Foodservice Update Q3 2023: What’s on the Menu? Contract Catering Special Edition

Demand disruptions and unforeseen inflation have shaped a new reality for contract catering. Activity is stabilizing with a new balance and consumption patterns. Contracts and prices are still adjusting to cost inflation, and this slow adjustment is cause margin pressure for catering providers.

Report summary

Activity in contract services is stabilizing. As we enter the second half of 2023, activity in education, health, services and events has normalized at levels similar to 2019. In business, hybrid working has become a new normal for certain jobs and industries. At work, consumption patterns have changed – greater spending per meal but more volatile traffic is the new norm.

Contract prices haven’t fully adjusted to rising costs. More increases seem unavoidable. Despite a sales recovery, elevated costs result in operating margins that are still lower than those of 2019, even for industry leaders. In certain countries and segments – such as public sector education – raising prices is complex. We expect price increases to continue as growing requirements related to sustainability, nutrition, or more flexible supply come at an extra cost.

Complexity and demographics shape the longer-term outlook. Users in education are likely to decline further in many markets. Care-related demand is likely to increase due to an aging population, but the lifestyle and needs of seniors are also evolving. Old formulas do not always suit new demand. Outsourcing is increasing, and further industry consolidation is also likely. Both trends provide business opportunities for successful operators with access to funding.

Strategies adjust to new perspectives. Contract caterers are reviewing their business models to meet current and future challenges and demands. Improving profitability and securing access to funding are key short-term priorities behind corporate moves. Building up capabilities to meet customer requirements is also a must. More sustainable alternatives, enabling technology, and new business models need to be implemented to secure competitiveness.

The reshaping of the industry offers opportunities. Contract caterers that can profitably meet evolving customer needs will capture new business. Small caterers, convenience/QSR operators and on-demand delivery platforms are also finding new opportunities in corporate catering. For food suppliers and technology providers that can meet the evolving needs of contract catering, new business opportunities will emerge. Sustainability, traceability and flexibility are the key buzzwords.