Until the Gate Gourmet row erupted in August 2005, most people had just assumed that airlines made their own food. Yet, when British Airways ground staff went on strike in sympathy with the 800 Gate Gourmet employees, who the company had just sacked, the airline’s operations at Heathrow Airport were shut down, and suddenly the public became aware of the food service sector. It is in fact a large and growing sector that is facing several interesting marketing challenges.
The food service sector is comprised of two sub-sectors. The profit sub-sector contains hotels, pubs, restaurants, fast food outlets, motorway service stations and other places where food and drink are sold. The cost sub-sector contains people at work, hospitals, schools, airlines, prisons, social services and other places where it is compulsory to provide food and drink.
The lines between the food service and the food retail sectors are becoming increasingly blurred as supermarkets offer takeaway Indian meals on deli counters and petrol stations sell coffee and burgers.
Jeremy Gibson, marketing manager at information provider The Caterer Group, says: “It is difficult to assess the size of the market because different people include or exclude different elements of the sector. However, reports on our website Caterersearch.com suggest that the total value of the market is around £55 billion. We reckon it employs about 1.5 million people. A notable feature of the market is that around 70 per cent of the market is comprised of small businesses in the form of independent hotels and restaurants.
The growth in the market has come predominantly from the profit side. While eating out used to be a special event for UK consumers, over the last 10 years it has become an everyday activity.
According to research company Horizons 10.5 million meals are served in food service every year. That is 20,000 meals every minute. Since 1997 the number of meals served has risen by 16.5 per cent and their value has grown by 30 per cent in the last five years alone. It is now the fourth largest consumer market after grocery retail, housing and transport.
Small budgets
Despite this growth in the market, budgets for marketing remain small. B2B marketers will recognise the story: sales teams can draw clear links between their work and the results they bring in, so tend to get the lion’s share of the business development budget. Furthermore, most food service suppliers are a division of a larger food retail business, and as such there is a tendency for them to be seen as the poor relation.
It is certainly a challenge, but one which Rebecca Riches, MD at The Hub, a food service marketing agency, relishes: “Having worked in both food service and retail I can confidently state that food service is considerably more challenging and complex than any consumer sector. Budgets are always very challenging and require a particular approach.”
She goes on to explain how she copes with these budget constraints: “The first thing to do is to look at how you can leverage consumer campaigns. It’s not always appropriate but, where it is, it can be very effective. Chefs, caterers, operators, and buyers are still consumers at the end of the day. They’re subjected to consumer television, radio and press advertising like the rest of us, so we can use their awareness of our consumer brands to maximise the bang we get from our B2B marketing buck.”
That buck is typically spent on integrated agencies. Not only do budgets rarely stretch to employing separate advertising, direct marketing, sales promotion, event marketing, public relations and design agencies, but also the market is so complex that it requires specialist sector, rather than discipline knowledge.
In terms of techniques, food service marketers use all of the usual suspects from on-pack promotions to trade exhibitions, and everything in between. There are roughly 60 publications servicing the sector, such as Caterer & Hotelkeeper, Catering Update and Chain Leader. The advertising that does occur tends to be tactical and offer-led rather than strategic and brand-led, and many brands shy away from advertising altogether, aiming instead to generate free editorial coverage.
Complexity of the market
Nestlé Foodservices is a division of Nestlé selling well-known brands such as Nescafe, Kitkat, Aero and Herta hotdogs to all parts of the food service sector. It uses on-pack offers, direct marketing, trade press advertising, exhibitions and chef training to reach its 300,000 prospects, but the biggest problem it faces is knowing who those prospects are.
David Field, MD of Nestlé Food Services, comments, “Only about 40 per cent of those prospects are chains. The rest are independents and it’s really hard for us to acquire and maintain information on them. We want to build relationships with them. We want to know who they are, what products they want, and which promotions interest them.”
This is why Nestlé Foodservice was one of the two founding members of Foodservice Rewards, a loyalty programme launched by communication and motivation company BI in June 2005. This programme allows caterers to earn points when purchasing products from participating brands. They can redeem those points for rewards such as business equipment, or incentives for high-performing employees, or prizes for a customer draw. In return the sponsors get valuable information about those caterers.
Nestlé and Young’s Bluecrest Seafood were the two founding members, and have so far been joined by KK Fine Foods. At the time of writing 1400 caterers had joined up and in the United States, a similar scheme has attracted 50,000 caterers.
Peter Milsted, foodservice director at Young’s Bluecrest Seafood, commented: “This will give us access to the caterers who are so important to our business. We’ve operated schemes in the past to try to achieve this but this initiative stands a much greater chance of success simply because it is a coalition of several manufacturers.”
The advantages of integration
Once food service marketers have identified their prospects they then face the challenge of how to reach them. Fiona Grogan, MD of food service marketing agency Jellybean, offers this advice: “Don’t try to reach all of them. There are too many, and you’ll end up reaching none of them. Instead, identify a specific target audience and deliver a campaign that speaks directly to it. You’ll do this better if you keep a consistent message across all of your channels, and this integrated approach also helps keep costs down.”
Increasingly, as the sector grows and matures, food service marketers are looking beyond the ‘push’ marketing to caterers to explore ‘pull’ marketing to consumers, and this is leading to a growing amount of branding activity. Anne Bahr Thompson of branding consultancy Onesixtyfourth, observes that: “Food service has traditionally been done in a ‘white label’ manner, but some providers are looking to get noticed by consumers. In the US this is quite advanced and many hospitals, offices, and schools have food courts in which well known brands are highly visible.”
It is also happening in the UK. Rice brand Tilda recently briefed Jellybean to position it as ‘the quality rice brand’. The agency delivered advertising and public relations in publications read by top end restaurant chefs and managers.
It also distributed over 110,000 recipes to foodservice outlets as it attempted to dispel the idea that rice is merely an accompaniment to curries. Recipes created by twelve celebrity chefs were made available on a website which has received nearly 12,000 hits since its launch in May 2005.
Ongoing evolution
The sector has changed a great deal, and looks set to continue to change in the foreseeable future. Food service marketing is yet to embrace online marketing in any significant way, and many see that as the next frontier (see page 48).
The sector will also continue to be affected by changes to the way in which we eat. For instance; with around a third of our food consumption now taking place outside of the home, we have become a nation of grazers and this has an effect on the type of products caterers want to sell, and the way in which they want to sell them.
In only the past 12 months the issue of healthy eating has rocketed up the agenda. It was already an issue on the profit side with low fat, low carbohydrate and low salt diets coming in and out of fashion. But the exposure created by celebrity chef Jamie Oliver, of the nutritional standards of food in our schools has also made it important to marketers on the cost side.
McDougals Healthy School Food Award is an attempt by one food service company to associate itself with the healthy eating agenda, and to remind the public that not all schools serve unhealthy food. Launched in September, it will see schools from across the country competing for the award. Prizes will be presented at the annual Local Education Authority conference in February 2006.
Finally, a third of all food spending may now be on out-of-home consumption, but we still have some way to go before we catch up with the US, where the food service sector claims half of the wallet share. So, while much will change, one thing about the food service sector seems likely to remain the same: it will continue to grow at a rapid pace.
