Caterers cook up cloud kitchen strategy for post-pandemic offices

Food has emerged as a new front in the battle to lure reluctant workers into the office and just as companies adapt to hybrid working, so do the restaurant groups that serve them.

Lunch menus at the London offices of tech companies like Netflix and Palantir now include main courses of chermoula-marinated hake, sides of roasted carrots with orange and saffron, and triple chocolate and sea salt brownie desserts. sea, provided free to workers.

Food is no longer a “commodity” but a means of attracting staff to the office, said Cristina Covello, head of strategic growth at Fooditude, the company producing the meals in its 3,000 square foot kitchen located in an industrial area of ​​South Bermondsey in London.

Fooditude is part of the French company Sodexo, which acquired a majority stake in the group in 2020 to boost its capacity in so-called cloud kitchens: off-site catering facilities used to prepare meals for delivery.

Traditional caterers like Sodexo are hoping this flexible approach will allow them to bounce back from the pandemic. It could also help ward off delivery start-ups like Just Eat that are jumping into a $70 billion workplace catering market that hasn’t yet recovered from the impact of working from home.

UK office occupancy levels were just 25% of capacity last week, according to property analysts Remit Consulting.

According to Compass, the world’s four largest caterers, Compass, Sodexo, Elior and Aramark, account for about 30% of the $220 billion global contract catering market. They provide services to hospitals, schools, and events, but 30-45% of their revenue comes from business and industry, a category that includes offices.

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Dominic Blakemore, chief executive of Compass, said more than half of the UK-listed restaurant group’s business had “completely” ceased following the Covid-19 outbreak. Operating profit fell 70% in 2020.

The company has since rebounded, but its commercial and industrial revenue remains 23% below 2019 levels.

The decline in desktop restore demand has come as new threats emerge. The top four suppliers account for one-fifth of total business and industry sector revenue, according to Bernstein analyst Richard Clarke. But food delivery start-ups are trying to eat out of the market.

Just Eat Takeaway, best known for its takeaway delivery service, paid £16million in 2019 to acquire City Pantry, a London-based start-up which said it was ‘transforming the way people eat at work’ . Since rebranding as Just Eat for Business, it says it delivers home and office meals to 30,000 employees at 600 businesses every week. Competitor Deliveroo has launched a similar service, Deliveroo for Work.

While companies like Sodexo prepare their own food, Just Eat and Deliveroo deliver restaurant meals to corporate customers through an extension of their core customer service, although their market share remains low and they are focused on town.

For workers, a choice of local restaurants provides a more appealing range of lunch options, said Matt Ephgrave, general manager of Just Eat for Business.

Despite the emergence of Just Eat and Deliveroo, some companies have remained “quite reluctant” to invest in upgrading their own services with technologies such as fully cashless services, Clarke said.

But faced with a long-term shift towards flexible working, some restaurateurs are reinventing themselves.

Elior, whose UK clients include Coca-Cola and property company Hammerson, is using its network of cloud kitchens to tap into a new revenue stream: small and medium-sized businesses.

On-premises kitchens needed to serve at least 150 covers to be profitable, but cloud kitchens allow caterers to serve businesses with 10 or 15 employees, dramatically increasing the addressable market.

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Caterers are also developing expertise in other areas. Elior has acquired meal delivery start-up Nestor, while Sodexo has expanded its courier service with contract caterer The Good Eating Company.

With fewer kitchens on site, catering businesses can also save money by operating with fewer staff. Julie Ennis, Managing Director of Corporate Services for Sodexo UK & Ireland, said: “We are also working in partnership with existing clients to use the space already available to serve sites within a 20 km radius. minutes.”

Blakemore and other caterers say they can develop more profitable delivery models than Just Eat.

Compass bought London cloud canteen start-up Feedr for around $24m in 2020. “We have the efficiencies of scale and delivery. We don’t deliver two meals, we deliver 50 to 100,” Blakemore said, adding that many customers don’t want multiple delivery drivers arriving at their office throughout the day.

Reduced labor costs will be a particular benefit for hospitality businesses in the UK, where Brexit and the pandemic have affected the workforce.

Ennis said: “We have to adapt anyway because we can’t get the staff. We need to change the model to achieve this.

Caterers are investing in automation that could help solve this problem. Last year, Compass acquired Indian start-up SmartQ, which it claims would provide technology for cashierless cafeterias.

Cost savings from running cloud kitchens also provide caterers with an opportunity to combat rising inflation, particularly the pressure to increase wages.

“Inflation is driving these changes,” said Goldman Sachs analyst Daria Fomina. “With labor shortages and rising labor costs, you need to be more creative.”