... 18 Forecast methodology .................................................................................................................. 18

MARKET DRIVERS AND TRENDS: .................................................................................................... 19

Key points ..................................................................................................................................... 19 Factors influencing consumer product choice .............................................................................. 19

Figure 7: Factors influencing consumer product choice, 2016 .......................................................................... 19 National economy and British population ..................................................................................... 20

Figure 8: Gross domestic product, annual growth, %, 2007-15 ........................................................................ 20 Growth in under-14s should boost demand for school catering services ..................................... 20

Figure 9: Trends in the total and age structure of the UK population, 2014, 2019 & 2024 ................................ 21


© Mintel Group Ltd. All rights reserved. iv

The impact of the EU referendum ................................................................................................. 21 Negative implications ........................................................................................................................................ 21 Potential benefits .............................................................................................................................................. 22 Outcome ........................................................................................................................................................... 22

Growing concern around food waste ............................................................................................ 22 Waste and Resources Action Programme .................................................................................... 23 Contract catering has lower waste levels than other kitchen types .............................................. 23

Figure 10: Where food is wasted, contract catering and mean across all kitchen types, November 2013 ........ 23 Introduction of the NLW ................................................................................................................ 24

Figure 11: National minimum wage and national living wage, £ per hour, 2010-16........................................... 24 Figure 12: Forecast wage rate growth, £ per hour, April 2016 and April 2020 .................................................. 24

MARKET ENVIRONMENT BY SECTOR.............................................................................................. 26

Key points ..................................................................................................................................... 26 Business and industry ................................................................................................................... 26

Figure 13: UK employment and unemployment, 000, 2011-16 ......................................................................... 26 Schools ......................................................................................................................................... 27

Figure 14: Trends in school numbers and numbers of pupils, 2005-16 ............................................................. 27 Falling proportion of pupils getting free school meals ....................................................................................... 28 Figure 15: Rates of eligibility and claiming of free school meals, state-funded primary and secondary, %, 2011-16 ............................................................................................................................................................ 28 Universal infant free school meals .................................................................................................................... 28

Healthcare ..................................................................................................................................... 28 National Health Service patient demand ........................................................................................................... 28 Figure 16: Average daily available beds open overnight, England, Q1 2012/13 – Q1 2016/17 ......................... 29 Figure 17: NHS inpatient elective admission events, England, Q2 June 2012-16 ............................................. 29 NHS Employee demand ................................................................................................................................... 29 NHS funding continues to increase ................................................................................................................... 30 Food costs edging upwards .............................................................................................................................. 30 The aging population should support demand for healthcare ........................................................................... 30

Prisons .......................................................................................................................................... 30 Figure 18: England and Wales prison population, 2012-16 ............................................................................... 30 Figure 19: Forecast England and Wales prison population, 2017-20 ................................................................ 31

Defence ......................................................................................................................................... 31 Figure 20: UK Armed Forces personnel, 2007-16............................................................................................. 31 Figure 21: UK defence budget, £ billion, 2015-20 ............................................................................................. 31

Remote sites ................................................................................................................................. 31 Figure 22: UK construction output, 2010-16 ..................................................................................................... 32

COMPANY PROFILES ......................................................................................................................... 33

Aramark ......................................................................................................................................... 33 Financial information ........................................................................................................................................ 33 Figure 23: Financial performance of Aramark UK Ltd, 2011-15 ........................................................................ 33 Company strategy ............................................................................................................................................ 33 Recent developments ....................................................................................................................................... 33

Bartlett Mitchell ............................................................................................................................. 34 Financial information ........................................................................................................................................ 34 Figure 24: Financial performance of Bartlett Mitchell Ltd, 2011-15 ................................................................... 34 Company strategy ............................................................................................................................................ 34 Recent developments ....................................................................................................................................... 34

BaxterStorey ................................................................................................................................. 35 Financial information ........................................................................................................................................ 35 Figure 25: Financial performance of BaxterStorey Ltd, 2011-14 & 2016 ........................................................... 35 Company strategy ............................................................................................................................................ 35 Recent developments ....................................................................................................................................... 35

Compass Contract Services (UK) ................................................................................................. 36 Financial information ........................................................................................................................................ 36 Figure 26: Financial performance of Compass Contract Services (UK) Ltd, 2011-15 ....................................... 36 Company strategy ............................................................................................................................................ 36 Recent developments ....................................................................................................................................... 36

Elior ............................................................................................................................................... 37 Financial information ........................................................................................................................................ 37 Figure 27: Financial performance of Elior UK PLC, 2011-15 ............................................................................ 37


© Mintel Group Ltd. All rights reserved. v

Company strategy ............................................................................................................................................ 37 Recent developments ....................................................................................................................................... 38

Harrison Catering .......................................................................................................................... 38 Financial information ........................................................................................................................................ 38 Figure 28: Financial performance of Harrison Catering Ltd, 2012-16 ................................................................ 38 Company strategy ............................................................................................................................................ 38 Recent developments ....................................................................................................................................... 38

Interserve Catering Services......................................................................................................... 39 Financial information ........................................................................................................................................ 39 Figure 29: Financial performance of Interserve Catering Services, 2011-15 ..................................................... 39 Company strategy ............................................................................................................................................ 39 Recent developments ....................................................................................................................................... 39

OCS .............................................................................................................................................. 39 Financial information ........................................................................................................................................ 40 Figure 30: Financial performance of OCS Ltd, 2011-15 .................................................................................... 40 Company strategy ............................................................................................................................................ 40 Recent developments ....................................................................................................................................... 40

Sodexo .......................................................................................................................................... 40 Financial information ........................................................................................................................................ 41 Figure 31: Financial performance of Sodexo Ltd, 2011-15 ............................................................................... 41 Company strategy ............................................................................................................................................ 41 Recent developments ....................................................................................................................................... 41

THE CONSUMER .................................................................................................................................. 42

Key points ..................................................................................................................................... 42 Buying lunch out of the home ....................................................................................................... 42

Frequency of buying lunch to eat out of the home ............................................................................................ 42 Figure 32: Frequency of buying lunch to eat out-of-home, for an everyday occasion, July 2016 ...................... 43 Figure 33: Frequency of eating lunch out-of-home in the last three months, by age, July 2016 ........................ 44 A fifth usually spend at least £6 on everyday lunches out-of-home ................................................................... 44 Responses hint at further scope for premiumisation ......................................................................................... 44 Figure 34: Approximate spend on a lunch out of home on an everyday occasion, July 2016 ........................... 45 Contract catering venues lag well behind rival lunchtime options ..................................................................... 45 Figure 35: Venues visited for lunch out of home, July 2016 .............................................................................. 46

ACCESS TO WORKPLACE CATERING FACILITIES ........................................................................ 47

45% of employees have access to a workplace canteen ............................................................. 47 Figure 36: Available workplace facilities, July 2016 .......................................................................................... 47

Are caterers failing to make the most of their market? ................................................................. 47

USE OF WORKPLACE CANTEENS .................................................................................................... 48

Workplace canteens shunned by 36% of potential customers ..................................................... 48 Figure 37: Use of workplace facilities, July 2016 .............................................................................................. 48

Are canteens pricing themselves out of the market? .................................................................... 48 Figure 38: Use of workplace facilities, by household financial situation, July 2016 ........................................... 49

Older employees are less likely to use workplace canteens ........................................................ 49 Figure 39: Use of workplace facilities, by age, July 2016 ................................................................................. 50

ATTITUDES TOWARDS WORKPLACE CATERING CHOICES ......................................................... 51

Healthy options are key to increasing custom .............................................................................. 51 Figure 40: What could workplace facilities do to improve, July 2016 ................................................................ 51

The challenge of reaching older employees ................................................................................. 51 Figure 41: What could workplace facilities do to improve, by age, July 2016 .................................................... 52

ATTITUDES AMONG EMPLOYEES WITHOUT ACCESS TO WORKPLACE CATERING ............... 53

How to build a case for workplace catering .................................................................................. 53 Figure 42: Attitudes towards workplace catering among people without access to a canteen, July 2016 ......... 53

Open-minded on quality – But perceived value is a concern ....................................................... 53 Are older employees’ pre-conceptions holding back the market? ................................................ 54

Figure 43: Agreement with the statement “I would use a workplace canteen if one was available”, July 2016 .......................................................................................................................................................... 55


© Mintel Group Ltd. All rights reserved. vi

USE OF HOSPITAL CATERING .......................................................................................................... 56

A third of adults have visited a hospital in the last three months… .............................................. 56 Figure 44: Hospital visiting, July 2016 .............................................................................................................. 56 Figure 45: Use of hospital catering facilities, July 2016 .................................................................................... 57

Patients and visitors share similar purchasing patterns ............................................................... 57 Figure 46: Use of hospital catering facilities, by reason for visiting hospital, July 2016 ..................................... 58

UK B2B ................................................................................................................................................. 60

Trade research .............................................................................................................................. 60 Informal ............................................................................................................................................................ 60 Formal .............................................................................................................................................................. 60 Desk research .................................................................................................................................................. 60

Consumer research .......................................................................................................................... 61 Sampling and weighting ...................................................................................................................................... 61 Definitions ......................................................................................................................................................... 63 Qualitative Research............................................................................................................................................ 63 Further Analysis ................................................................................................................................................. 63

Statistical forecasting .................................................................................................................... 64

Introduction Contract Catering UK, January 2017

© Mintel Group Ltd. All rights reserved. 7

Introduction In the coming years, the contract catering industry should benefit from the ongoing UK economic

recovery, increased employment, and greater outsourcing contracts. However, while cuts in public

spending have increased the use of outsourcing, budgetary pressures mean a strong emphasis on price

competition, creating tough trading conditions and pressure on margins. The slow but steady decline in

workplace catering is also reducing the pool of available business.

Definition

For the purposes of this report, contract catering is defined as the part of the foodservice industry that

supplies meals to third-party organisations. This encompasses a wide variety of businesses and

institutions.

This report concentrates on the following main sections of contract catering:

Business and Industry: company staff catering, including government and agency locations.

Local Authorities: local government.

Education: including both state education, such as schools, colleges and universities, and

independent schools.

Healthcare: including NHS and trust hospitals, private hospitals, and private nursing homes.

Defence: MOD and armed services.

Remote sites: including oil rigs, training centres, and construction sites.

Retail catering: including catering for the public in high-street retail outlets.

There has been an increasing trend for facilities management companies to provide contract catering

services. However, as these services are often bundled with other services and provided under one

facilities management contract, it is not always possible to analyse the value of the catering aspect of

contracts.

Abbreviations BHA British Hospitality Association DEFRA Department for Environment, Food and Rural Affairs MoD Ministry of Defence NLW National Living Wage NMW National Minimum Wage ONS Office for National Statistics UIFSM Universal Infant Free School Meals

Executive Summary Contract Catering UK, January 2017


Executive Summary “Austerity measures have meant continued strong pressure on public sector bodies to cut

spending. While this has led to some outsourcing in the contract catering sector, it has also led

to intense price competition and even reductions in some existing contracts. This is particularly

true in sectors that have felt the brunt of staffing cuts, such as defence. The private sector,

meanwhile, has benefitted from ongoing economic development, which has seen the gradual

return of confidence and security in recent years. This has been bolstered by similar

improvements in consumer confidence, the frequency with which people eat out, and growth in

average expenditure.”

– Marco Amasanti, Research Analyst

The market

Contract catering market nears £4 billion in 2016

Mintel estimates that the contract catering market grew by 1.5% over 2016 to reach a total of £3.88

billion. This expansion follows steady growth over the past five years, whereby value has risen by an

overall 6.5% from £3.64 billion. Looking forward, Mintel expects this growth to continue in the

coming years. We estimate that value will rise by 9.1% from £3.88 billion to £4.23 billion by 2021,

with annual growth of between 1.5% and 2% during this period.

FIGURE 1: UK MARKET FOR CONTRACT CATERING, £ MILLION, 2012-21

Note: Prior figures are at current prices and real terms for forecast SOURCE: MINTEL

A number of over-arching factors are supporting this growth. The primary driver, as has been the case

in recent years, is the steady recovery from the 2008 global recession. This has driven demand for

catering in business and industry, retail and remote sites. At the same time, the contract catering

industry has benefitted from the continued rise of outsourcing in the public sector, particularly in

healthcare, prisons and defence.



Market environment by sector

Business and industry

UK employment grew by 1.6% over the past year to 31.8 million. This growth means that employment

has risen by an impressive 8.3% since 2011, as the UK consolidates its recovery from the 2008 global

economic crisis; thereby supporting demand for workplace catering.

Schools

Demand for contract catering in schools continues to grow in line with the 1.4% rise in pupil numbers

over 2015, and the 3.3% increase reported since 2005. Elsewhere, the Universal Infant Free School

Meals initiative continues to bolster growth. However, ongoing pressure on public expenditure has

increased price competition and difficult trading conditions in the sector.

Healthcare

The average number of available beds open overnight fell across England by 0.8% over 2015, and has

declined by 4.8% since 2012. However, the number of inpatients has risen by 3.1% over the past year

and 16% since 2012. Meanwhile, NHS employment and budgets continues to grow, supporting

demand from the sector. However, demand for healthcare services is increasing more quickly than

NHS budgets, putting huge pressure on spending. As in the education sector, this will inevitably lead

to a price squeeze.

Prisons

The prison population in England and Wales has fallen by 1.9% from 86,656 in 2012 to 84,967 in

2016, though the figure remains one of the highest in Europe. Income from the sector has been

challenged by the rising climate of outsourcing, including catering, in the UK justice sector.

Defence

The number of UK armed forces personnel fell by 1.8% in 2016, adding to an overall fall of 20.8%

since 2007. Demand from the sector has therefore fallen significantly in recent years and, as with other

areas dependent on government spending, austerity means that contract caterers face growing price

competition.

Remote sites

Remote sites, covering facilities like oil rigs and construction sites, remain highly sensitive to global

demand and the health of the broader economy. The broad nature of this sector means that market

conditions vary widely depending on the site. Output in the construction sector, for example, fell 1.7%

in the year to July 2016, though total output is still up by 7.4% since July 2010.

Market drivers

National economy and British population

The primary external factors that affect the contract catering market are the state of the national

economy and the shape of the British population. Both have grown over the past five years. Gross

domestic product has grown steadily since 2009, while the population has seen impressive growth over

the past decade, driving demand across the industry.



Brexit

The recent decision to leave the European Union brings a number of challenges and opportunities for

the market. There is currently too much uncertainty to know exactly what impact the vote will have on

the sector, but the importance of hospitality to the national economy means it will likely be

safeguarded throughout the process. The most immediate threat has been the impact on the exchange

rate, pushing up the price of imported goods and adding cost pressures in an already competitive

market. In the longer term, curbs on EU immigration could also be problematic given the sector’s

relatively heavy dependence on migrant workers.

Growing concern around food waste

Food waste has become a pressing issue amid mounting concern from British consumers. The contract

catering industry must therefore be proactive in combatting food waste in the coming years, not only to

allay consumer concerns, but also to potentially significantly reduce costs across the industry.

Introduction of the National Living Wage

On April 1 2016, the government introduced a new National Living Wage (NLW) for people aged 25

and over. The threshold is set at £7.20 per hour, replacing the previous £6.50 rate for the National

Minimum Wage (NMW). The vast majority of the industry’s labour force qualifies for these pay rises,

and costs are expected to rise across the industry. Companies are likely to pass some of these raised

costs onto the customer through price and contract rises, but a competitive and price-sensitive market

means that operators will inevitably have to absorb some of the increased costs.

Demand for healthier options is affecting consumer decision making

It is essential to analyse the key factors motivating consumer choice when assessing areas of prosperity

and opportunity in the contract catering market. In recent years, the most commonly cited choice

factors have been price, quality, health, and ethical/eco status. Health is a particularly important factor,

with consumers looking for healthier options than the traditional favourites of workplace canteens. The

rise of ‘clean eating’ and the growth of the free-from sector have also had an impact on consumer

preferences.

Companies

The contract catering industry is primarily made up of smaller companies, with over three-quarters of

operators employing less than nine workers. However, there are also a number of major enterprises,

many of which also offer wider facilities management and support services in the hospitality sector.

There have been a number of acquisitions in recent years as companies look to strengthen their market

positioning. For example, in July 2016, Elior Group acquired Waterfall Catering Group, a UK-based

contract caterer for the education, care and welfare markets, thereby strengthening its presence,

especially given the tough trading conditions in recent years.

The consumer

More than half of consumers have access to workplace catering facilities

Respondents were asked:



FIGURE 2: AVAILABLE WORKPLACE FACILITIES, JULY 2016

“Which, if any, of the following on-site catering facilities do you have at your place of work?” Base: 1,209 internet users

SOURCE: LIGHTSPEED/MINTEL

The contract catering industry is effectively dependent on on-site facilities, with workplace canteens a

key income channel. However, only 45% of employed respondents said they had a workplace canteen

or café, limiting this key area of income.

Moreover, of those who had facilities, only 64% had eaten at them in the last three months, further

restricting this potential income channel. In light of this, market leaders should be looking to entice the

other third through improved product offerings, with price, offers, promotions and quality the key

choice factors, as shown below.

The proliferation of fast-casual dining options and the ever-improving range of on-the-go options from

mainstream retailers mean that workplace catering operators face increasing competition. The

convenience offered by workplace canteens gives contract caterers a powerful advantage over outside

options, but they will struggle to convert convenience to increased sales without continued product

innovation and a keen attention to changing consumer tastes.

Buying lunch out of the home

When respondents were asked:



“Which of the following most closely describes how often you have bought lunch to eat out of

home for each of the following occasions in the last three months? Please note that this includes

both lunch bought from a supermarket, bakery shop etc. (e.g. a sandwich) and lunch bought

from a food outlet such as a coffee shop, fast food outlet or restaurant/pub/bar.” FIGURE 3: FREQUENCY OF BUYING LUNCH TO EAT OUT-OF-HOME, FOR AN EVERYDAY OCCASION, BY AGE, JULY 2016 Base: 2,000 internet users aged 16+


The data highlight the size of the out-of-home lunch market, and the rewards on offer for contract

caterers who can capture even a relatively small slice of that market.

The data also shows how strongly the market is skewed towards younger consumers. 78% of under-

34s had bought lunch out-of-home for an everyday occasion in the last three months, falling to just

35% of the over-65s. The key factor here is working status: younger people are simply more likely to

be working or studying, and therefore have more occasions to buy lunch out-of-home. 84% of full-

time students and 75% of full-time employees buy lunch out-of-home on an everyday occasion,

compared to 40% of retirees.

A fifth usually spend at least £6 on everyday lunches out-of-home

When people who had bought lunch to eat out-of-home on an everyday occasion were asked how

much they tended to spend, 38% spent less than £4. However, 22% said they usually spend upwards of

£6, reflecting the ever-growing range of premium out-of-home lunch options.



FIGURE 4: APPROXIMATE SPEND ON A LUNCH OUT OF HOME ON AN EVERYDAY OCCASION, JULY 2016

"Approximately how much, on average, do you typically spend on a lunch out of home for yourself on an everyday occasion (including drinks and any other extras such as crisps, chocolate)? Please use the slider to indicate how much you spend."

Base: 1,121 internet users aged 16+ that have bought lunch to eat out of home in the last month for an everyday occasion


Predictably, Londoners lead the way when it comes to trading up, with 35% saying they usually spend

at least £6 when buying lunch on an everyday occasion. Londoners are also the biggest spenders on

lunches during leisure occasions, with 21% usually spending at least £20, compared to 13% across the

population.

What we think

Although the result of the EU referendum is likely to impact economic growth in the coming years, the

UK economy should continue to grow. Rising employment and a growing population will organically

boost demand across the market, while initiatives such as Universal Free Infant School Meals, which

was recently renewed until 2017, should also help maintain important income channels.

However, continued pressure on government budgets and the uncertainty around Brexit mean that the

market could face price competition and tough trading conditions. In this environment, caterers should

look to emphasise their value, while also exploiting changing consumer tastes to ensure ongoing

interest.

Issues and Insights Contract Catering UK, January 2017


Issues and Insights “Food continues to be targeted as a primary area for cost-saving, limiting market value, though

this has lessened somewhat in recent years as real incomes have started to increase. However,

ongoing price competition and tough trading conditions across the market, especially in the

public sector, means a continued emphasis on displaying value for money. Elsewhere, operators

have sought to boost demand by capitalising on broader food and drink trends, offering

heightened diversity, customisation and health-orientated products.”

– Marco Amasanti, Research Analyst

The continued need to demonstrate value for money

The facts

According to the government’s Food Statistics Pocketbook 2016

(https://www.gov.uk/government/statistics/food-statistics-pocketbook-2016), price was voted the

most important factor in influencing consumer product choice; with 36% citing it as the most

important and 90% naming it in their top five influencing factors.

Moreover, 6% cited special offers/promotions as the most important factor, with 60% citing it

within their top five choice factors, further reinforcing the importance of value for money in the

industry.

Packed lunches are the main rival to workplace contract catering, with Mintel’s consumer research

revealing that 83% of those who take their own lunch to work do so to save money.

The implications

Given growing price competition and tough trading conditions, value for money continues to be a key

priority for UK consumers in the contract catering market. This emphasis on price is evident in our

consumer survey, whereby price was echoed as the main motivation behind not just product choice,

but also the prevalence of the market’s primary rival: packed lunches.

Despite ongoing economic improvements, many people are still under heavy financial pressure, and

food, especially out of the home, remains targeted as a key area of cost saving by consumers. People

are prepared to spend on food and drink, but value is a concern. Similarly, on the corporate level

companies remain subject to stringent budgeting, creating a climate of price sensitivity across the

market.

Contract caterers therefore need to prove their value for money both to customers and in contracts to

public and private operators. This will be a key opportunity for market leaders in the coming years.

Need to tap into younger demographic

The facts

According to Mintel’s consumer survey, 16- to 24-year-olds were the most likely to frequently buy

lunch out of the home, with 30% doing so daily, 24% a few times a week, and 21% once a week.

Just 8% said they hadn’t bought lunch out of the home in this period.

Issues and Insights Contract Catering UK, January 2017


Moreover, 56% of 16 to 24-year-olds spent £4 or over, on average, on lunch out of the home for

everyday occasions; representing a significant income channel to the industry and one of the

highest areas of average expenditure.

However, much of this spend is bypassing the contract catering market. This age group were

among the least likely to have recently eaten at a workplace canteen/café, with only 16% having

done so, compared to 36% of 25 to 34-year-olds.

The implications

Younger demographics, outside of the education sectors, represent a major opportunity for the contract

catering industry. They are most likely to frequently eat lunch out of the home, and spend some of the

highest amounts on these goods. Yet, they are currently less likely to visit workplace canteens or

contract caterers than other demographics.

Younger consumers are instead more likely to visit high-street alternatives, such as supermarkets,

bakeries, fast-food chains, coffee shops and sandwich shops. Contract caterers can look to tap into this

age group by matching their areas of interest to heighten appeal.

Beyond value, young consumers are interested in customisation, which allows the pick and mixing of

dishes, and special offers and promotions. The industry should look to harness current taste trends,

offering fashionable dishes to pique interest and attract footfall to canteens and cafeterias.

The potential role of technology

The facts

When asked what would make them more likely to visit workplace canteens, 25% of respondents

to Mintel’s consumer research agreed that being able to see the menu in advance would tempt

them.

23% would be attracted by customisable dishes, 15% by quicker payment and 14% by being able

to vote on dishes - all of which can be facilitated by technology.

In 2011, the UK hospitality and food service sector wasted more than 1.3 billion meals annually,

worth a total of £2.5 billion, which is estimated to rise to £3 billion by 2016. Again, the use of

technology could play a key role in reducing food waste.

The implications

Following significant progress over the past decade, technology has come to play an increasingly

central role in much of British industry. The impact of technology remains relatively minor in the

contract catering industry, but it could offer a number of opportunities in the coming years.

For example, technology could reduce and raise awareness of food waste, driving efficiency across

preparation and ingredient sourcing, thereby lowering waste and improving the industry’s public

image.

Elsewhere, technology could be used to drive demand through pre-ordering, customisation, and

allowing customers to see or vote on menus in advance. Such advances could be facilitated by a surge

in mobile devices and apps, which have become increasingly popular, and could harness areas of

interest among the UK consumer base.

Market Size and Forecast Contract Catering UK, January 2017


Market Size and Forecast

Key points

ONS data shows that UK consumer expenditure on catering as a whole has increased notably over

recent years, growing by 18.8% since 2010 and by 39% from £41 billion in 2005.

In 2015, the market was worth a total of £57 billion. The increase reflects the post-2008 recovery

in consumer spending and the ever-growing appetite for out-of-home dining among UK

consumers.

The contract catering market was worth an estimated £3.9 billion in 2016, up by 1.5% from the

previous year and 6.5% since 2012. This follows improving conditions across the public and

private sectors, though the former remains constrained somewhat by the ongoing climate of

austerity.

Market value is forecast to maintain growth over the next five years, and Mintel estimates this

figure to rise by an estimated 9.1% from £3.9 billion in 2016 to £4.2 billion in 2021. This is

expected in line with ongoing economic development, with indicators suggesting that the national

economy will continue to grow at a stable rate over the next five years, facilitating heightened

demand across public and private sectors.

Market performance

Food service management

The contract catering industry is an integral part of the broader foodservice sector, itself a component

of the wider hospitality industry. The foodservice sector, comprising any meal eaten outside the home,

has been in good health in recent years; boosted by ongoing economic development, which has seen

confidence gradually return to the consumer base following the adverse impact of the 2008 economic

crisis. This recovery has seen the value of out-of-home food expenditure grow significantly over the

past five years, driving income across restaurant, pub, cafeteria, and catering operations.

FIGURE 5: UK CONSUMER EXPENDITURE ON CATERING, £ BILLION, 2005-15

Note: Catering incorporates restaurants, cafes and canteens; that is, all non-residential catering SOURCE: ONS, DEFRA, FOOD STATISTICS POCKETBOOK 2016



Table highlights

Expenditure grew year-on-year throughout the review period, with the exception of 2009,

following the onset of the economic crisis.

Overall, expenditure totalled £57 billion in 2015, up by 39% from £41 billion in 2005, and 18.8%

from £48 billion in 2010.

Contract catering

The contract catering market has, in turn, also seen growth. Though some market drivers differ to the

broader foodservice industry, the two markets still tend to move in tandem.

As people become more optimistic about their finances, they are increasingly likely to spend at

caterers, whether employees buying lunch or dinner from canteens or cafeterias, or parents paying for

pupils’ school lunches. This drives both demand and income for the contract catering industry,

bolstered by the income generated by public bodies. Although spending remains constrained by

ongoing austerity measures, the necessity of catering across healthcare, education, prison and defence

provides a reliable – if price-sensitive – income stream.

FIGURE 6: UK CONTRACT CATERING MARKET SIZE, £ MILLION, % CHANGE, 2012-21

Note: Prior figures are at current prices and real terms for forecast SOURCE: MINTEL

Table highlights

Mintel estimates that the contract catering market was worth £3.9 billion in 2016, following

growth of 1.5% from the previous year.

This means overall growth of 6.5% from the £3.6 billion figure recorded in 2012.



Growth expected to continue into 2017 and beyond

Looking forward, Mintel expects the contract catering market to maintain steady growth between 2017

and 2021. Market value is forecast to expand at a consistent rate over the next five years, with annual

growth of between 1.5% and 2% over this period. Overall, the market is projected to grow by an

estimated 9.1% from £3.9 billion in 2016 to £4.2 billion in 2021.

There are a number of factors behind this forecast growth, with ongoing economic development an

important driver. Although the Brexit vote has added uncertainty, indicators suggest that the national

economy should continue to grow at a stable rate over the next five years, facilitating heightened

demand across public and private sectors.

Another element of this expected growth is employment. The most recent government employment

projections estimated that the British labour force would grow by 2.9% from 32.5 million in 2014 to

33.4 by 2019 and by 5.4% to 34.2 million by 2024. Elsewhere, the Universal Infant Free School Meals

initiative has an agreed policy until 2017, and is widely expected to be renewed or replaced by a

similar scheme following its completion.

Forecast methodology

For full details of forecast methodology please see Appendix: Market Size and Forecast.

Market Drivers and Trends: Contract Catering UK, January 2017


Market Drivers and Trends:

Key points

In recent years, consumer drivers in the foodservice market have surrounded price, quality and

health. An assessment of these factors enables operators to respond accordingly in their offerings,

harnessing and exploiting trends to enhance income.

The primary external determinates of the contract catering market are the state of the national

economy and population dynamics. Both the UK economy and the population have grown over the

past five years, sustaining and driving demand across the market.

The recent Brexit vote has introduced uncertainty to the market, though it remains unclear whether

this represents an opportunity or threat to industry prosperity.

Food waste has become more important to consumers and legislators, and is now a primary factor

across food markets. The contract catering industry must be proactive in combatting this growing

issue in the coming years, not only to allay consumer concerns, but also to help bring down costs.

The vast majority of the industry’s labour force qualifies for the pay rises introduced by the

National Living Wage (NLW). Companies are likely to pass these heightened costs onto the

customer through price and contract rises, though many will have to accept reduced margins in a

price-sensitive market.

Factors influencing consumer product choice

It is essential to analyse the key factors motivating consumer choice in the contract catering market

when looking for areas of prosperity and opportunity. This assessment enables operators to respond

accordingly in their offerings, harnessing and exploiting trends to enhance income.

FIGURE 7: FACTORS INFLUENCING CONSUMER PRODUCT CHOICE, 2016 Most important Rated within top 2 Rated within top 5

% % %

Price 36 24 30

Quality or performance 18 12 32

Special offers/promotions 6 15 39

Taste or smell 13 13 29

Healthy option 10 8 29

Ethical or eco-friendly 2 3 13

Note: Percentage of shopper responses, responding to top 5 factors SOURCE: ONS, DEFRA, FOOD STATISTICS POCKETBOOK 2016

According to DEFRA’s Food Statistics Pocketbook 2016, price is the primary driver behind consumer

product choice in the UK food industry. The study revealed that 36% of consumers cite price as the

most important consideration in food purchases, with 90% listing it within their top five

considerations.



There was a long period in the aftermath of the financial crisis when prices increased quicker than

average wages. Although real incomes have finally started to increase again, the post-crisis income

squeeze has led to a strong focus on value among consumers. Despite recent economic development,

price continues to dominate consumer choice in the industry, and expenditure on catering remains

vulnerable if consumers need to cut back on household spending as it is considered discretionary.

However, this has been somewhat nullified by food deflation in recent years, compounded by low

retail prices.

Beyond this, respondents emphasised the importance of quality, with 18% citing this as their most

important factor and 62% naming it in their top five considerations - linked to this, 13% also stated

taste or smell as their top consideration, with 55% putting it in their top five.

The next most important factors surround specific considerations around food, with respondents

emphasising health, ethical and environmental credentials. In fact, 10% named health as their primary

factor, while 2% cited ethical and environmental attributes as most important, and 18% placed it in

their top five considerations. Although these are secondary factors compared to taste and cost, they can

set operators aside in a crowded market. These issues have gained significant traction in recent years,

with awareness driven by heightened exposure across the consumer base, aided by the rise of social

media. Consumers have displayed willingness to spend more for these benefits, and as such, they

represent a key avenue for growth and demand in the contract catering industry.

National economy and British population

The primary external factors in the contract catering market are the state of the national economy and

British population dynamics. The UK economy ultimately decides supply and demand levels, while

the structure and growth of the population drives demand across the market.

In recent years, the UK has made significant economic progress as it has consolidated its recovery

from the 2008 global crisis. Gross domestic product (GDP) has recorded steady growth since 2009,

and the UK has been among the best-performing of the Western economies.

FIGURE 8: GROSS DOMESTIC PRODUCT, ANNUAL GROWTH, %, 2007-15 2007 2008 2009 2010 2011 2012 2013 2014 2015

Growth % 2.6 -0.5 -4.2 1.5 2 1.2 2.2 2.9 2.3

SOURCE: ONS

Ultimately, there is greater price sensitivity and awareness of spending among the populace in times of

financial hardship. However, businesses and consumers are less likely to be cautious when they see a

revival in income, giving rise to less stringent budgeting and growing demand for the contract catering

industry.

Growth in under-14s should boost demand for school catering services

The second over-arching determinate of market value is the structure of the population. A growing

population equates to a larger potential market, while changes in the age structure affects demand in

particular markets, such as education and healthcare. Overall growth and changes in age structures will

set demand in these areas moving forwards.



FIGURE 9: TRENDS IN THE TOTAL AND AGE STRUCTURE OF THE UK POPULATION, 2014, 2019 & 2024 2014 2019 2024

0-14 11.4 12 12.3

15-29 12.6 12.4 12.3

30-44 12.7 12.9 13.6

45-59 13 13.4 12.9

60-74 9.7 10.4 11.1

75 & over 5.2 5.8 7

Total 64.6 66.9 69.2

SOURCE: ONS

There are three key demographics of interest in the above table: children, who set demand in

education; those of working age, who set demand in retail and B&I; and those eligible for pensions,

who have a strong influence on demand in the healthcare sector.

The number of children is expected to rise in the UK in the coming years, with the under-15s predicted

to grow by 4.1% to 2019 and by 7.4% to 13.1 million by 2024. This forecast should drive growth in

the key education catering sector. However, austerity and current and expected budget cuts are likely

to ensure continued price competition, leading to tougher trading conditions for contract caterers.

Elsewhere, the working age population is expected to grow strongly, rising by 5% to 2019 and by

7.5% to 2024. This growth should sustain and drive demand across the healthcare, defence, retail,

business and industry, and remote-site sectors. As the labour force grows, the need for catering should

also grow accordingly, facilitating growth in market value.

Lastly, the number of consumers of pensionable age - defined by the state pension age for a given year

- is expected to fluctuate, falling by 1.6% to 2019, before growing by 4.8% to 13 million in 2024. This

age group is key to assessing demand in the healthcare sector; however, given the ageing population,

this group is forecast to increase pressure on the public purse over the coming decade, which could

drive unfavourable conditions for the industry, more of which is discussed in Market Environment by

Sector.

The impact of the EU referendum

On 23rd

June 2016, the UK voted to leave the European Union in a nationwide referendum, with a 52%

majority. This move sent shockwaves around British industry, and could have adverse political and

financial percussions throughout the UK. However, it is necessary to distinguish between the short-

and long-term implications of the vote, with very little expected to happen in the short term given the

lengthy process to leave the EU, and the two-year negotiating period required after triggering Article

50.

Negative implications

Brexit will bring a number of speculative challenges to the contract catering industry over the coming

decade. These challenges can be assessed according to the market’s core areas of demand, split

broadly across the public sphere, such as government, NHS, education and defence; and the private

sphere, incorporating business and industry, private healthcare and education, retail, and remote sites,

such as oil rigs and construction areas.



In the public sector, the uncertainty surrounding the need to renegotiate the UK’s position in the global

trade arena could constrain government budgets. This tightening would have ramifications for the

contract catering market, with clients potentially looking to cheaper catering services or cutting

services altogether, thereby restricting market value. This could elevate major operators at the expense

of SMEs as the former are often able to reduce prices through economies of scale, potentially

damaging the health and competitiveness of the market.

The uncertainty following the UK’s exit from the world’s largest single market and the potential

jeopardising of free movement of people, goods and ideas could also significantly limit consumer

expenditure in the private sector. Footfall across private education, healthcare, business, industry and

retail could fall if the British population becomes more cautious with their spending, and this blunting

of income and activity would damage demand for contract catering, reducing output and value.

Potential benefits

However, many ‘vote leave’ advocates point to a number of opportunities that will counter these

negatives. In the short term, the fall in the pound looks to have increased tourism, which has seen a

temporary surge in retail, business and industry, supporting demand for the contract catering industry

and driving market value.

In the longer term, freedom from EU trade constraints could open a number of avenues for growth.

Firstly, the UK can look further afield for opportunities and exploit its leading reputation to explore

growing areas of demand beyond Europe. Secondly, Brexit could remove EU food regulations, freeing

the industry to a greater pool of options and enhancing overall value. However, this could be offset by

food inflation as a result of new import tariffs, though such tariffs remain unclear.

Outcome

The fallout from the Brexit decision on the contract catering industry ultimately depends on the

manner in which exit negotiations are managed. With diligent consideration, forethought and

diplomacy, the industry could come out of the process better off than while it was a member of the EU.

To ensure this, the industry needs to articulate its concerns to the relevant authorities and negotiators

during these turbulent times. The government is likely to listen to these concerns as contract catering

forms part of the hospitality sector, which is the fourth largest industry in the UK.

Following these negotiations, the contract catering industry must continue to integrate with Europe,

while looking to explore opportunities further afield. Elsewhere, it is essential that the industry

safeguards SMEs, which form the backbone of the market and could be more affected by uncertainty

than major players.

Overall, it is worth noting the resilience of the catering and wider hospitality industry in the face of

economic turmoil, and consumers’ ever-growing appetite for new cuisines and experiences. Even if the

economy does suffer following the Brexit vote, the experience of the foodservice sector during the last

downturn shows that agile operators can profit from market disruption.

Growing concern around food waste

Food waste has become an important issue across food markets in recent years amid mounting concern

among British consumers. The contract catering industry is central to these concerns due to its heavy

involvement in wastage, and proactively combatting food waste will be at the forefront of the

industry’s agenda in coming years, especially given the risk of negative publicity associated with the

issue.



Waste and Resources Action Programme

The main authority on food waste is the Waste and Resources Action Programme (WRAP). The

charity works with governments, businesses and communities to deliver practical solutions to improve

resource efficiency. Alongside other key areas, such as retail, agriculture and government, the

organisation targets the hospitality and foodservice sector as a primary area of concern.

In 2012, WRAP succeeded in enrolling leading fast-food restaurants, pubs, hotels and contract caterers

in the Hospitality and Food Service Agreement, a voluntary agreement to the support the sector in

reducing waste and recycling more. The group previously undertook research into the extent of waste

in the UK hospitality and food service sector, discovering that it wasted more than 1.3 billion meals in

2011. The group also estimated the value of this food waste at £2.5 billion, and forecast that the figure

would rise to £3 billion by 2016.

The agreement set two targets: to reduce food and packaging waste by 5% (measured by CO2

emissions); and to increase the amount of food and packaging waste that is recycled, sent to anaerobic

digestion, or composted to at least 70%. The deal expired in December 2015, but WRAP found that

the initiative had already seen emissions fall by 3.6% in 2014 as it closed on the 5% target, while

composting had risen to 57%, representing a 12% increase from the previous figure. There was also a

47% increase among signatories in surplus hospitality and foodservice food going to charities and food

banks.

This agreement has now expired and WRAP is currently working on expanding the initiative to the

entire food and drink industry through the proposed Courtauld Commitment 2025. This is an

ambitious voluntary agreement that hopes to reduce food and drink waste by 20%, and minimise the

impact associated with water use in the supply chain.

Contract catering has lower waste levels than other kitchen types

In the meantime, the contract catering industry needs to continue to understand how else it can combat

this growing challenge. This includes breaking down processes throughout the industry to analyse

where waste originates and where it could therefore be halted.

FIGURE 10: WHERE FOOD IS WASTED, CONTRACT CATERING AND MEAN ACROSS ALL KITCHEN TYPES, NOVEMBER 2013

Contract catering (%)

Mean across kitchen types* (%)

Spoilage waste 26 21

Preparation waste 38 45

Plate waste 36 34

Waste per person served (kg) 0.15 0.22

* mean across kitchen types incorporates basic, casual & fine dining SOURCE: HOSPITALITY AND FOOD SERVICE AGREEMENT, NOVEMBER 2013

The above table, based on 2013 figures, illustrates that the contract catering industry leads the way in

some categories, but there is nonetheless extensive food waste throughout operations. The contract

catering industry has above average wastage in spoilage (the deterioration of food and other perishable

goods) and plate waste (wastage from served portions).



The industry can use a number of short-term options to address these deficiencies in the coming years.

For example, reassessing total food orders would help combat spoilage, especially in the most

perishable foods, such as meat, fruit and vegetables; while damage could be lessened via heightened

recycling. Plate waste can be addressed through portion control, including simple controls such as

different portion sizes and the option to top up if customers want more. This latter option would also

offer value savings, making it mutually beneficial for both companies and the food industry, and

therefore more likely to be adopted.

Another factor in reducing food waste in the coming years could be offered by the UK’s recent

decision to leave the EU. The contract catering industry could be freed from EU food regulations

following Brexit, which have often been criticised for their stringent limitations. Elsewhere the

industry could harness the recent trend toward ‘wonky veg’ as non-aesthetic fruit and vegetables have

gained greater exposure over the past year.

Introduction of the NLW

On April 1 2016, the government introduced a new National Living Wage (NLW) for people aged 25

and over. The threshold is set at £7.20 per hour, replacing the previous £6.50 rate for National

Minimum Wage (NMW), and the rate is due to rise to £7.50 in April 2017.

Workers aged under 25 will still earn the NMW, which stands at £5.55 for 18 to 20-year-olds, and

£6.95 for 21 to 24-year-olds.

FIGURE 11: NATIONAL MINIMUM WAGE AND NATIONAL LIVING WAGE, £ PER HOUR, 2010-16 NMW NLW

2010 2011 2012 2013 2014 2015 2016 2017

£ per hour 5.93 6.08 6.19 6.31 6.50 6.70 7.20 7.50

Note: 2016 figure is the NLW, which replaced the NMW, however the parameters shifted from 21 and over to 25 and over SOURCE: ONS

The contract catering industry relies on a large, flexible, and often low-paid labour force, the vast

majority of which satisfies these age qualifications. Changes to the minimum wage will therefore have

a significant impact on the market.

FIGURE 12: FORECAST WAGE RATE GROWTH, £ PER HOUR, APRIL 2016 AND APRIL 2020 2016 2020

£ £

NMW 6.70 8.25

NLW 7.20 9.35

SOURCE: OFFICE FOR BUDGET RESPONSIBILITY, UPRATING THE OUT-OF-LONDON LIVING WAGE 2014, LOUGHBOROUGH

UNIVERSITY

Moreover, the introduction of the NLW is part of a larger growth structure, with the figure intended to

reach 60% of a typical over 25 year old workers’ hourly wage by 2020; alongside accompanying

growth in the NMW. To reach this, the Office for Budget Responsibility estimates that the NLW will

have to reach £9.35 in 2020.



Although this rise affects the whole industry, its impact could potentially disadvantage some

companies more than others. This is because some employers may be more equipped to manage the

transition than others due to their scale and involvement in a broader range of services, which could

limit the damage incurred. As such, major companies could gain a potential advantage at the expense

of other groups, primarily SMEs.

Employers are expected to look to mitigate these extra costs through a number of cost-managing

strategies, including increased employment of graduates and young workers, who are not entitled to

the NLW and therefore represent an easy means of balancing wage books amid these rises. Companies

are also likely to pass raised costs onto the customer through price and contract rises, while some will

attempt to absorb the costs through reduced margins.

The ramifications of the NLW are expected to shape the contract catering market in the coming years,

and the expected outcomes must be managed carefully. For the health of the industry, the impact on

SMEs should also be nullified through greater cohesion and action at a wider level.

Market Environment by Sector Contract Catering UK, January 2017


Market Environment by Sector

Key points

UK employment grew by 1.6% over the past year to 31.8 million. This growth means that

employment has risen by an impressive 8.3% since 2011 as the UK consolidates its recovery from

the 2008 global economic crisis.

Demand for contract catering continues to grow in schools following 1.4% growth in the number

of pupils over the past year and a rise of 3.3% since 2005. However, ongoing pressure on public

expenditure has increased price competition and made trading conditions more difficult in the

sector.

The average number of available beds open overnight has fallen by 0.8% across England over the

past year and by 4.8% since 2012. However, the number of inpatients has increased by 3.1% over

the past year and 16% since 2012. Meanwhile, NHS employment continues to grow despite

pressures on budgets, ensuring demand from the sector.

The prison population in England and Wales has fallen by 1.9% from 86,656 in 2012 to 84,967 in

2016, though this remains one of the highest figures in Europe. Income from the sector has been

challenged by the rising climate of outsourcing, including catering, in the UK justice sector.

The number of UK armed forces personnel has fallen by 1.8% over the past year and by 20.8%

since 2007. As such, demand for contract catering facilities from the sector has also fallen

significantly in recent years.

Activity in the remote sites sector remains highly sensitive to global politics and the economy. For

example, construction activity has declined by 1.7% over the past year, but risen by 7.4% overall

since 2010.

Business and industry

The business and industry sector forms a key component of private sector demand for the contract

catering market. Given its broad nature, the easiest means of assessing demand in the sector is by

analysing UK employment and unemployment figures; which give a picture of the current state of

British business.

FIGURE 13: UK EMPLOYMENT AND UNEMPLOYMENT, 000, 2011-16

2011 2012 2013 2014 2015 2016

Employed 29,376 29,696 30,044 30,757 31,296 31,811

Unemployed 2,593 2,572 2,474 2,026 1,781 1,656 SOURCE: ONS, UK LABOUR MARKET

Employment grew consecutively over the six-year review period, rising by a cumulative 8.3% to

reveal a strong national economy. In the past year, employment grew by an impressive 1.6% to 31.8

million in 2016.



Meanwhile, unemployment has been in consecutive decline, falling year-on-year by an impressive

36.1 % overall to 2016. This figure also fell by 7% over the past year to 1.7 million people. These

trends bode well for the market, with growth in the UK labour force driving demand for food supply, a

great deal of which is undertaken by contract caterers.

However, demand in the sector remains subject to ongoing price sensitivity, with lunch continually

targeted as a primary way of cutting expenditure by workers. This is compounded by the prevalence of

high-street options, many of which offer variation, taste and value beyond that of contract caterers. To

maintain interest and footfall, contract caterers must therefore continue to emphasise innovation and

taste trends, allowing their offers to stand out against retail alternatives.

Looking forward, UK employment is expected to continue to grow, with the Office for National

Statistics estimating that the figure could rise to 33.9 million people by 2022, representing growth of

6.7% from 2016. As such, demand should continue to grow for this sector, though these forecasts

could be challenged by a number of uncertain external issues, such as Brexit and the introduction of

the National Living Wage.

Schools

The education sector represents one of the largest areas of value for the contract catering market. The

latest figures, released by the Department of Education in September 2016, stated that there were

approximately 8.6 million pupils enrolled in schools in England, including state-funded and

independent schools at all ages.

FIGURE 14: TRENDS IN SCHOOL NUMBERS AND NUMBERS OF PUPILS, 2005-16 All schools Number of pupils

2005 25,335 8,287,195

2006 25,179 8,231,050

2007 25,018 8,167,715

2008 24,882 8,121,955

2009 24,737 8,092,280

2010 24,616 8,098,360

2011 24,507 8,123,865

2012 24,372 8,178,200

2013 24,328 8,249,810

2014 24,347 8,331,385

2015 24,317 8,438,145

2016 24,288 8,559,540

SOURCE: ONS, DEPARTMENT OF EDUCATION

The number of pupils grew by 1.4% over the past year, with overall growth of 3.3% from the 8.3

million recorded in 2005. By contrast, the number of schools has fallen by 4.1% from 25,335 in 2005

to 24,288 schools in 2016.

These contrasting trajectories are a symptom of recent austerity, with the government looking to

centralise operations to cut public spending. The economies of scale associated with feeding a larger

number of pupils offers scope for cost savings, though this may, in turn, limit the potential to increase

value sales in the education sector.



Falling proportion of pupils getting free school meals

The percentage of children, in both primary and secondary schooling, receiving free lunches has fallen

to its lowest figure in over a decade. The fall is largely down to the fact that eligibility is based on

receipt of state benefits, with government austerity measures restricting benefit entitlement, thereby

driving down free school meal eligibility.

15.2% of children in primary schools receive free school meals, compared to 14.1% in secondary

schools, with these figures representing a significant drop from the 19.3% and 16% respectively

recorded in 2012. This decline is a worrying development, blunting income channels for the contract

catering industry. However, the impact is somewhat nullified by the wider growth in pupil numbers,

which grew by 1.4%, or 121,000 pupils, over the past year, furthering consecutive growth since 2009.

FIGURE 15: RATES OF ELIGIBILITY AND CLAIMING OF FREE SCHOOL MEALS, STATE-FUNDED PRIMARY AND SECONDARY, %, 2011-16 2012 2013 2014 2015 2016

Primary 19.3 19.2 18 16.5 15.2

Secondary 16 16.3 15.7 14.9 14.1

Note: The figures exclude those receiving lunches on the Universal Infant Free School Meal programme SOURCE: ONS, DEPARTMENT OF EDUCATION

Universal infant free school meals

An important element of the education sector for the contract catering market has in recent years been

the Universal Infant Free School Meals scheme. The initiative, introduced by the government in 2014,

placed a legal duty on all state-funded schools in England to offer a free school lunch to all pupils in

reception, year one and year two, presenting a significant opportunity for value growth across contract

caterers.

However, the scheme has come under scrutiny over the past year, with widening discrepancies in

budgeting placing greater pressure on all public sector expenditure. The initiative has so far survived a

number of spending reviews as the government stands firm on education funding. However, even if the

scheme perseveres, future contract bids are likely to face tougher trade conditions through heightened

cost-based competition.

Healthcare

Another essential income channel for the contract catering industry is the healthcare sector, spanning

the public and private sector, and institutions such as care homes and rehabilitation centres. There are

two core areas of demand in the sector: patient food provision, and catering for the huge workforce

operating in healthcare.

National Health Service patient demand

A good overview of existing patient demand in the NHS is afforded via an analysis of overnight

occupancy and inpatients as longer-term patients are the primary recipient of hospital meals.



FIGURE 16: AVERAGE DAILY AVAILABLE BEDS OPEN OVERNIGHT, ENGLAND, Q1 2012/13 – Q1 2016/17 2012/13 Q1 137,287

2012/13 Q2 135,559

2012/13 Q3 136,044

2012/13 Q4 138,178

2013/14 Q1 136,459

2013/14 Q2 135,037

2013/14 Q3 135,489

2013/14 Q4 136,811

2014/15 Q1 135,754

2014/15 Q2 134,753

2014/15 Q3 134,573

2014/15 Q4 136,946

2015/16 Q1 131,795

2015/16 Q2 130,633

2015/16 Q3 130,404

2015/16 Q4 131,561

2016/17 Q1 130,717

SOURCE: ONS, NHS

The average number of available beds open overnight has fallen by 0.8% across England over the past

year and by 4.8% since 2012. This decline can be attributed to a number of developments, including

the shift toward out-of-hospital care, partly symptomatic of austerity, and broader medical advances.

FIGURE 17: NHS INPATIENT ELECTIVE ADMISSION EVENTS, ENGLAND, Q2 JUNE 2012-16 Admissions

2012 1,255,901

2013 1,313,152

2014 1,334,530

2015 1,413,243

2016 1,457,289

SOURCE: ONS, NHS

However, the number of inpatient admissions grew considerably in the same period. Growth of 3.1%

was recorded over the past year, meaning that inpatient admissions have risen by 16% from 1.3 million

in 2012 to 1.5 million by 2016. Existing demand and its contribution to total market value should

therefore grow accordingly in the coming years in line with this trajectory, despite a fall in available

beds.

NHS Employee demand

The NHS employs more than 1.5 million people, comprised of doctors, general practitioners, nurses,

ambulance and administrative staff, as well as wider medical and dental staff across England,

Scotland, Wales and Northern Ireland. This huge workforce - the fifth largest in the world - is largely

fed through contract catering, generating huge daily demand throughout the UK.



NHS funding continues to increase

According to the latest figures, NHS net expenditure (resource plus capital, minus depreciation) has

grown by 54.6% since 2006, with funding expected to rise by 1.4% year-on-year to £118.83 billion in

2016. The NHS budget is then forecast to grow by 2.5% to £120.16 billion by 2020.

This funding growth is positive for the industry, not just in budgeting but also infrastructure

investment, with new buildings generating heightened demand for catering due to higher patient and

staff numbers. However, the vast majority of funding growth is intended for elsewhere, with pressure

remaining on current spending and heavy price competition still rife across public sectors, especially

healthcare.

Food costs edging upwards

2015 NHS Benchmarking Data showed that the mean cost of food per patient per day is £8.97, though

there was significant fluctuation between facilities. This figure has risen by 2.3% from £8.77 in 2012,

and by 11.3% from £8.06 in 2010.

This growth has broadened income channels to the contract catering market, but has also increased

scrutiny on certain high-spending institutions and pushed a wider drive for efficiency across NHS

expenditure.

The aging population should support demand for healthcare

Demand in the healthcare sector is forecast to grow in line with the UK’s growing population and

ageing demographic, which should increase demand for services.

Prisons

England and Wales’ prison population has fluctuated between growth and decline over the past five

years. Overall, however, the figure has fallen by 1.9% from 86,656 in 2012 to 84,967 in 2016.

FIGURE 18: ENGLAND AND WALES PRISON POPULATION, 2012-16 2012 2013 2014 2015 2016

Population 86,656 84,135 85,385 85,699 84,967

SOURCE: ONS, PRISON POPULATION STATISTICS

Nonetheless, compared to the rest of the continent, the UK still has one of the highest prison

populations, and the largest in Western Europe. The number of prisoners per 100,000 of the population

is 149.7 for England and Wales, notably higher than the 118 for France and 81.4 for Germany.

As such, catering demand remains strong in the sector, representing a sustained source of daily

income, despite the fall in the overall population. Population figures are also expected to remain stable

in the coming years, with government figures estimating that the population will fall by just 1.1%

between 2016 and 2020.

The prison sector is, however, under intense budget pressure and home to extensive outsourcing. This

will reduce the expenditure available for catering facilities and, in common with other areas of public

spending, put pressure on pricing and margins.



FIGURE 19: FORECAST ENGLAND AND WALES PRISON POPULATION, 2017-20 2017 2018 2019 2020

Population 84,600 83,700 83,800 84,000

SOURCE: ONS, PRISON POPULATION PROJECTIONS

Defence

The number of UK regular soldiers, the core area of demand, has fallen consistently over the past

decade, driven by ongoing austerity and the changing requirements of a modern defence force. The

figure fell by 1.8% over the past year, adding to a cumulative decline of 20.8% since 2007. This large

decline is a worrying development for the contract catering industry, with the loss of more than a fifth

of the workforce in the past decade reducing demand for food provision accordingly.

FIGURE 20: UK ARMED FORCES PERSONNEL, 2007-16 2007 2008 2009 2010 2011

UK regulars 190,670 186,910 188,600 191,660 186,360

2012 2013 2014 2015 2016

UK regulars 179,800 170,710 159,630 153,720 151,000

SOURCE: MINISTRY OF DEFENCE, UK ARMED FORCES PERSONNEL STATISTICS

However, this decline in personnel could be reversed, or at least slowed, in the coming years in line

with recent budgets and government commitments to further expenditure in the sector. In the last

budget, the government committed to increasing defence spending by 0.5% above inflation every year

until 2020. This means that the budget should increase by nearly £5 billion to £39.7 billion in 2020.

FIGURE 21: UK DEFENCE BUDGET, £ BILLION, 2015-20 2015 2016 2017 2018 2019 2020

£ billion 34.3 35.1 36 37 38.1 39.7

SOURCE: ONS

This should facilitate an expansion in the armed forces, which should, in turn, increase demand for

contract catering services.

Remote sites

The remote sites sector covers a number of areas of demand, such as oil rigs, training centres and

construction sites. The sector remains sensitive to broader changes in the global and domestic

economy.

Due to the broad nature of the sector, it is difficult to gain a single outlook on demand. However,

reliable analysis can be made for individual sub-sectors, such as construction output.



FIGURE 22: UK CONSTRUCTION OUTPUT, 2010-16 2010 2011 2012 2013 2014 2015 2016

All work 105.2 107.2 97 99.7 108.9 114.7 113

All new work 110.2 112 94.9 100.2 110.5 119.7 119

Repair and maintenance 97.2 99.6 100.3 99 106.4 106.9 103.4

Note: Figures from July of each year; not seasonally adjusted Note: Index June 2013 = 100 SOURCE: ONS, CONSTRUCTION OUTPUT DATA

As with many areas included in the wider remote sites sector, the health of the UK construction sector

reflects the state of the national economy, which influences demand across the industry. Activity fell

notably during the 2008 global economic crisis and its aftermath, but has gradually recovered in recent

years as public and private budgeting has relaxed with the return of security in the wider economy.

The marginal decline recorded over the past year represents the first contraction in output since 2012,

when the UK continued to feel the effects of the 2008 economic crisis. Overall, the all-work output

index fell 1.7%, and while this can be partially attributed to the uncertainty introduced by the Brexit

vote, the sector was in fact struggling even before then.

Nonetheless, the sector has made an impressive recovery as it looks to return to its pre-recession

prominence. Despite the decline recorded in the past year, the construction sector will continue to

provide significant demand for the contract catering industry, though there will be some volatility.

Company Profiles Contract Catering UK, January 2017


Company Profiles

Aramark

www.aramark.co.uk

Aramark provides food, vending, and refreshment services to organisations in the industrial and

commercial sectors, including education, B&I, healthcare, offshore, judicial, and defence. The

company also offers grounds maintenance, cleaning, and reception services.

The company has an estimated 270,000 employees across 21 countries. The British operation has

9,000 employees, working with 200 clients across 800 locations and sites, and serving over a quarter

of a million meals each day. Aramark UK is based in Farnborough, Hampshire.

Financial information

Aramark Limited’s turnover fell by 3.8% in the year to October 2015, dropping from £319.7 million to

£308.2 million. Overall, turnover has fallen by 9.7% from £341 million in 2011 to £308 million in

2015.

Post-tax profits also fell by 75.1% from £16.5 million in 2011 to £4.1 million in 2015.

FIGURE 23: FINANCIAL PERFORMANCE OF ARAMARK UK LTD, 2011-15 Year Turnover % change Post-tax

profits % change

£m £m

2011 341 - 16.5 -

2012 351 +2.9 8.0 51.5

2013 302 -14 2.3 -71.3

2014 320 +6 8.3 n.a

2015 308 -3.8 4.1 -50.6

Note: Year end is October SOURCE: COMPANY ACCOUNTS/MBD

Company strategy

The company operates three brands focusing on distinct customer groups:

Original Food Company targets the ‘accomplished and driven’ and ‘business professionals’;

Made focuses on ‘young and mobile’ customers; and

Bite is the brand aimed at ‘manual and technical’ clients.

Recent developments

In April 2016, Aramark extended its partnership with the Subway brand. This saw the company’s

portfolio grow from four stores to nine, with an additional five stores scheduled to open by the end of

the year.



In the same month, Aramark also joined the Supplier Ethical Data Exchange (Sedex), a non-profit

organisation dedicated to improving global supply chains. In joining the group, Aramark agreed to

share supply chain data, aiding altruistic improvements in the ethical compliance of global chains and

demonstrating the company’s commitment to sourcing products in a responsible and ethical manner.

Bartlett Mitchell

www.bartlettmitchell.co.uk

Bartlett Mitchell is one of the UK’s leading independent caterers. It offers services across three

sectors: workplace catering, events, and reception and concierge.

Bartlett Mitchell has expanded to serve around 40,000 customers every day in over 90 locations in

London and the south east. The company is based in Egham, Surrey.


Bartlett Mitchell Limited’s turnover grew impressively in the year to October 2015, rising 50% from

£21.3 million to £32 million. The company attributes this to a targeted focus on people and systems,

with extensive investment in additional resource and infrastructure in this period. This was

accompanied by a surge in post-tax profit, which rose by 35% in the past year. However, profitability

fell marginally, revealing the need for heightened financial input to grow overall performance figures.

FIGURE 24: FINANCIAL PERFORMANCE OF BARTLETT MITCHELL LTD, 2011-15 Year Turnover % change in

turnover Post-tax

profit % change

£m £m

2011 16.6 - 0.11 -

2012 17.9 +7.9 0.32 n.a

2013 19.2 +7.3 0.38 18.8

2014 21.3 +11.2 0.30 -21.1

2015 32.0 +50 0.41 36.7

Note: Year end is October SOURCE: COMPANY ACCOUNTS/MBD

Company strategy

Bartlett Mitchell continues to prioritise client satisfaction to aid client retention and allow the company

to consistently win new clients. Bartlett Mitchell also has a focused control on costs to ensure

profitability, and looks set to continue growth over the next year due to this solid base.

Recent developments

At the start of 2016, Bartlett Mitchell acknowledged rising health-consciousness with the release

of a new healthy eating campaign, Delicious and Responsible Eating (DARE). The move offers

meals across all sectors and a number of formats, particularly on-the-go packages. The company

has also worked with the MyFitnessPal app to display nutritional information in an interactive

manner.

In June 2016, Bartlett Mitchell acquired its first ever Investors in People Gold Award, recognising

the group’s commitment to the development and training of its employees.



BaxterStorey

http://www.baxterstorey.co.uk/

Founded in 2004 following the merger of BaxterSmith and Wilson Storey Halliday, BaxterStorey Ltd

has become one of the UK’s leading caterers. The group provides contract catering services to

organisations across the business and industry sector throughout the UK and Ireland, and more

recently, to the continent. In 2011, the company successfully expanded operations to Belgium, the

Netherlands, Norway and France.

BaxterStorey’s holding company, Westbury Street Holdings (WSH), owns a number of other contract

service providers, including retail and public venues operator Benugo; the education catering services

provider Cater Link; Holroyd Howe, a contract caterer that exclusively works in the independent

education sector; and reception management service provider Portico. BaxterStorey is based in

Reading, Berkshire.


Baxter Storey Limited’s turnover grew in the year to January 2016 by a minimal 0.3%. Overall,

turnover has grown notably by 48.7% from £252 million in 2011 to £374.8 million in the past year.

However, post-tax profits fell by 9.3% from £24.6 million to £22.3 million, while profitability also

declined from 7% to 6% over the past year.

FIGURE 25: FINANCIAL PERFORMANCE OF BAXTERSTOREY LTD, 2011-14 & 2016 Year Turnover % change Post tax

profits % change

£m £m

2011 252.0 - 17.2 -

2012 275.8 +9.4 18.5 7.6

2013 303.5 +10 20.9 13

2014 373.8 +23.2 24.6 17.7

2016 374.8 +0.3 22.3 -9.3

Note: Year end is January SOURCE: COMPANY ACCOUNTS/MBD

Company strategy

BaxterStorey places great emphasis on its employees, with an established network for graduates in

particular. Over recent years, extensive investment has allowed the group to expand its chef, leadership

and barista academies, taking on more graduates than ever before. The company has also introduced a

new Apprenticeship Academy, aimed at creating approximately 200 new roles across operations by

2018.

Recent developments

In August 2016 BaxterStorey achieved its highest Hospitality Assured score to date with 81.6%.

Hospitality Assured is the quality standard created by the Institute of Hospitality. It assesses nine areas

of business, from customer research and business planning, to service delivery and customer

satisfaction improvement.



In line with its prioritisation on innovation, the group launched a recipe book, titled The Modern

Baker, in April 2016, celebrating the best of contemporary baking. The book has been introduced to

chefs as a new training tool, and the company claims it has contributed to a sales increase of up to 30%

at some BaxterStorey cafes and restaurants.

Compass Contract Services (UK)

http://www.compass-group.co.uk/

Compass Contract Services (UK) is a large-scale service provider, offering contract catering, cleaning,

property management and wider support services. The company operates in business and industry,

education, healthcare, sports and leisure, defence and government, hotels and aviation, offshore, fine

dining and senior living sectors.

Compass Contract Services (UK) is part of the larger Compass Group, a global market leader working

in over 50 countries with over 470,000 employees. The global company is based in Chertsey, Surrey.

The UK and Ireland division was formed in July 2000 and currently employs more than 60,000 people,

working in over 10,000 client sites.


Compass Contract Services (UK) Limited’s turnover grew by 6.4% in the year to September 2015,

rising from £1,537 million to £1,636 million. However, turnover fell over the five-year review period

by 2.9% from £1,685 million in 2011. Post-tax profit also grew over the past year, from £40.8 million

to £42.6 million, while profitability was maintained at 3%.

FIGURE 26: FINANCIAL PERFORMANCE OF COMPASS CONTRACT SERVICES (UK) LTD, 2011-15 Year Turnover % change Post-tax-

profit % change

£m £m

2011 1,685 - -14.2 -

2012 1,640 -2.7 3.7 n.a

2013 1,558 -5 -49.9 n.a

2014 1,537 -1.3 40.8 n.a

2015 1,636 +6.4 42.6 4.4

Note: Year end is September SOURCE: COMPANY ACCOUNTS/MBD

Company strategy

Compass Group exploits its global presence to ensure a mutual approach around progress, utilising

best practice across the group to bring clients and consumers the latest innovations. However, the

group also exploits its individual operations to bring local creativity and flair to food and services.

The company’s strategy is to generate long-term value by leveraging scale to create a competitive

advantage, delivering consistent organic revenue growth and margin improvements.

Recent developments

In October 2016, Richard Cousins, the chief executive of Compass Group, was one of only three

Britons named in the Harvard Business Reviews’ rankings; coming in a highly respectable 17th place.



In September, Compass Group UK & Ireland launched Foodbuy, a food and drink procurement

company for the foodservice industry. This move will allow Foodbuy clients to pick and choose the

products they want to source, while still having access to the scale of their supply chain.

In August, Compass Group won a Green Apple eco-award, an international quality standard that

recognises major companies’ environmentally-friendly approach.

Elior

http://www.elior.co.uk/

Elior UK is the British branch of Elior SCA, a French contract caterer active across Europe. Elior UK

provides catering and site services across business and industry, the city, defence, public sector, health

and care, and education. The company employs around 10,000 people across 650 client sites in the

UK. The British branch is based in Macclesfield, Cheshire.

The overall group has 106,000 employees, taking care of 3.8 million customers each day across 13

countries. Elior owns the coffee brand Fontanella, operates the Café in Tesco stores, and runs Paul,

Costa Coffee and Illy Espressamente fascias on a franchise basis. The company has also developed a

range of concepts, such as Chefs Forum, ChU*, Umami, &Cake and ‘Fresh’ Salad Bar. Overall

operations are based in Paris, France.


Elior UK PLC’s turnover grew in the year to September 2015, rising 5.9% from £201.1 million to

£213 million. Overall, turnover has grown by 8.9% over the past five years. However, post-tax profits

fell in the past year, dropping by 30.3% from £5.7 million to £4 million. Profitability also fell from 3%

to 2% in the review period.

FIGURE 27: FINANCIAL PERFORMANCE OF ELIOR UK PLC, 2011-15 Year Turnover % change Post tax

profits % change

£m £m

2011 195.6 - 3.2 -

2012 192.4 -1.6 6.2 93.8

2013 190.8 -0.8 5.5 -11.3

2014 201.1 5.4 5.7 n.a

2015 213 5.9 4 -29.8

Note: Year end is September SOURCE: COMPANY ACCOUNTS/MBD

Company strategy

Elior UK places great emphasis on innovation. The company has a desire to be the leading figure in

contract catering by understanding changing trends in consumer tastes and creating new service

concepts, driving the appeal of services to its client base. The company also prioritises contract

retention, acknowledging the highly competitive nature of the contract catering market.



Recent developments

In July 2016, Elior Group acquired Waterfall Catering Group, a UK-based contract caterer for the

education, care and welfare markets, to strengthen its UK market positioning.

In March, Elior UK secured a major contract in the care sector, covering 96 sites owned by Four

Seasons Health Care, Britain’s largest care home operator.

Harrison Catering

http://www.harrisoncatering.co.uk

Founded in 1994, Harrison Catering Services is an independently family-owned company that operates

in the B&I, independent schools and maintained education sectors.

Harrison’s proposition is centred around the on-site preparation and cooking of meals made using at

least 90% fresh ingredients. Over 100 clients are currently serviced by Harrison foodservice, with

more than 100,000 meals served each day by approximately 2,500 staff across more than 400 sites.


Harrison Catering Limited’s turnover fell in the year to March 2016, dropping 1.4% from £51.2

million to £50.5 million. Overall, turnover has also fallen in the past five years, dropping 6.7% from

£54.1 million, though this figure did spike in certain years. However, post-tax profits grew by 2% over

the past year from £1.5 million to £1.6 million, while profitability was maintained at 3%.

FIGURE 28: FINANCIAL PERFORMANCE OF HARRISON CATERING LTD, 2012-16 Year T'over % change PTP % change

2012 54.1 - 1.8 -

2013 57.6 6.5 1.9 5.6

2014 57.3 -0.7 1.9 0

2015 51.2 -10.5 1.5 -21.1

2016 50.5 -1.4 1.6 6.6

Note: Year end is March SOURCE: COMPANY ACCOUNTS/MBD

Company strategy

The group’s primary focus is to continue to produce great food from fresh ingredients. Harrison

Catering also continues to invest in state-of-the-art information management systems, heightening

efficiency across service management.

Recent developments

In light of growing concern around childhood obesity, Harrison continues to encourage children to

eat healthily, aiming to not only match but exceed the government’s School Food Standards.



Interserve Catering Services

http://www.interserve.com

Interserve Catering Services is a food supplier and services management company, primarily operated

via its Eden and Autograph brands. The group is based in Dudley, West Midlands and London.

Interserve Catering Services is especially active in the education sector, serving over 700 UK primary

and secondary schools every day.

The company forms part of the larger Interserve support service and construction company. Interserve

employs around 80,000 employees across the globe and is headquartered in Reading, Berkshire.


Interserve Catering Services’ turnover grew in the year to December 2015, rising 2.9% from £60.3

million to £62 million. Overall, however, turnover has fallen by 17.3% since the £75 million recorded

in 2011. However, post-tax profits grew significantly over the past year, from £4.4 million to £5.3

million, while profitability surged from 1% to 9% in the same period.

FIGURE 29: FINANCIAL PERFORMANCE OF INTERSERVE CATERING SERVICES, 2011-15 Year T'over % change PTP % change

2011 75 - 4.4 -

2012 66.6 -11.2 2.6 -40.9

2013 59 -11.4 0.4 -84.6

2014 60.3 2.1 0.7 75

2015 62 2.9 5.3 n.a

Note: Year end is December SOURCE: COMPANY ACCOUNTS/MBD

Company strategy

A key element of recent growth is the broadening of the company’s existing customer base through

sales activity. Interserve Catering Services continues to identify opportunities for business growth,

which is evident in its ongoing acquisition of contracts throughout the UK.

Recent developments

In February 2016, Interserve’s £300 million seven-year catering and cleaning contract at Leicester

hospitals was bought to an end four years early following criticism.

OCS

http://www.ocs.co.uk/

OCS is a major international business involved in support services, from aviation and defence to retail

and healthcare, covering 80 core services. The company operates in 50 countries, with 90,000 staff

worldwide serving an estimated 100,000 clients.



OCS’ contract catering solutions include Just Deli, a high street-influenced deli bar offering hot food;

retail lines and branded products from Costa Coffee; Just Dine, a court-style staff restaurant serving

food prepared on-site; and Eligo, a high-end fine dining service. OCS also caters for hospitals. The

company is based in Crawley, West Sussex.


OCS Group UK Limited’s turnover grew in the year to March 2015, rising by a minimal 0.1% from

£530.9 million to £531.4 million. Overall, turnover has grown by 8.1% over the past five years, rising

from £491.4 million in 2011. However, post-tax profit fell significantly over the past year to a deficit

of £12.8 million; pushing profitability down to -24% from 1% the year prior.

FIGURE 30: FINANCIAL PERFORMANCE OF OCS LTD, 2011-15 Year T'over % change PTP % change

2011 491.4 - 7.4 -

2012 493.2 0.4 5.6 24.3

2013 540.9 9.7 -4.1 n.a

2014 530.9 -1.8 5.1 n.a

2015 531.4 0.1 -12.8 n.a

Note: Year end is March SOURCE: COMPANY ACCOUNTS/MBD

Company strategy

OCS continues to expand its support services, of which catering is integral. In recent years the

company has increasingly looked abroad for new growth opportunities, such as a targeted expansion in

the Middle East. By exploiting its market-leading reputation, the group hopes to consolidate its

position in this area, enhancing profitability and sustainability.

Recent developments

In October 2016, OCS acquired a six-year catering contract from the Greater London Authority.

Under the new contract, the company will continue to provide catering in City Hall’s café and the

Café on Trafalgar Square; a full hospitality service to internal and external clients in the GLA’s

entertainment, meeting and office spaces; tea point supplies throughout City Hall; and external

sales, lettings and marketing of the City Hall and Chamber catering spaces, as well as the Café on

Trafalgar Square.

In July 2016, OCS was ranked 59th in the Sunday Times top 100, the list tracking the UK’s top 100

private companies with the highest turnover. This inclusion represents the 15th year in a row that

OCS was on the list.

Sodexo

http://uk.sodexo.com

Sodexo is a facilities management and catering company that has established itself as a leading figure

in British industry. The group’s UK operations employ 35,000 people across the UK and Ireland,

working at over 2,000 locations covering all its services. The wider global group employs 420,000

workers at over 34,000 sites across 80 countries worldwide.



Sodexo UK & Ireland is part of the Sodexo Group, which was founded in 1966 by Pierre Bellon in

Marseilles, France, and now operates in 80 countries worldwide. The company is headquartered in

Paris.


Sodexo Limited’s turnover rose impressively in the year to August 2015, growing 8.9% from £1,062.9

million to £1,157.6 million. The company broke the billion pound benchmark in 2013. Overall,

turnover grew by 21.8% over the five-year period from £950.6 million in 2011. Post-tax profits also

grew over the past year, rising by 17.4% from £48.2 million to £56.6 million, while profitability was

maintained at 5% in both years.

FIGURE 31: FINANCIAL PERFORMANCE OF SODEXO LTD, 2011-15 Year T'over % change PTP % change

2011 950.6 - 66.8 -

2012 990.2 4.2 87.1 30.4

2013 1,008.9 1.9 51.8 -40.5

2014 1,062.9 5.4 48.2 -6.9

2015 1,157.6 8.9 56.6 17.4

Note: Year end is August SOURCE: COMPANY ACCOUNTS/MBD

Company strategy

There are two central tenets to Sodexo’s strategy: it will remain a services and an independent

company.

Recent developments

In October 2016, Sodexo acquired procurement firm PSL, a fresh food company that should

enhance food cost management potential and waste management.

In the same month, Sodexo announced that it will acquire the public catering contracts business of

Peyton and Byrne, which operates food and drink outlets at some of London’s most high-profile

visitor attractions.

The Consumer Contract Catering UK, January 2017


The Consumer

Key points

Contract catering revenues are heavily dependent on spending on out-of-home lunches. The most

likely age group to have bought lunch out of home in the last three months was 16 to 24-year-olds,

30% of which did so.

However, though they were the most likely to frequently buy lunch out of the home, 16 to 24-year-

olds were among the least likely to have recently eaten at a workplace canteen/café, meaning the

market is missing out a significant potential audience.

For everyday occasions, such as work, the most likely location to buy lunch was on the high street,

with supermarkets, bakery shops, cafes and sandwich shops leading the way. Contract catering

facilities, such as work and school canteens and in-store restaurants, are low on the list because

many employees don’t have access to work canteens, while the range and quality of high street

lunch options is also growing.

There is a huge discrepancy between out of home lunch expenditure depending on whether it is an

everyday or a leisure occasion. This discrepancy constrains market value given that consumers

rarely visit contract caterers on leisure occasions.

Buying lunch out of the home

Frequency of buying lunch to eat out of the home

Mintel commissioned consumer research for this report to assess consumer usage of and attitudes

towards school meals. This report also draws on research conducted for Mintel’s Attitudes towards

Lunch Out-of-Home – UK, October 2016 report. Research was carried out by Lightspeed among an

internet-representative sample of 2,000 internet users aged 16+.

Respondents were asked:

“Which of the following most closely describes how often you have bought lunch to eat out of home for each of the following occasions in the last three months? Please note that this includes both lunch bought from a supermarket, bakery shop etc. (e.g. a sandwich) and lunch bought from a food outlet such as a coffee shop, fast food outlet or restaurant/pub/bar.”

Though people were slightly more likely to have bought lunch out-of-home in the last three months for

a leisure occasion than an everyday occasion, everyday lunches are driving frequency. 22% of people

buy lunch at least a few times a week for work or when shopping, while more than half do so at least

monthly.



FIGURE 32: FREQUENCY OF BUYING LUNCH TO EAT OUT-OF-HOME, FOR AN EVERYDAY OCCASION, JULY 2016 Base: 2,000 internet users aged 16+


The data highlights the size of the out-of-home lunch market, and the potential rewards on offer for

contract catering operators who can capture even a relatively small slice. The data also shows how

strongly the market is skewed towards younger consumers.

78% of under-34s bought lunch out-of-home for an everyday occasion in the last three months, falling

to just 35% of the over-65s. The key factor here is working status: younger people are simply more

likely to be working or studying, and therefore have more occasions to buy lunch out-of-home. 84% of

full-time students and 75% of full-time employees bought lunch out-of-home on an everyday occasion,

compared to 40% of retirees.



FIGURE 33: FREQUENCY OF EATING LUNCH OUT-OF-HOME IN THE LAST THREE MONTHS, BY AGE, JULY 2016 Base: 2,000 internet users aged 16+


A fifth usually spend at least £6 on everyday lunches out-of-home

When people who bought lunch to eat out-of-home on an everyday occasion were asked how much

they tended to spend, 38% said less than £4. However, another 22% said they usually spend upwards

of £6, reflecting the ever-growing range of premium out-of-home lunch options.

Predictably, Londoners lead the way when it comes to trading up, with 35% saying they usually spend

at least £6 when they buy lunch on an everyday occasion. Londoners are also the biggest spenders on

lunches during leisure occasions, with 21% usually spending at least £20, compared to 13% across the

population.

Responses hint at further scope for premiumisation

There is a difference in spending when it comes to household income, with higher earners tending to

spend a little more, but the gap isn’t as pronounced as regional differences. For example, 21% of

people with a household income of under £15,500 say they usually spend at least £6 when buying

lunch for an everyday occasion.

This suggests that even people on relatively modest incomes can be convinced to trade up as long as

the options are tempting enough. Value for money is always important, and is cited as a key reason for

employees opting for a packed lunch instead of eating at workplace catering facilities. However,

“value” is not the same as “cheap”. Even when household budgets are tight, people are prepared to

indulge if they think they will receive a big enough pay-off for the additional spend.

(For further analysis of spending on lunchtime food, please refer to Attitudes towards Lunch Out-of-

Home – UK – October 2016, where these results are examined in more detail.)



FIGURE 34: APPROXIMATE SPEND ON A LUNCH OUT OF HOME ON AN EVERYDAY OCCASION, JULY 2016

"Approximately how much, on average, do you typically spend on a lunch out of home for yourself on an everyday occasion (including drinks and any other extras such as crisps, chocolate)? Please use the slider to indicate how much you spend."

Base: 1,121 internet users aged 16+ that have bought lunch to eat out of home in the last month for an everyday occasion


Contract catering venues lag well behind rival lunchtime options

A large majority of employees and full-time students bought lunch out-of-home over the last three

months, but most headed to the high street to make purchases. Supermarkets were by far the most

common choice for everyday lunches, reflecting both their near-ubiquity and the rapid improvement in

the quality and range of on-the-go options.

Both work and college canteens languished towards the bottom of the list. Just 11% of employees who

bought an everyday lunch in the last month did so at a workplace canteen. Some respondents simply

didn’t have access to a workplace canteen, but as data contained in the Access to Workplace Catering

Facilities section shows, this only accounts for 37% of employees.

The remaining 63% say their employer offers either a canteen, vending machine, sandwich trolley, or

other type of catering facility. Workplace caterers are therefore clearly missing out on a sizeable

proportion of their potential target market.



FIGURE 35: VENUES VISITED FOR LUNCH OUT OF HOME, JULY 2016

"From which of the following places have you bought lunch, to eat out of home in the last month, for each of the following occasions? Please select all that apply."

Base: 1,121 internet users aged 16+ that have bought lunch to eat out of home on an everyday occasion in the last month


Access to Workplace Catering Facilities Contract Catering UK, January 2017


Access to Workplace Catering Facilities

45% of employees have access to a workplace canteen

As stated throughout this report, the primary income channel for the contract catering industry,

alongside education and prisons, is workplaces throughout the UK, whether retail, business, industrial,

healthcare, defence, or remote sites such as construction.

To establish how widely available these facilities are, respondents in either full- or part-time

employment were asked:

“Which, if any, of the following on-site catering facilities do you have at your place of work?”

FIGURE 36: AVAILABLE WORKPLACE FACILITIES, JULY 2016 Base: 1,029 internet users aged 16+ that are full/part-time employees


Are caterers failing to make the most of their market?

The changing nature of employment means that workplace catering facilities are becoming less

common. Among employed respondents, only 45% said they had access to a workplace canteen or

café, though 32% had access to either vending machines or sandwich trolleys, and 12% had another

catering facility available to them at work.

Just 37% of respondents didn’t have access to any on-site catering facilities at all, highlighting the

huge potential market for contract caterers. However, the statistic also highlights the extent to which

caterers are failing to make the most of available opportunities. Work canteens lag well behind

supermarkets, bakeries and sandwich shops as a source of everyday out-of-home lunches.

As shown in the Use of Workplace Canteens section of this report, even among those who have access

to a workplace café, a third haven’t used it at all within the last three months. Convenience is a huge

influencing factor for lunch choices, and the workplace canteen should have an inbuilt advantage in

this regard. The data does give some grounds for optimism, however: if caterers can get their offering

right, there is huge scope to increase sales.

Use of Workplace Canteens Contract Catering UK, January 2017


Use of Workplace Canteens

Workplace canteens shunned by 36% of potential customers

Respondents who have access to a workplace canteen were then asked whether they had actually used

those facilities within the last three months.

Two thirds of respondents had used the facilities available to them. However, this means a sizeable

proportion of the addressable market is largely ignoring their workplace canteen. Respondents were

asked whether they’d used the canteen at any point within the last three months. The fact that so many

people hadn’t used the facility even once over this extended period highlights just how much scope

there is to increase sales in this segment of the contract catering market.

FIGURE 37: USE OF WORKPLACE FACILITIES, JULY 2016

“Have you eaten at your workplace canteen/café within the last 3 months?” Base: 468 internet users aged 16+ who have access to a workplace canteen


Are canteens pricing themselves out of the market?

Mintel’s data suggests that a major reason people are shunning their workplace canteen is

affordability. 70% of employees who say their financial situation is “healthy” have used a workplace

canteen within the last three months, compared to just 52% of those with “tight” finances.

There’s a similar (albeit not quite as pronounced) gap when household income is considered: 73% of

people who earn at least £50,000 a year used their workplace canteen in the last three months,

compared to 65% of those with a household income of less than £25,000.

Supermarket price wars and the growing importance of on-the-go food options have intensified

competition at the lower end of the market. Packed lunches also offer an affordable alternative to the

workplace canteen, with 63% of workers who don’t have access to a canteen agreeing that they are

better value than a canteen meal (See Attitudes Towards Workplace Catering for further details).



Pricing is a complex subject. Offering a budget option alongside standard lunchtime fare could bring

in new, budget-conscious customers, helping establish new lunchtime habits and, in time, providing

the opportunity to up-sell. However, this needs to be balanced against the risk of giving existing

buyers the option of trading down.

FIGURE 38: USE OF WORKPLACE FACILITIES, BY HOUSEHOLD FINANCIAL SITUATION, JULY 2016



Older employees are less likely to use workplace canteens

There’s a clear age divide when it comes to using workplace catering facilities. Three in ten under-45s

who have access to a canteen have used it within the last three months, compared to half of the over-

45s. This chimes with other Mintel data on lunchtime eating habits, which show generally lower usage

of most lunchtime food outlets among this age group.

Older diners have a narrower repertoire of dining choices. While younger people switch between

supermarkets, packed lunches, cafes and canteens as the mood takes them, older respondents are more

likely to have a few favoured options used to the exclusion of other outlets.

This makes it difficult for foodservice companies to cut through and change these well-established

dining habits, but it does reward those caters that can convince people to make the switch with greater

loyalty. The key is to ensure customers are not given an excuse to switch by offering a wide enough

variety of options to ward off boredom.



FIGURE 39: USE OF WORKPLACE FACILITIES, BY AGE, JULY 2016



Attitudes towards Workplace Catering Choices Contract Catering UK, January 2017


Attitudes towards Workplace Catering Choices

Healthy options are key to increasing custom

Two-thirds of people with access to a workplace canteen have visited it at least once in the last three

months, but there’s still huge scope to increase usage. In a market where attention on healthy eating

continues to grow, it’s not surprising that the thing most likely to tempt people to eat at their

workplace canteen more often is ‘more healthy options’.

Importantly, the range of healthy options available is more important than exhaustive information on

nutritional content, with only 15% of respondents agreeing that they would visit facilities more often if

the caterer added nutritional details to menu options.

There’s a similar contrast when looking at the control people want over meals. The ability to customise

lunch is important to 23% of respondents, but people have relatively little interest in controlling the

food served by canteens. It’s ultimately about choice on the day, rather than making decisions in

advance.

FIGURE 40: WHAT COULD WORKPLACE FACILITIES DO TO IMPROVE, JULY 2016

“Which, if any, of the following would be most likely to make you visit your workplace canteen/café more often?”

Base: 468 internet users aged 16+ that are full/part-time employees and have a workplace canteen/café at their workplace

All

%

More healthy options 31

Being able to see the menu in advance of arriving 25

Customisable dishes (eg grilled chicken with your choice of sauce/salad, in a sandwich or with rice)

23

Availability of trendy dishes (eg pho soup, pulled pork) 16

Quicker payment (eg contactless payment) 15

Nutritional details available on menu items 15

Getting to have a say about the menu (eg vote for future dishes) 14

None of these 32


The challenge of reaching older employees

Older employees are not only less likely to use workplace canteens, they are also much less open than

younger counterparts to initiatives that might make facilities more attractive. Roughly half of 45 to 64-

year-olds say nothing would tempt them to visit the canteen more often, and responses levels across

the board tend to be lower.

The most promising means of convincing older employees to change habits is offering greater

visibility and control over the menu, with ‘being able to see the menu in advance of arriving’ more

attractive to this age group than ‘more healthy choices’.

Attitudes towards Workplace Catering Choices Contract Catering UK, January 2017


FIGURE 41: WHAT COULD WORKPLACE FACILITIES DO TO IMPROVE, BY AGE, JULY 2016

“Which, if any, of the following would be most likely to make you visit your workplace canteen/café more often?”

Base: 468 internet users aged 16+ that are full/part-time employees and have a workplace canteen/café at their workplace

All 16-34 35-44 45-64

% % % %

More healthy options 31 39 27 23

Being able to see the menu in advance of arriving 25 26 26 24

Customisable dishes (eg grilled chicken with your choice of sauce/salad, in a sandwich or with rice)

23 28 20 17

Availability of trendy dishes (eg pho soup, pulled pork) 16 17 21 11

Quicker payment (eg contactless payment) 15 19 15 9

Nutritional details available on menu items 15 21 11 9

Getting to have a say about the menu (eg vote for future dishes) 14 13 18 14

None of these 32 22 31 47


Attitudes Among Employees Without Access to Workplace Catering Contract Catering UK, January 2017


Attitudes Among Employees Without Access to

Workplace Catering

How to build a case for workplace catering

Almost two fifths of employees say they don’t have access to any workplace catering facilities at all. If

contract caterers are to expand their market, they need to build a financial case as to why employers

should introduce catering facilities.

There is a strong belief among people who don’t currently have access to facilities that offering in-

house catering is a good way for employees to show they value their employees, with 48% agreeing

with the statement, compared to just 9% who disagreed. This kind of non-salary incentive could help

boost staff retention and satisfaction when employers face strong competition for talented workers.

There’s also a sizeable minority who feel that workplace catering facilities can boost communication

within companies, which is an important consideration as remote working, email and time pressures

make it difficult to promote the informal interpersonal contact that can help build relationships and

support creativity.

Contract caters that can build a financial case among employers, and then create an attractive

environment with meals that match current consumer demand for healthy lunchtime options, will find

an appreciative audience: 39% say they would use a workplace canteen if it was available, with only

20% actively ruling out the possibility.

FIGURE 42: ATTITUDES TOWARDS WORKPLACE CATERING AMONG PEOPLE WITHOUT ACCESS TO A CANTEEN, JULY 2016

“Thinking about workplace catering facilities, do you agree or disagree with the following statements?”

Base: 561 internet users aged 16+ that are full/part-time employees without catering facilities in their workplace

Agree Neither agree nor disagree

Disagree

% % %

A packed lunch offers better value for money than a canteen meal 63 33 4

Offering in-house catering facilities is a good way for employers to show they value their employees

48 43 9

I prefer to leave the office/workplace at lunchtimes 41 45 14

I would use a workplace canteen if one was available 39 41 20

A workplace canteen would improve communication within my company

31 49 20

The quality of canteen food is not as good as other lunchtime food outlets

23 65 12


Open-minded on quality – But perceived value is a concern

There is concern among people who don’t currently have access to a workplace café that the quality of

such facilities isn’t up to the standard of other outlets. However, this remains a minority view -

expressed by 23% of respondents - with most people undecided and at least open to trying workplace

catering if introduced by their employer.



There is also the strong belief that packed lunches offer better value, confirming earlier analysis that

highlighted the importance of ensuring catering facilities offer options at different price points.

An emotional barrier to adoption also exists, with 41% of employees who don’t currently have access

to workplace catering facilities actively preferring to get out of the office at lunchtimes. Some workers

might value how canteens improve workplace communication, but there will always be people who

think they spend enough time with colleagues, and who welcome the chance to get away from the

office for half an hour.

The key is to make sure that workplace canteens can function as both an escape from the workplace

and an extension of it. This represents a further development of the ‘third space’ concept that has led to

the rapid growth of coffee shops: somewhere that sits somewhere between a casual venue and office

space.

Are older employees’ pre-conceptions holding back the market?

The Use of Workplace Canteens section of the report showed a marked divide in usage among those

who have access to catering facilities at work by age, with older employees generally less likely to use

the canteen than their younger counterparts.

This divide holds up even among those who don’t have access to a canteen, with a steady decline in

interest if their employer offered one, from 47% of the under-35s to just 31% of the over-45s.

The over-45s generally have a much narrower repertoire of lunchtime dining options than their

younger counterparts. This lack of interest may reflect long established routines they don’t want to

change, or disappointing experiences with workplace catering in the past. Even if caterers introduce

lighter, healthier options, it may take some time to turn around consumer opinions, given the extent to

which rival lunchtime foodservice providers have raised their game in recent years.



FIGURE 43: AGREEMENT WITH THE STATEMENT “I WOULD USE A WORKPLACE CANTEEN IF ONE WAS AVAILABLE”, JULY 2016 Base: 561 internet users aged 16+ that are full/part-time employees without catering facilities in their workplace


Use of Hospital Catering Contract Catering UK, January 2017


Use of Hospital Catering

A third of adults have visited a hospital in the last three months…

Hospitals represent another key contract catering market. A third of respondents to Mintel’s survey

have visited a hospital in the last three months, showing the sheer size of the potential market.

Visits were split equally between those attending hospital as a patient and those visiting friends or

relatives, while 3% say they’ve visited a hospital as part of their employment.

Response rates are remarkably consistent, regardless of demographic group. As shown in the report

databook, there is a slightly higher chance that older respondents have been to hospital as a patient, but

this increase is not dramatic. The biggest variation, as would be expected, is among the proportion who

have been to a hospital because they work there, peaking at 7% of 25 to 34-year-olds.

FIGURE 44: HOSPITAL VISITING, JULY 2016

"Have you visited a hospital over the last 3 months, either as a patient, a hospital employee or as a visitor?"

Base: 2,000 internet users aged 16+


Chain coffee shops are the most used catering option in hospitals. Among those who have visited a

hospital in the last three months, the most common place to have bought food or drink was a chain

coffee shop. Despite the growth of independent coffee shops on the high street in recent years, they lag

well behind coffee chains when it comes to hospital catering: with 30% of respondents having visited a

chain coffee shop, compared to 16% for an independent.

For the majority of visitors and out-patients, hospital visits are not long enough to justify a formal

meal, which is reflected in the dominance of grab-and-go options, such as coffee shops and

newsagents.



A key advantages of operating hospital catering facilities is that there is a large and effectively captive

market: even if people are prepared to leave the site to buy food and drink, many hospitals are sited

well away from other outlets. Unlike workplace caterers, operators also face relatively little

competition from food brought from home. Packed lunches at work are common, but just 9% of

hospital visitors said they had consumed food brought from home, or that they had bought food off-

site to eat while at hospital.

FIGURE 45: USE OF HOSPITAL CATERING FACILITIES, JULY 2016

"Which, if any, of the following catering services have you used to buy food/drink in a hospital in the last 3 months?"

Base: 690 internet users aged 16+ that have visited a hospital in the last 3 months All

%

Chain coffee shop (eg Costa Coffee) 30

Food from a shop within the hospital (eg newsagent, supermarket) 22

Sandwich shop 18

Food provided by the hospital (eg meals brought round to patients) 17

Independent/unbranded coffee shop 16

Fast food outlet (eg Burger King) 13

Food from a vending machine 12

I brought my own food from home/purchased outside the hospital 9

None of these 30


Patients and visitors share similar purchasing patterns

Hospital visitors behave very similarly when buying food and drink, regardless of whether they are a

patient or visitor. The only statistically significant difference is the proportion who had eaten food

provided by the hospital. Even here, only a quarter of patients selected this option, reflecting the fact

that many are out-patients.



FIGURE 46: USE OF HOSPITAL CATERING FACILITIES, BY REASON FOR VISITING HOSPITAL, JULY 2016

"Which, if any, of the following catering services have you used to buy food/drink in a hospital in the last 3 months?"

All Yes, as a

patient Yes, as a

visitor

Base: internet users who have visited a hospital in the last three months

690 348 337

% % %

Chain coffee shop (eg Costa Coffee) 30 28 32

Food from a shop within the hospital (eg newsagent, supermarket) 22 22 24

Sandwich shop 18 18 21

Food provided by the hospital (eg meals brought round to patients) 17 26 12

Independent/unbranded coffee shop 16 16 17

Fast food outlet (eg Burger King) 13 12 15

Food from a vending machine 12 12 13

I brought my own food from home/purchased outside the hospital 9 9 9

None of these 30 31 28


Appendix: Research methodology

UK B2B Contract Catering UK, January 2017


UK B2B Mintel is an independent market analysis company that prides itself on supplying objective

information on a whole range of markets and marketing issues.

There are five main sources of research that are used in the compilation of Mintel’s business-to-

business (B2B) reports:

Desk Research

Trade Research

Statistical forecasting.

Mintel’s exclusive archive of over 40 years of analysis and expertise

Consumer research (selected reports only)

Mintel reports are written and managed by analysts with experience in the relevant markets.

Trade research

Informal

Trade research is undertaken for all reports. This involves contacting relevant players in the trade, not

only to gain information concerning their own operations, but also to obtain explanations and views of

the strategic issues pertinent to the market being researched. Such is Mintel’s concern with accuracy

that draft copies of reports are sent to industry representatives, to get their feedback and avoid any

misrepresentation of the market. These comments are incorporated into reports prior to final

publication.

Formal

Internally, Mintel’s analysts undertake extensive trade interviews with selected key experts in the field

for the majority of reports. The purpose of these interviews is to assess key issues in the market place

in order to ensure that any research undertaken takes these into account.

In addition, using experienced external researchers, trade research is undertaken for some reports. This

takes the form of full trade interview questionnaires and direct quotes are included in the report and

analysed by experts in the field. This gives a valuable insight into a range of trade views on topical

issues.

Desk research

Mintel has an internal team of desk researchers who monitor: government statistics, consumer and

trade association statistics, manufacturer sponsored reports, annual company reports and accounts,

directories, press articles from around the world and online databases. The latter are extracted from

hundreds of publications and websites, both British and overseas. All information is cross-referenced

for immediate access.

Data from other published sources are the latest available at the time of writing the report.



In addition to in-house sources, researchers also occasionally use outside libraries such as the British

Library or the Department of Trade and Industry.

Consumer research

Exclusive and original quantitative consumer research is commissioned for almost all Mintel reports.

In addition, qualitative research is also undertaken for a large proportion of reports in the form of

online discussion groups. Mintel invests a considerable sum each year in consumer research, and the

purchaser of a Mintel report benefits, as the price of an individual report is less than the cost of the

original research alone. The research brings an up-to-date and unique insight into topical issues of

importance.

Consumer research is conducted among a nationally representative sample of either adults or internet

users and is generally carried out by Lightspeed (online), Ipsos Mori (face to face), while other

suppliers are used on an ad hoc basis as required. The results are only available in Mintel reports.

Sampling and weighting

Face to Face Surveys

Ipsos Mori

Ipsos MORI Capibus uses a two-stage random location sample design which generates a very high

quality sample representative of the Great Britain adult population. Interviews are conducted via c170

sampling points, randomly selected every week, and MOSAIC is employed to set interlocking quota

controls specific to each interviewer location. This ensures consistent accurate representation of the

locations interviewed every week. By using this proven sample design, all sub-sectors of the

population are represented – at a national and regional level.

All information collected on Capibus is then weighted to reflect the known profile of the adult

population in Great Britain. Capibus uses a rim weighting system which weights to mid-2010 census

and NRS defined profiles for age, social grade, region, ethnicity and working status - within gender.

Additional profiles used include tenure and car in household, for example.

Because the sampling process is repeated every week, the Capibus sample is matched wave on wave,

making it ideal for taking successive measurements on the same issue.

Online Surveys

Lightspeed GMI

Founded in 1999, Lightspeed’s double opt-in online consumer panel has reach to approximately

450,000 consumers in the UK. Lightspeed delivers uniquely identified online respondents via

extensive use of fraud detection and location-verification technology at multiple points in the research

cycle, from initial registration through survey fielding and incentive redemption. Lightspeed

panellists are profiled on a wide variety of attributes to deliver the specific hard-to-reach demographics.

To ensure our surveys are nationally representative of internet users, Mintel sets quotas for each age group, split by gender. Specific quotas for a sample of 2,000 adults aged 16+ are shown below:

Note:- Lightspeed GMI was re-branded as Lightspeed in September 2016



% N

Age groups by gender

16-19 Men 3.3 67 16-19 Women 3.2 64 20-24 Men 4.6 92 20-24 Women 4.5 89 25-34 Men 9.3 186 25-34 Women 9.3 186 35-44 Men 8.7 174 35-44 Women 8.8 177 45-54 Men 9.3 186 45-54 Women 9.5 190 55-64 Men 7.1 141 55-64 Women 7.3 146 65+ Men 7.3 147 65+ Women 7.8 155

Total 100 2,000

Mintel also sets quotas on region and socio-economic group. Specific quotas for a sample of 2,000

adults aged 16+ are shown below:

% N

Region

North East 4.1 83

North West 11.3 227

Yorkshire & Humberside 8.5 170

East Midlands 7.4 148

West Midlands 9.1 182

Greater London 13.7 274

South East/East Anglia 23.7 475

South West 8.6 173

Wales 4.9 98

Scotland 8.5 170

Total 100 2,000

% N



Socio-economic grade

AB 22.3 446

C1 30.9 618

C2 20.9 418

DE 25.9 518

Total 100 2,000

Definitions

Socio-economic group

Socio-economic groups are based on the head of household or chief income earner and are defined as

follows:

Socio-economic group Occupation of chief income earner

A Higher managerial, administrative or professional

B Intermediate managerial, administrative or professional

C1 Supervisory or clerical, and junior managerial, administrative or professional

C2 Skilled manual workers

D Semi and unskilled manual workers

E All those entirely dependent on the state long term, through sickness,

unemployment, old age or other reasons

Retired persons who have a company pension or private pension, or who have private means are

graded on their previous occupation.

Students in higher education living at home are graded on the occupation of the head of the

household. Students living away from home are graded C1 (no account is taken of casual or vacation

jobs).

Qualitative Research

FocusVision Revelation

FocusVision provides Mintel with qualitative bulletin board software ‘Revelation’. This allows the

creation of Internet-based, ‘virtual’ venues where participants recruited from Mintel’s online surveys

gather and engage in interactive, text-based discussions led by Mintel moderators.

Further Analysis

Mintel employs numerous quantitative data analysis techniques to enhance the value of our consumer

research. The techniques used vary form one report to another. Below describes some of the more

commonly used techniques.



Repertoire Analysis

This is used to create consumer groups based on reported behaviour or attitudes. Consumer responses

of the same value (or list of values) across a list of survey items are tallied into a single variable. The

repertoire variable summarises the number of occurrences in which the value or values appear among a

list of survey items. For example, a repertoire of brand purchasing might produce groups of those that

purchase 1-2 brands, 3-4 brands and 5 or more brands. Each subgroup should be large enough (ie

N=75+) to analyse.

Cluster Analysis

This technique assigns a set of individual people in to groups called clusters on the basis of one or

more question responses, so that respondents within the same cluster are in some sense closer or more

similar to one another than to respondents that were grouped into a different cluster.

Correspondence Analysis

This is a statistical visualisation method for picturing the associations between rows (image, attitudes)

and columns (brands, products, segments, etc.) of a two-way contingency table. It allows us to display

brand images (and/or consumer attitudes towards brands) related to each brand covered in this survey

in a joint space that is easy to understand. The significance of the relationship between a brand and its

associated image is measured using the Chi-square test. If two brands have similar response patterns

regarding their perceived images, they are assigned similar scores on underlying dimensions and will

then be displayed close to each other in the perceptual map.

CHAID analysis

CHAID (Chi-squared Automatic Interaction Detection), a type of decision tree analysis, is used to

highlight key target groups in a sample by identifying which sub-groups are more likely to show a

particular characteristic. This analysis subdivides the sample into a series of subgroups that share

similar characteristics towards a specific response variable and allows us to identify which

combinations have the highest response rates for the target variable. It is commonly used to understand

and visualise the relationship between a variable of interest such as “interest in trying a new product”

and other characteristics of the sample, such as demographic composition.

Key Driver Analysis

Key driver analysis can be a useful tool in helping to prioritise focus between different factors which

may impact key performance indicators (eg satisfaction, likelihood to switch providers, likelihood to

recommend a brand, etc). Using correlations analysis or regression analysis we can get an

understanding of which factors or attributes of a market have the strongest association or “link” with a

positive performance on key performance indicators (KPIs). Hence, we are able to identify which

factors or attributes are relatively more critical in a market category compared to others and ensures

that often limited resources can be allocated to focusing on the main market drivers.

Statistical forecasting

Statistical modelling

Historical market size data feeding into each forecast are collated in Mintel’s own market size database

and supplemented by macro- and socio-economic data sourced from organisations such as the Office

for National Statistics, HM Treasury and the Bank of England. Forecasts are modelled in the unique

Mintel database, based on trade insight and expectations, combined with historic performance, taking



into account a combination of economic factors, end use market activity, the regulatory environment

where applicable, industry expectations and technological developments.

Qualitative insight

Crucially the vast majority of reports also draw on the Mintel quantitative and qualitative

understanding and analysis of the relevant end use markets. At Mintel we understand that historic data

is limited in its capacity to act as the only force behind the future state of markets. Thus, rich

qualitative insights from industry experts regarding future events that might impact upon various

markets play an invaluable role in our post statistical modelling evaluation process.

As a result, the Mintel forecast complements a rigorous statistical process with in-depth market

knowledge and expertise to allow for additional factors or market conditions outside of the capacity of

the statistical forecast.

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