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This is the future of small caterers

By: Reading Time: 5 Minutes

The catering industry is undergoing a massive upheaval – and no one is really talking about it. Why is this the case? What is the decline of small caterers all about? And where is the catering industry heading in the next few years?

People are more interested in how gastronomy works than ever before. It all started with the coronavirus pandemic. Suddenly, the hospitality industry became the focus of socio-political headlines: When will restaurants open again? Which rules will be in place? Oh, how wonderful things will be when we can go to a restaurant (again)!

Even after the pandemic, there was no let-up in the coverage – this time because of the war in Ukraine. Suddenly, it was inflation that hung over your favorite restaurant like the sword of Damocles. Not to mention the shortage of skilled workers who, according to the media, could destroy the industry in the short or long term. Simply put, gastronomy is all the rage.

Future event calculation of catering staff.

Image: AdobeStock | dpVUE .images

It’s different with the catering industry. That’s because it’s a sort of gastronomy behind the scenes, like an underground gastronomy that no one really talks about. At the same time, the development since Corona has been at least as dramatic for the catering industry as it has been for the restaurant industry – indeed, probably even more dramatic. But why is that?

Cost increases – a major reason for the decline of small caterers

“For small caterers, the Ukraine crisis has multiplied the coronavirus crisis tenfold,” says Ralf Blauert , Chairman of the Association of German School and Pre-school Caterers (VDSKC). Why? As a result of the war, inflation rose sharply, especially in the energy sector . This in turn led to significant cost increases in catering kitchens . “The energy outlay of a relatively small kitchen is already enormous,” says Blauert. “A small caterer makes up to 5000 meals per day. If the prices for energy, but also for cereals and other food suddenly multiply, then the entire company is at risk from one day to the next.”

For Blauert, it’s clear why this is hitting small school and daycare caterers the hardest: “The contracts generally run via the municipalities or generally via the public administration and are long-term from the outset. The last few months have shown how inflexible the public authorities are in terms of price adjustments. They simply refuse to adjust prices for the caterer, even though it is quite clear that the caterer simply cannot maintain the original prices due to unforeseen circumstances such as the war in Ukraine. What a kitchen costs, the staff, the cost of goods and so on – the municipalities simply don’t seem to understand this, or don’t want to understand it. Therefore, they are exploiting their “power” at the expense of the small caterers.”

Food to go boxes prepared by a small caterer.

Image: AdobeStock | foodandcook

The result: Many people throw in the towel, and the decline of small caterers is the logical consequence. This is because it simply no longer pays off.

But according to Blauert, demographic development also plays a decisive role. “The average age of many operators of smaller catering companies is quite high. If they are going to retire soon anyway, they simply won’t bother. Young people often don’t want to take over the struggling company. As a result, these kitchens will either stay closed for good, or be purchased by large catering companies.”

What do the big ones do differently from the little ones?

“In the past three years, purchase prices have varied almost weekly,” says Martin Wolf, Segment Director Catering at RATIONAL. Caterers in the public sector – especially school and daycare caterers – would hardly be able to cope with the costs of contracts concluded with authorities in the long term. “As a small business, you also suddenly have to deal with topics that were completely unknown to you until then,” he adds.

Two boys eating lunch at school cooked by a small caterer.

Image: Rational

In private catering, structures are often more flexible. Contracts can be renegotiated, because both parties have a sense for business. But regardless of whether in school and daycare catering or private-sector corporate catering, the business trend is clearly pointing in one direction: The larger a catering company is, the more crisis-proof it is.

“What you see is that more and more so-called family offices – in Germany, for example, Aurelius – are buying up smaller catering companies,” says Wolf. Family offices are family-run financial administrations that act de facto like an investment firm. The profit margin with catering companies is usually quite small, between six and eight percent,” says Wolf. However, there are indications that these larger corporate structures in particular will continue to shape the future of the catering industry.

The more smaller individual catering companies are purchased, the more centralized you can manage the whole as a large company.”Martin Wolf, Segment Director Catering RATIONAL

He continues by saying, “this means that you have better purchasing conditions because of the size, that you can use a single headquarters as an interface and control the entire inventory management system from there, for example. You can afford a managing director, which in turn allows you to address the issue of business development in a much more targeted manner, distribute costs, deploy staff more flexibly – and of course cushion crises better because you have a broader base. These are all advantages that cannot be dismissed in times like these. Sodexo, Aramark, Compass or just the new structures at Aurelius are demonstrating exactly this very well.”

But does this also mean that in the future only large corporations such as Sodexo will have a chance in the catering market?


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How bad would the decline of small caterers be?

“For me, it does look like this at the moment,” says Ralf Blauert. “But I also see young people starting their own businesses all the time with small catering concepts that really work. That definitely gives me hope.” Martin Wolf, on the other hand, lacks the facts and figures that really prove the decline of small caterers. In reality, if you look at figures from the USA, they point in a different direction. According to Statista, the number of companies in the catering sector has been growing steadily since 2017. While there were still 25,660 in the USA in 2017, the country had just over 30,000 in 2022. Statistically, it is not possible to prove that a few big ones are the same as the many small ones.

Above all, it shows one thing: As crisis-ridden as the catering market is, it is still continuing to grow. Sure, small catering companies getting bought out by larger ones is one fact. But there are still more small ones taking their place as well. It is precisely this balance that could have its positive sides in the future, says Martin Wolf. “Large catering companies in particular are increasingly in the spotlight. What they produce, how and where, is something that large customers, who are also in the spotlight, want to know. In countries such as France, you can see that issues such as organic and regional have also become the norm for large caterers. In addition, major caterers such as Sodexo, Compass Group or Aramark have set a zero-carbon strategy by 2030, so a lot will still happen because they will lead by example.”

One thing’s for sure: The catering industry is undergoing a massive upheaval. Nevertheless, there are good reasons to hope that it will emerge stronger from the recent crises. From the looks of it, there’s room in the catering market to accommodate not only a handful of big players, but also a lot of smaller ones.

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