Out of home in the spotlight

Wholesaler interest in the eating out of home market is at an all-time high with many of the companies and groups more usually associated with supplying retailers highlighting the potential they see in the catering and foodservice side of the business.

In the last year Makro has invested a substantial amount in developing its fresh and chilled offer for caterers, Booker has launched a free delivery service for its catering customers, and Landmark has designated catering and foodservice as a key expansion area and unveiled plans for investment in its offer.

With such intense competitive pressure on wholesalers’ retail customers the attractions of expanding business in this side of the market are clear. A recent study by the grocery think tank IGD, together with the foodservice research organisation Horizons, suggested that the annual total spent in the UK on eating out was pound;34.5bn.

But Peter Backman, managing director of Horizons, introduces a note of caution when talking about the overall market. He points out that when inflation is taken into account the annual rate of growth is only in the region of 1.5%.

Some wholesalers in the market have recorded impressive growth, he says, but this tends to be at the expense of their competitors rather than a sign of particularly strong growth in the overall market. Consolidation is also a factor, he believes, within both the wholesale industry and among its customers.

Looking at the sub sectors within the market, he says the biggest loser has been school meals where the “Jamie Oliver effect” has led to a major decline in the number of meals served. Whether the government’s focus on this subject will reverse the decline remains to be seen. On the positive side, Backman says that it is selected elements, rather than overall sectors, that are showing healthy growth. For instance, he says some of the newer branded restaurants such as Carluccio’s and Wagamama are doing well, as are some parts of the pubs market. Overall, he says, customers tend to be looking for good value for money, although not necessarily cheaper, when they are eating out.

Landmark Wholesale’s foodservice controller, Peter Saunders, agrees that the market is no easy option. “It is difficult. Margins are under pressure, the rising cost of diesel and commodity prices going up and down are all factors to contend with,” he says.

While most companies concentrate either on providing an exclusively delivered Features > Business, or cash and carry with an element of delivery, Saunders is in the unusual position of covering both sectors. Around 23% of the group’s turnover is in foodservice, and another 16% is in catering through its cash and carries, giving him an insight into both types of business.

“Cash and carry is much more price sensitive,” he says. “In foodservice there tends to be more of an element of flexibility, because of the service they are providing.” This difference, he says, is not always appreciated by suppliers. “Too many suppliers are trying to provide price-marked packs for the foodservice sector. They don’t seem to understand what it costs to deliver, and that a wholesaler may want some flexibility on what they are going to charge. If someone is delivering in the Orkney Islands their costs are going to be far higher and they need that flexibility.” In addition, he says, suppliers should also consider the type of packaging used. While suppliers will want their cases in cash and carries to stand out and attract customers’ attention, packaging for foodservice customers can be far more functional.

Saunders also believes suppliers need to concentrate more on new product development. Understandably, he says, there has been concentration on reducing the levels of salt, fat and sugar in existing products, but this has tended to be at the expense of developing genuinely new products.

Own brand products have tended to play a significant role in “back of house” applications, and Landmark is looking to develop its own label range, but Saunders says branded products will always feature, particularly at the front of house where consumers expect to see brands they recognise.

Graham Northfield, senior client manager of ACNielsen’s Out Of Home Team, echoes Backman’s view that pubs are one of the strongest parts of the sector. Based on information from ACNielsen’s Pubtrack Food service, which tracks the food sales of 9,265 managed pubs with data supplied by 14 pub companies, food sales in managed pubs showed growth of 7.9% in the year ending January 2006.

This strong growth has taken food’s share of revenue in managed pubs to 34% in the same period, compared with an estimated 12% in 1987.

There were over 500 million servings of food in managed pubs in the year ending January 2006, an increase of 7.3% from the previous year. Main meals accounted for 58% of those servings and have driven food growth increasing more than 9% in the latest year.

Traditional dishes continue to dominate, accounting for 84% of main meals servings and showing strong growth of 11% in the current year. Set menu events, such as Mother’s Day and Valentine’s Day performed strongly, accounting for almost five million additional servings.

Cooked breakfast is another top performer, even though only 12% of pubs provide it, adding two million servings in the last year with an average serving price of pound;5.75. Northfield says: “With pubs now opening their doors earlier the opportunity for growth on breakfast dishes is huge and this growth is expected to continue.”

Although traditional dishes continue to dominate both sales and growth, there are some new world cuisines starting to make an impact. Dishes such as lamb koftas, moussaka, Thai curry and sweet and sour prawns are all being served more in managed pubs, collectively being dished up an additional 1.3million times in the latest year.

When it comes to the food consumed out of home, despite the current consumer concerns over health and obesity, one of the categories showing strongest growth, according to Mintel, is cakes. Responding to this demand, particularly for traditional desserts, Scholler Ice Cream has launched 13 new premium cakes, patisseries and desserts under its Erlenbacher brand.

They include a range of sliced cakes which sales manager Lawrence Rippon says will go particularly well beside a coffee in the growth area of coffee shops and caf eacute;s.

Rippon says Scholler is also aiming to help restaurateurs sell more desserts. He points out that on average only 20% of diners order a dessert, and that this offers a huge opportunity to add to profits. The Erlenbacher range also offers the caterer the opportunity to serve the product as it is, or to decorate it, and add to its value, for a finer dining experience.

In the hot beverages category Nestl eacute; Foodservices launched several new products during 2005. Katy Hilditch, marketing manager, beverages, says: “As coffee experts we fully appreciate the importance of innovation and maintaining a fresh approach to our customers, to the brand and the category as a whole.

First, the launch of Nescaf eacute; Half Caff proved highly successful and captured the imagination of the end consumer in tune with changing lifestyle needs and added value to our wholesale partners along the way. Likewise, in the hot chocolate sector, Aero Instant Bubbly Hot Chocolate was launched during the last quarter of the year. This exclusive out of home product has challenged the market’s leading brand and position and we believe will have a big future.”

She adds: “Promotional activity last year was focused on campaigns aimed at increasing loyalty both to Nescaf eacute; and to our wholesale partners.

This year one of the company’s major promotions is a World Cup themed support package for caterers running on its Maggi and Herta products.

By purchasing two cases of the participating Maggi or Herta products caterers will be able to claim a World Cup kit. It includes menus coordinated with the event, enabling customers to eat the food from the country they support, such as Portuguese piri piri chilli, German frankfurters or English sausage and mash. In addition there will be bunting, posters and dish of the day cards.

A supplier working closely with wholesalers is Danby’s Foods, which has launched its Wholesaler Heaven initiative. It has developed a range of products in individual, multi portion and pouched formats, both fresh and frozen, and has seasonal items and monthly specials to add interest to menus.

In addition it will provide wholesalers with a mixed layer pallet providing its customers greater flexibility in ordering and giving them the opportunity to achieve faster turnaround in their frozen inventory.

The company will also produce bespoke recipe dishes and managing director Phil Ellis comments: “If you have a dish in mind for your company that you just can’t find, contact us to discuss your volume and recipe ideas.”

In frozen main meals, chicken has proved to be one of the best performing sectors for catering outlets over recent years, with added value products being the biggest segment, reflecting the trend towards convenience products and the need for speed of service.

To cater for the increased demand in chicken products, Padley’s offers the Chickwich range of burgers which can be ready in minutes and a range of other chicken products such as Chick ‘n’ Dixie 9ers ? portions of chicken coated in a southern fried batter – which are ready to serve in seven minutes – and each case contains free takeaway cartons and clean up tissues.

Rice has been another growing sector. Veetee says its sales of rice through cash and carries have seen double digit annual growth with the main volume from large pack sizes including 5, 10 and 20kg.

Veetee says its new 5kg jar has performed particularly well as it provides an easy storage solution for caterers while maintaining the quality of the product. Currently, Veetee Supreme Basmati, Veetee Supreme Basmati Easy Cook, Brown Basmati, American Long Grain and Easy Cook and Thai Fragrant are available in this format.

Veetee Foodservice works closely with large scale cash and carries such as Costco, Makro and Booker, as well as a number of large Asian independent wholesalers and cash and carries. Last year Veetee Foodservice worked with Makro to redesign its entire rice fixture to reflect market trends and to offer a balanced range to their customer base. The rice fixture was increased by 50% and segmented into three main categories – Basmati, American and Speciality.

Tilda has also been active in the foodservice sector launching Brown Pure Basmati rice. Tilda Foodservice national account controller Mark Lyddy says: “With the growing popularity of Brown Basmati in retail, it seemed the natural next step to introduce it into foodservice. By including Tilda Brown Pure Basmati on their menus, chefs can offer customers a healthier rice option using a quality brand.”

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