Catering Services Market Procurement Intelligence, Supplier Intelligence, Supplier Ranking, Pricing & Cost Structure Intelligence, Best Practices, Engagement Model, Low & Best Cost Country, Day One Analysis Report, 2020 - 2025

Category Overview

“The COVID pandemic has proven disastrous for the catering service providers due to businesses and restaurants being closed as well as people maintaining social distancing protocols.”

Catering service is the business of providing food or cooking and helping staff on a contractual basis. This can be done for commercial or non-commercial purposes. The global catering services market size was valued at USD 540 million in 2020 and is expected to record a CAGR of 4.5% from 2020 to 2025. Europe occupied a share of 43% in the global market in 2020 despite the pandemic and will continue to be the leading region for catering services.

The COVID-19 pandemic has resulted in major market disruption, barring all major public events and enforcing social distancing norms. This has led businesses to halt their operations, in turn, impacting the catering services market.

Supplier Intelligence

“The global cafeteria services market is highly fragmented and competitive, with many large corporations striking strategic partnerships with mid-sized or small-sized companies to leverage their regional logistics capabilities.”

The market for catering services is highly fragmented with the top seven suppliers occupying only 30% share in the overall market. Since the requirement for catering changes based on the location, occasion, the type of food required, and price point, the market is flooded with a host of catering service providers who cater to particular requirements. Growing markets like APAC are comparatively more fragmented than mature markets like Europe.

With barriers to entry being relatively lower, it is easier for new entrants to foray into the market. However, with several options, customers get to negotiate on price points, which drive price wars and bring down the overall profitability of the market.

Some of the major players in the market are Aramark, Compass Group, Bartlett Mitchel, Emirates Flight Catering, and Elior Group.

Pricing and Cost Intelligence

“Majority of the players in the market use cost-plus pricing. While this mode of pricing provides the least value to the client, there is certainty in profit generation per item sold.”

The cost of raw materials varies drastically based on the geography of service and the type of service provided. On average, the cost of raw materials accounts for 60%-65% of the overall cost incurred. Among the operational cost heads, personnel cost is the highest. With the rising salaries of chefs, cooks, and waiters, personnel cost is expected to increase even further. Most often, profits are kept as a percentage of the overall cost.

In addition to the cost of preparation, other lifetime costs that a cafeteria service provider incurs are insurances, warehousing and logistics, QC, marketing and branding, and training of personnel.

Cost-plus pricing is the most common pricing scheme followed in the industry. This leaves high negotiation margins and therefore, scope to maximize profits. Since forecasting demand for their services is seldom accurate, cost-plus pricing helps cafeteria services retain a share of the overall costs as profits. However, this also leaves room for price fluctuation. The report provides a detailed analysis of the cost structure of the service along with the prevalent pricing models that prominent suppliers in the market opt for.

Sourcing Intelligence

“The maturity of the European market helps the suppliers operating in it realize greater profitability as compared to ones operating in growing markets like APAC.”

The European market holds the largest share in the global catering services market, thanks to the market maturity in countries, like Germany, the U.K., France, Italy, and Spain. Hence price fluctuations in these countries are also less as compared to other growing markets due to the maturity of the market. From a profitability perspective, the U.K., Germany, and Poland are some of the most profitable countries in Europe for cafeteria service providers.

The APAC market is still in its growing phase and hence not as profitable as the European market. An exception to this is the Japanese market, which is not only mature but also profitable.

From a sourcing perspective, the majority of suppliers opt for a bundled/hybrid engagement model as it reduces the complexities associated with in-house logistics. Some of the global players tie up with regional players and follow a full-service outsourcing model.

Cafeteria service providers operate using two models. The most prevalent operating model is that of a basic provider. In certain cases, where there are several parties involved, a performance-based operating model is followed. This is mostly limited to instances where a multinational service provider has tied up with a regional cafeteria service provider.