Signs are emerging that multiples want a bite at the foodservice cherry. Mary Carmichael sifts through the evidence Foodservice ­ the final frontier. And it's the way UK multiples are going ­ if not quite boldly ­ for their next enterprise. It's a big consumer market ­ worth nearly £24bn according to Foodservice Intelligence ­ and growing at twice the rate of grocery. And the multiples want a slice of caterers' spend. Exclusive research for The Grocer backs this up. The Knowledge Store surveyed 100 city and tourist town supermarkets last month. Some 35% attract more foodservice customers than a couple of years ago, 46% said they got at least some custom from caterers, and 16% admitted actively targeting catering outlets (see panel). Qualitative research of licensees/publicans by web service on-tap.net ­ part of the William Reed Group ­ said they regularly used supermarkets for at least some of their supplies. The multiples' interest makes sense. Foodservice is a boom market. Half of all US meals are now eaten out of home and the UK follows where the US leads ­ into restaurants, cafés, fast food outlets and pubs. The IGD predicts that the UK will reach the same proportion by 2025. That is both a threat and an opportunity for the supermarkets. As the growth in out-of-home consumption threatens the in-home market ­ the multiples' bedrock ­ they are wise to check out the new competition. Until recently the supermarkets let the wholesalers have the foodservice pound unchallenged. They improved their own foodservice offerings to consumers to tap unrelenting demand for eating out ­ multiples' own restaurants and cafés offer impressive 55-60% margins ­ but their coffee shops are never going to compete with The Ivy, or even the local Indian. Even with such impressive wins, Sainsbury decided that catering was not one of its major capabilities and outsourced to Starbucks in flagship stores. And the ready meals category ­ meal solutions as they are otherwise known ­ is only stemming the tide rather than reversing the trend. So it's small wonder forward-thinking retailers are sneaking up on their wholesaler rivals and sniffing around the foodservice supply buck. Unsurprisingly, they are reluctant to admit their greed, and even more cagey about revealing possible methods of seduction. Tesco says primly: "We don't deliver to business addresses. We are a retailer not a wholesaler." Asda is alone among the multiples in admitting its intention. In 1999 a trial delivery service offered Big Saver lines to landladies in Eastbourne and Blackpool. Asda describes it as "a local scheme which had a mixed reaction". Although it's still available, it's not being marketed. But who says the multiples ever get things right first time? Look at home shopping, they've renamed, relaunched and reformulated their schemes numerous times. What is important is the experiment's very existence. It emphasises the fact that the big boys are thinking about picking the small fry's pockets. In foodservice the giants ­ Bidvest, Brake Bros and Iceland (Booker and Woodward's) ­ may be getting bigger by the day, but they are just as interested in stocking the Red Lion's kitchen on Any Street, Any Town. And the Red Lion is already regularly sourcing great just-in-time deals at the supermarkets. A good kitchen manager is nothing if not resourceful. There's no doubt that this activity has got wholesalers rattled. Wilf Pearce, trading director of 3663 ­ one of the biggest delivered wholesalers ­ describes the multiples as the "enemy" and warns that only a competitive pricing policy will curtail their expansion plans. "We must unite and pool knowledge to defend our foodservice business if we want to be here in 10 years' time," he says. And the sector certainly is uniting. There has been as much consolidation in wholesaling as there has been in grocery, with the top three operators now accounting for 13% compared with 10% at this time last year. Those industry watchers who take a holistic approach to the food market agree it's the multiples' newly acquired ability to deliver that's key to their potential. Local restaurants and pub kitchens may have been stocking up on value packs for some time, but multiple managers don't really want white van man harassing customers at peak times. Recent 24 hour opening and electronic shelf pricing which could be altered to target off peak shoppers are other routes. But it's the supermarkets' own vans that are the key. "With online delivery, they can look at new markets, particularly business to business," agrees Mike Godliman of Verdict Research. "And with buying power and national delivery they're a threat to anyone." Godliman sees moves towards supplying foodservice as a way of grocers "re-inventing" themselves. "They can get their brands to the same consumers in a different way," he says. Is it any coincidence value line packs are getting larger? Alan Toft, director general of the Federation of Wholesale Distributors, says that until recently the multiples' online delivery fleets were used inconsistently during the day. And vans in the car park represent a logistics system not making money. Toft points out: "They're beginning to realise that they have the ability to deliver stock at the time the caterer wants it." And that, more often than not, is the time when the consumer doesn't. But it's not only private catering outlets in the frame. Flexible delivery times mean that institutions and government catering supply contracts come within range. Old people's homes, hospitals, children's homes ­ they're all targets it seems. Somerfield is considering extending its village store delivery scheme to nursing homes ­ something that could score it PR points into the bargain, with "Supermarket saves old folk's home" headlines perhaps? Institutions are lucrative markets and have limited menus. They make a good investment for supermarkets' future as the country learns to live with an aging population and stores face a shrinking domestic customer base. Asda pioneered links with government services, with a London-based home delivery programme organised through social services in the late 1980s. This would have given them a head start in today's race, but Asda's streamlining programme led to the scheme being sold off in the early 1990s. For the time being, the bigger supermarkets are likely to stick to subtle assaults on smaller caterers until they get it right. But will their overtures be well received? Godliman says that while the more exclusive restaurants will stay the province of specialists, the mass market is price driven and will succumb if the offer is sweet enough. And Ben Wishart, principal at Cap Gemini, says the plethora of safe, relatively unimaginative, mass market restaurant chains fit well with deliveries to institutions. "Supplying a narrow range of products for a regular menu ­ supermarkets could handle that," he says. Some wholesalers declare that their armoury is strong enough to withstand the pressure. Steven Sharp, marketing director of Booker, says the multiples are targeting foodservice only in a limited way. "They'll only get very small caterers ­ mums doing children's parties and so on. "We're into serious catering so that doesn't really affect us. Guaranteed continuity of supply for caterers with standard menus is far more important than saving a penny or two on a large can of baked beans." But this nonchalant attitudes belies a few preparatory tactics. Booker has already adopted retailer style "guerilla" tactics ­ giving caterers free stock and in some cases own label, including BOGOFs and half price offers. It has also just finished a scheme where customers were able to claim back up to 10% on Booker's own brands. "Why should these offers be the exclusive province of the retailer?" says Sharp. The FWD's Toft is keen to stress the benefits of the traditional supply routes for foodservice customers. He warns caterers that enrolling in any multiple's delivery service may mean "paying a high price". Loss of the specialist services ­ knowledge, consistency, inspiration, broad product range, personal service, information on new products and guaranteed delivery times ­ will cost caters dear, he promises. Toft believes that caterers' visits to the cash and carry also provide a social and support outlet, which they wouldn't get in supermarket queues with Joe Public. "Caterers would be foolish to put all their eggs in the multiples' basket," he says. Toft is keen to marshal allies. And manufacturers are the wholesalers' most important weapon. "Big companies don't want their foodservice offering devastated in the same way that grocery has been, losing all their power to the multiples," he says. However, this support is not as strong as he thinks. A spokesman for a leading manufacturer of food products for retail and wholesale thinks that Toft is probably overstating the case, as the route to market is not strictly within manufacturers' control. "They're interested in getting their products into as many consumer hands as possible," he says, "irrespective of the route they might take." Whatever the massed forces, it's a tough task to withstand the multiples' juggernaut. Pack sizes, storage and the risk of spreading their talents too thinly will be overcome ­ it's not as if supermarkets haven't proved their versatility. They can grow into supercentres to take on out-of-town malls, or shrink to fit c-stores' local shopping territory. They have given banks and mortgage companies a sharp shock with their financial services, and takeaways are still reeling from the onslaught on take home meals. Meanwhile, their ever-increasing share of non-food has high street specialists squirming. And Dutch food company Ahold is proof that having different strings to a specialist's bow doesn't necessarily stop it shooting straight. The international multi-channel food provider has 8,000 retail outlets in the US, Europe, Latin America and Asia and is also developing e-commerce interests ­ with the acquisition of US online shopping and delivery service Streamline.com ­ and moving into foodservice. This year's shopping spree has added food distributors US Foodservice and PYA/Monarch in the US and it has also added Belgian foodservice company Mea-de-Wilde-De Loore to its Dutch foodservice company Deli XL. And rather than inhibit the retail area,the combination of retail and wholesale maximises Ahold's global resources, according to boss Cees van der Hoeven. "We are absolutely convinced that there is huge potential for synergies ­ and find evidence of this every day," he says. Iceland/Booker will not be the only wholesale/retail deal in the UK and Iceland has already proved it can make unification work. Since it acquired Woodward Foodservice in 1997 Iceland has increased its turnover eightfold and will try to do it again with Booker. Iceland's extensive own-label range is rapidly filling depot and caterers' freezers. Others are going to follow ­ and they won't be able to hide their activities. Today's consumers like brands they trust, whether they meet them over a supermarket trolley or on a restaurant table. The question is: who can get the products to them most cheaply and efficiently? {{COVER FEATURE }}

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