There was a time when a meal out was reserved solely for special occasions, a birthday or anniversary for example. Times have changed.
These days, consumers are eating out more, and with increasing affluence, and greater demand for convenience, that growth is only likely to continue.
The range and variety of foodservice outlets has multiplied over the last few years, from sandwich shops and fast food outlets, to gourmet pubs and celebrity chef hangouts.
All of which provides considerable opportunity for fresh produce suppliers. A recent study on the sector by the Produce Marketing Association in the US found that 83 per cent of industry respondents believed fresh produce would be important or very important to foodservice operators when considering new menus. And while the US has a more advanced foodservice market the UK is following the trend closely.
The PMA FreshTrack study, carried out in October 2003, found most fresh produce suppliers expected their sales to have increased significantly by 2005. The report also highlighted a growing relationship between suppliers and foodservice operators, with 66 per cent of operators saying they planned to increase discussions with their suppliers.
But as with any area that is growing rapidly, it represents both opportunities and challenges. Those in the sector will have to move fast to keep up with the changes.
“The industry is moving really quickly,” says Tony Reynolds, md of Reynolds Catering. “The market is consolidating because of the need for greater efficiency. Our customers want easier access to supply and they want to take costs out.”
And of course, increasing your volume is a good way to get your costs down, as the retail sector has shown.
Reynolds adds: “The retail market is very mature compared to foodservice, which is still very fragmented. There’s still a lot of consolidation to go to achieve what the supermarkets have done in the last 15 to 20 years.
“I don’t think it will take quite that long, but I think we’re going to see some significant consolidation over the next five years or so.”
Reynolds says his company, which won the Re:fresh Foodservice Supplier of the Year award, is certainly moving with the times. “We’ve invested significantly in things such as quality control and human resources.” The company also has higher level BRC accreditation and is about to start building a new 100,000 square foot depot in London, for completion in mid-2005.
“There needs to be investment in the foodservice sector, in people, infrastructure and IT. We’ve got to do what the supermarkets did 20 years ago, and put these things in now so hopefully we can get a return as the market consolidates,” he adds.
However, some people in the sector feel that when it comes to consolidation, some areas have already outpaced the retailers.
David Burns, commercial director with Caterfresh, says: “If you look at the market positions of the two leading suppliers Brakes and 3663 and then look at who’s third, there’s a massive gap there.”
He says the structure of the market leaves just two major suppliers: “I think that’s a more serious problem than what is happening in the retail market.”
There has already been significant change within the fresh produce supply sector, with the acquisition of Pauleys by Brakes. The deal was significant as it gave Brakes a fresh produce offer for the first time and added weight to its strategy for European food service domination.
And Pauleys MD, Mark Crowther, says the consolidation is not likely to stop: “We’re on the lookout for any potential acquisitions within fresh produce. Consolidation is gathering pace as people want more scale.”
The move is certainly something Burns is watching closely. He says with the bigger players swallowing up the competition in the fresh produce market, it leaves more room for those with real expertise. “It does open up opportunities for us, if the big players remain one-dimensional. I think a lot of the expertise is going out of the business.”
However, even specialists have had to move with the times and both Caterfresh and Reynolds Catering have broadened their range to offer more to their customers.
Burns says: “We’re offering what we call a package of morning goods, giving chefs the things they need for breakfast.” But, he says they are determined to remain focused on their core activities: “We want to be seen as fresh-produce experts. We need to be able to say to people, ‘do you want a fresh produce expert that can distribute, or do you want a distributor that can handle fresh produce?’” He says the distinction allows them to have a USP in the market.
That view is echoed by Nigel Harris, md of Fresh Direct, which, like Caterfresh, is an independently owned fresh-produce supplier to the foodservice sector. He says the two companies have formed an independent trading alliance, giving them combined national coverage, to deal with a common competitor.
“We’re seeing a lot more of the distribution companies starting to add fruit and vegetables to their operations, selling it off the back of other deliveries. I think that’s the future of our competition.
“And, at the end of the day, I’d rather compete against somebody who isn’t a produce specialist, it gives us a competitive advantage.”
Caterfresh is certainly hoping to cement that specialist image with the relocation of its operations within the Manchester area. The £4 million move will see the creation of what Burns refers to as “the Caterfresh Academy.
“We see ourselves as category managers and we’ve decided to create a special space within our new operation.”
He says the company is creating a special area, featuring a boardroom with kitchen facilities. “People will be able to come and look at the products on the shop floor and then use them in the kitchen. We can also demonstrate new products to our customers.
“If it was just down to delivering a box of cucumber or tomatoes, Brakes would always be able to deliver commodity products like those cheaper than us. But for us, its about more than that. We’re able to demonstrate there are significant benefits to sticking with the experts, and the academy will help with that.”
Harris adds: “Our customers still want specialist knowledge and that is our unique selling point over the distribution companies. We can advise people about the right product to use with their menus.”
However while the likes of Caterfresh and Fresh Direct are keen to flaunt their expertise, they cannot be complacent. Pauleys’ Crowther dismisses the idea that his company does not have an expert edge and says they have plenty of knowledge to draw upon.
“We’re working very closely with our suppliers and growers and that’s where we can draw our expertise. We have experienced technical people and we’re looking at innovation and added value.”
The advantage of being part of Brakes is also enabling the company to target new sectors as well, he adds.
“We’re starting to focus on the indpendent sector, which is an area we haven’t had the resources to focus on before. We’re taking on 24 produce specialists across the UK to focus on the independents.”
He says, while it was a challenging sector, the experience and contacts of parent company Brakes would provide a number of leads for them to begin with.
So with the likes of Pauley’s and Brakes, along with the other big players increasingly focused on fresh produce, competition is likely to heat up. And with a lot of the major foodservice providers looking for one-stop solutions from their suppliers, life is going to be tough for the specialists.
Norman Heyes, md of Planet Produce, says his company’s key strength has been adapting to each customers needs: “Our level of service to each and every customer, big or small, has helped us sustain the growth we have enjoyed in recent years in what is a specialised and price-competitive sector.”
The strength of their relationships with growers has also paid dividends: “Our offer has changed very little over the last six years, but thanks to the partnerships we have developed with our growers, we have managed to strengthen our key brands, thus improving reliability of supply and quality of both product and packaging without impacting on price.
“Products are procured solely for this sector of the market and our growers are as committed as we are to getting the job right. With their support on product development and our ability to respond to our customers’ requirements, we believe we can put attractive offers together enabling us to stay at the forefront of the industry.”
Planet Produce has recently achieved BRC accreditation for its temperature-controlled facility, and plans for a continued programme of investment to expand the site further. The company is certainly optimistic about the future, “We are looking to take the business forward all the time and as long as we continue to control costs, maintain high-service levels and develop product with our suppliers, the future looks positive,” adds Heyes.
Meanwhile Burns says Caterfresh is determined to stay ahead of the game: “Two or three years ago, it was all about establishing a fixed price from the grower, but that’s a pre-requisite now. It’s all about labour and innovation.
“People are now looking for products that are labour-saving and can make life easier in the kitchen. It’s about delivering a solution, and not just raw material.”
Growing demand for prepared produce illustrates this, although Burns says there is a tendancy to get stuck in a rut. “We need to get away from the baton carrot and menu fatigue,” he says.
Caterfresh is looking at machinery options to provide labour-saving solutions to chefs.
It is also keeping an eye on emerging product trends in the sector, and Burns says baby veg could prove a big opportunity for foodservice. “There are issues at the moment over cost, but I think we can crack that.”
Of course, cost is always an issue, whether you are supplying an upmarket hotel or a school canteen, especially with the ongoing push for improved diet and good quality, says Steve Jobson, purchasing controller with Sodhexo.
“Price can sometimes be an issue but we will continue to promote 5-a-day and fresh food in schools within our budgetary constraints,” says Jobson.
“We’re working with very tight budgets within hospitals and schools and it’s a major challenge for us to provide the level of quality within that budget.”
He says there is also a growing pressure, particularly with local authority contracts, on sourcing, especially when it comes to local. “We’re being asked for country of origin, and also being asked to provide locally sourced products. It’s a real challenge for us as its difficult to meet each individual client’s needs.
“It’s also not clear on local purchasing - does that mean from within the UK, or from within a 10 mile radius of the business unit?”
So overall we are seeing increasing consolidation and increased competition within the foodservice market - and in many ways mirroring what has happened within retail.
However, Fresh Direct’s Harris is confident the sector will not not follow in retail’s footsteps. “The difference is, we’ve seen it happen there and we’re ready. We’ll make sure we’ll not allow it to happen in foodservice. I’ve every confidence in the future that we have.”
And Pauleys’s Crowther agrees there is a high level of confidence in the foodservice market future: “Suppliers are not seeing the same growth in the retail sector, and I think there’s an awakening that its not the poor relative of retail any more, it’s a great business in its own right.”
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