The Global Contract Catering Industry and M&A

Various types of businesses and organizations engage the services of contract catering companies to provide daily or regular meal program services. The sectors that are the primary consumers in this growing industry include:

Business & industry: Large corporations providing meals to their employees in the workplace (accounts for one third of the market)
Education: Schools, universities and institutions
Healthcare: Hospitals and senior care facilities
Sports & Leisure: Public attractions such as sports venues and museums
Travel: Inflight and airport lounge services

The global contract catering industry and food service contractor market is forecasted to surpass $601.9 billion by 2026.

Staying Competitive

In order to differentiate themselves and maintain a competitive advantage, the leading vendors in the global contract catering market commonly employ tactics such as the following offerings:

Flexible service models that leverage on-demand online systems
Limited-time menu offerings
Value add-ons such as employee support, training, and guaranteed service-level agreements
Use of predictive analytics to improve operational efficiencies and reduce waste
Unique options that enhance experiences and provide “eatertainment”
Innovative menus that cater to the evolving tastes of emerging middle-aged audiences
Creative promotional items

Types of Contracts

Catering contracts are subject to a multitude of circumstances and can fall under one of several types, based on the level of the organization’s requirements, policies, financial risks, potential profits or losses, and other factors:

Fee-based/cost plus/cost-plus guarantee
Nil subsidy/cost
Profit and loss
Fixed price/cost/subsidy
Fixed cost per head
Concession
Royalty-based

Market Dynamics

Tech-Driven Meal Services: Home meal subscription and online food catering services have permeated all areas of the market. This includes manufacturers who have needed to adapt in order to offer fresh food subscription services. People want quick and healthy eating with the added perks of personalization, convenience, and unique choices of cuisines. Food operations need to be more flexible to serve these needs. Vendors need to seek logistics partners to accommodate delivery. As these services rise in popularity and increase in number, there is a growing opportunity for mergers and acquisitions in this space.Health Focus: Emphasis on health and wellbeing has created massive growth opportunities for the global catering sector, driven by the demands of businesses, hospitals, schools, and aging care facilities. These types of clients increasingly seek healthier choices and higher nutrient quality, and meals with certain characteristics such as low sugar or easy digestibility. This shift has reinvented the kinds of expectations placed on contract caterers.

Sustainability: A major factor playing into the dynamics of the catering market is a growing demand for sustainability. Contract caterers must find ways to accommodate clients who are becoming more and more concerned about sustainability and environmental issues. The availability of seasonal and local food, organic and vegetarian options, and fair trade are influencing the catering landscape. Creation of new endeavors that ensure ethical responsibility and resource management continue to drive growth in this market.

M&A Scenarios: Consolidation in this market is frequent as the dominant industry players continually seek to expand their brand and global presence, and diversify their services. This also raises the level of competition for M&A transactions. Key priorities include integration of facility services, and customization and personalization, all with the intent of attracting new clientele. There are also slews of contract catering businesses of all sizes around the world, and they are offering products and services that enhance their differentiation, and this creates a market brimming with choices for buyers in this industry.

Another scenario in this industry that can arise after a company is acquired is that some clients prefer having a relationship with a smaller, independent caterer. They do not wish to be “just another number” to a large catering firm. This creates great business opportunities for the niche players, especially as the other small boutique caterers are being bought up and disappearing. This particular environment also creates the potential for catering business leaders to exit their existing companies and create new independent ventures.

Entry Challenges: There are several barriers to market entry that caterers face when trying to establish a new business. These factors include the growing cost of operations due to food price inflation, regulation, rising labor costs, the need for more technology, and changing contractual relationships.

Contact Us

The M&A specialists at Benchmark International would love to discuss the sale of your company with you. At your convenience, set up a call with one of our analysts and we can talk about growth and exit strategy options that align with your plans for your future and retirement.

Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com

Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com

Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkCorporate.com

ABOUT BENCHMARK INTERNATIONAL:

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.

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