Kellogg’s Foodservice may be small in comparison with its parent company, with a turnover just over pound;30m, but it has achieved sales increases every year since its formation in 1992 and has plenty of scope for further growth, according to its director, Alan Shakeshaft.
He says he first highlighted the potential for breakfast cereals in the out of home market for his employer in the early 1990s, and Kellogg’s reaction was to invite him to set up its foodservice division. In its early years the accommodation market – hotels and bed and breakfasts – accounted for about half of its Features > Business, but nowadays three other channels have a similar turnover to accommodation. Education, place of work and health – care homes and hospitals – all provide steady, year-round business while accommodation is more seasonal, peaking over the summer. Travel is another channel with specialists supplying food to train operators and airlines.
Shakeshaft sees plenty of potential for growth within these channels, but also has his eye on other sectors where his products currently don’t get a look in. “I’d love to crack cereals in coffee shops or in a fast food operator like McDonald’s. We’re trying to find the right format, but we’re not quite there yet,” he says.
In addition to 16 direct employees, the foodservice division also has a share of the time spent by 50 territory sales people who cover the multiple retailers as well as delivered wholesalers. Cash and carry is a small part of the foodservice business and is handled separately. Shakeshaft says it accounts for about 9-10% of turnover, although this increases in the summer as many bed and breakfast operators and smaller hotels stock up at cash and carries. In addition to the resources devoted to it in the UK, the division also receives support from Kellogg’s European foodservice operation which is based in Dublin.
Shakeshaft says his division works very closely with the foodservice wholesalers and values their abilities. He says: “There is often a suspicion among wholesalers that manufacturers want to go direct to customers, but we have absolutely no interest in that. The wholesalers are the only economic way to achieve distribution to so many small operators across the country.” He believes it is essential that manufacturers, wholesalers and operators work together, sharing data and insights, in order to build categories, but says all too often there is reluctance to share data, or there is a lack of data altogether.
He is also critical of what he sees as short-term promotional strategies, such as buy one get one free. He says: “Some suppliers will do deals to sell trunkers into wholesalers, but all they are doing is filling up the larder for two months, taking value out of the market and doing nothing to grow the category. I would much prefer to collaborate with a wholesaler and develop a strategy to increase distribution and produce sustainable growth.”
Kellogg’s products occupy a privileged position within the out of home sector, says Shakeshaft, because unlike many of the unbranded items used in the kitchen they are front of house items sold on their brand. “It was no accident that a lot of hotels moved over to buffet breakfasts,” he says. “We worked very hard to convince them of the economic benefits.”
The foodservice division works with a tight core range of about 12 brands. “The away from home cereal market is very adult driven,” says Shakeshaft. This means familiar brands such as Cornflakes and Special K are the biggest sellers out of home while a lot of the newer products developed recently, which are growing strongly in the retail sector, do not achieve the same performance in foodservice. Muesli is also very strong in the away from home market, and he says Kellogg’s has developed a special luxury muesli, solely for the out of home market, that is performing very well.
Shakeshaft says the out of home breakfast market develops much more slowly than the retail side, and perhaps it is the knowledge that there are a number of successful retail brands yet to make their mark that underpins his confidence of future growth.