How sectors change in leading innovation

EP asks if the foodservice sector is ready for a brave new world

Hotels dominated the industry in the 1970s before foodservice stepped forward to enjoy a golden era in the 1990s. Today hotels are showing great innovation in seeking to re-engage with the customer, so how will foodservice respond?

 

The contract catering sector has enjoyed a long period of success. Many of the leaders who were at the fore in the late 1990s are still in place today, and there is no doubt they have been the most influential and able set of leaders the industry has seen. However, there is a view that the sector has become less innovative, less flexible and today is responding to the questions of clients rather than leading the change process.

The natural counterargument is that the business model needs to change, that too much is expected of contractors for too small profit margins and these margins are under increasing pressure. It is true that more and more is being expected of every leader and company. In the 90s, it was enough to provide a great service but today each business needs to be strong in sustainability, culinary excellence, purchasing and technological advancement. The argument is that innovation is difficult when margins are under pressure.

Both sides of the argument are correct. It is not a new argument that the margins contractors work under are too small. 

However, the solution is missing.

It will be fascinating to see how this is resolved and that will happen when the market and the traditional players are forced to change. Their view is that the traditional barriers between markets are breaking down. Restaurateurs are now moving into concessions and outsourcing foodservice on to the high street and into hotels, while hotels may move into front-of-house outsourcing solutions. As these barriers break down, new models and solutions will come through and change will take place.

Hotels have been in a period of innovation and change over the last few years. One can argue that there was an arrogance about hotels in the late 2000s that alienated many. Some spoke of rooms as retail products rather than as a service. There was a logic to the argument, but it only held good when a room could be a commodity in a strong market. Some felt that the brand name was enough when the truth is that a hotel experience does possess an emotional connection. Food and beverage service in hotels had been allowed to be average with little expectation. However, this is now all changing and hotels are, arguably, becoming increasingly innovative and leading the way once again.

“There is a new generation of hotel leadership breaking through that will push the sector forward, and an energy and vibrancy about the industry again”

One can argue over the catalyst for change. One reason has been the increasing influence of women both in business and in spend. They have migrated to hotels and away from clubs and bars as hotels offer more security and a more private environment for socialising. Hotels have also reinvented themselves in F&B through new rooftop bars that have excited the consumer and with new food solutions.Suddenly hotels have woken up to the fact that their F&B cannot just be profit centred but a greater F&B offer can add a certain amount to the room rate and increase the profitability of the whole operation.

Hotels are today showing greater offers plus greater variety and innovation. There is a new generation of hotel leadership breaking through that will push the sector forward, and an energy and vibrancy about the industry again. The challenge is being passed to the foodservice sector to respond,  and it will. There are new leaders emerging who possess a clear and strong vision of the future. However, they are at their best when seeing new competition enter the market. The sector is highly competitive and the overall food offers on display are exceptional. The problem is how to improve margins without relying just on purchasing power. It must come through revenue generation and by managing the consumer far better – just as hotels have learnt to do.

It will lie in a change of mindset. Contractors have long argued that the high street is their competition. It has been, but there is a psychology that the high street is better at engagement and that the focus should be on providing a great alternative service and improved cost controls.

The change will come in being more proactive in winning over hearts and minds of consumers. This will happen because there is a move away from brands towards bespoke services and great produce. The foodservice companies are well placed to achieve this as they can win in providing greater service and bespoke food solutions.

This is the time for reinvention.