Food Industry

The biggest Russian catering holding CorpusGroup started its business in 1991 with event catering. According to Oleg Lobanov, Chair of the Board and the owner of CorpusGroup, he was so impressed by the reception organized by French Potel&Chabot that later decided to set up catering facilities in business-centers, at the plants and factories. At the same time, he started to develop cleaning   business. Since 1998 the holding operates in Russian regions. And now Sergei Vilensky, General Manager of CorpusGroup, declares that the company is no more developing event catering.

The other market leader, international company Sodexho, also does not focus its efforts on event catering; however, several years ago this service was declared. «Now we organize special events for our permanent clients», tells us Irina Baeva, Sodexho's Commerce Director. Compass Group does not develop the direction of event catering. «Event catering is a very specific direction, season-based business with the peak coming to New Year, and thre are practically no orders in January and February. By  New Year there appear one-day companies , declaring their decades experience and disappearing in a couple of months, explains Sergei Vilensky. “Besides, the clients want a variety: Chinese or country- stile party, and they are not in a position to sign long-term contracts with one operator». 

Over a hundred companies offer off-site catering service in Moscow. And following the initiative of Arkady Novikov, who established Novikov Catering a year ago, the number of this type companies will continue to grow: those who were only thinking of viability of catering banquettes, will for sure follow the most famous restaurateurs. “Over 400 companies are engaged in event catering in New-York! Soon we will have the same in our capital city, says Sergey Vilensky.
The growing number of those who desire to organize leisure for prosperous citizens breaks to pieces the market, which capacity is not that high. Reduction of orders and client demands - these are the key reasons that have forced the big operators to turn from event catering. CorpusGroup, Sodexho, Mega Foods, City Management, Rostic Group, Compass Group and other focus on catering facilities in offices, business-centers and at the plants. These are the most profitable directions.

WHITE COLLARS

Large western companies were the first clients of catering operators. International standards of office infrastructure, compensation packages, including lunch, saving time for the personnel, who instead of leaving the building looking for the place for lunch simply go down to catering facility, - all these from the 1990-s started to be applied by some Russian companies. However, according to the data provided by PricewaterhouseCoopers, which carries out regular review of labor payments, lunch subsidies is provided to staff mainly by foreign companies, whereas the Russian companies  most frequently provide lunch only to the staff with low salary.

At the same time, the number of foreign and Russian companies providing lunch subsidies was growing during last three years. Moreover, PricewaterhouseCoopers notes the increased number of the companies, which provide food in their regional offices. Year by year the allowance per company staff increases. Today, according to the data provided by PricewaterhouseCoopers, in Moscow this amount is $1300-1700 per year, and in the regions - $800-1000.

”Most frequently lunch subsidies are provided for the employees if they get food in the  catering facility of the company, and some companies buy and deliver lunch for their staff directly to the office. The lunch coupons loose its popularity”, says to Valeria Kireeva, senior manager of PR consulting department of PricewaterhouseCoopers.

A & B-CLASS

The main engine for this segment of catering is the market of office buildings rather than international holdings. “One can understand the structure of corporate catering from the market of commercial real estate, says Nikolai Bondarenko, Director of Mega Foods' customer relations. - Just look at the growing number of class A & B buildings in Moscow, practically all of them are designed to house catering facilities». According to the report provided by Colliers International, as of the end of 2005, the total number of the offices of class A & B in Moscow amounted to 4,3 million sq. m (A - 1,2 million, B - 3,1 million), 120,000 sq. m of building space was commissioned during the first half of 2006.

The space of catering facilities is considered at design stage, when the building owner conducts tender for setting up a catering facility and signs appropriate contract; however, even the landlord not always understands what catering facility is. According to representatives of catering companies, they have to struggle with the building owners on the rent. “Unfortunately, until now they establish for us the same rent as for other lessees, whereas due to the economic nature of our business we are not able to pay  $750 per 1 sq. m. Catering company is ready to pay $200-250 at best, says Nikolai Bondarenko from Mega Foods. When there is a catering facility in the building, it is the service that raises the site class, but it is not easy to pass this message to the building owner”. Nicos Antoniadis, head of Representative Office of Compass Group in Russia supports the above statement. “There is no such problem in other countries, and nobody pays that high rent“, he thinks.

However, catering facility in the offices is not the most profitable and developing segment of catering in Moscow. According to Nicos Antoniadis, the competition for access to business-centers is very hard. “During last couple of years the operator is selected only on tender basis,” he noted. Besides, large catering operators not only offer to organize catering facilities, but also undertake building maintenance and services. CorpusGroup provides cleaning service, and Sodexho even organizes reception and procurement of office supplies. “It is easier to list what Sodexho doesn't do: we don't manage the personnel, IT», grinningly tells us Irina Baeva.

FORMAT C

In class C offices the space for catering facilities is not designed, so sometimes one of the rooms is used for lunch. As a rule, the employees bring with them sandwiches and soup or go outside to have a snack. Some prefer ordering lunch-box food delivery. However, none of big catering companies deals with lunch-box food delivery. “We can not guarantee the quality, explains Nadezhda Zalesskaya, Marketing Director of CorpusGroup. - Besides, people order pizza delivery today, and lunch tomorrow. The demand is very unstable, and operating at this market is very difficult”. Nikolai Bondarenko from Mega Foods adds that for class C office the profitability of catering business decreases by 40-50%. The costs grow due to logistics. “It is simply not interesting to us”, he concludes.

For small offices, where as a rule, are small groups of personnel, i.e. 5-25, the service is provided by small operators. According to Andrei Kiselev, Development Manager of Obed.ru, there are 200-400 small companies in Moscow. “Lunch-box food delivery to catering facilities and schools is provided by private entrepreneurs, he explains. - Very often the lunch-box food delivery in the companies is initiated by HR departments. Sometimes this is organized by local activists, but their enthusiasm is not very lasting”.

The main problem preventing the development of the sector of lunch-box food delivery, according to Kiselev, is limited assortment, lack of quality and low-level client service. “People get tired from unvaried food, but if several operators combine efforts and jointly extend the menu, the clients will not look for other options”, he comments. Obed.ru concentrates business efforts particularly on this. It is the system integrating 15 lunch suppliers. Obed.ru does sales, develops new technologies of corporate catering, and the suppliers do cooking.

FOOD AND MONEY

Like restaurant companies, catering operators also carry out experiments with the menu. The days of national cuisine is obviously accepted by the consumers (whereas CorpusGroup offers even sushi for lunch). «For big sites we have a separate station “Global Tastes”, where the assortment changes every day. The dishes are little more expensive due to high cost, and nevertheless, they are popular, says Irina Baeva. - Of course, there are dishes for vegetarians, fresh salads and triangle sandwiches to pick up”. In order to find out the desires of the clients, Sodexho carries out pools among people in each office building.
City Management company has have launched co-brand projects with Publishing House Round the Globe involving catering facilities. The guests are regularly offered cuisines from all over the world, and in the future, as noted by the boss of City Management Elena Vasil'eva, the guests ordering a specific course will get gifts from Round the Globe. The program details are under development.

The average lunch cost in business-centers is 150-180 rub. The price for lunch-box varies from 65 to 150 rub. At the same time, according to Nicos Antoniadis, the cost of lunch is too high. In Europe, lunch is cheaper. The highest price that the Russians are ready to pay for business lunch is 300 rub. Even if in five minutes after lunch somebody orders cappuccino for 150 rub., for paying more than 300 rub. for lunch the person is prevented by psychological barrier: the guests clearly see the value of lunch in a catering facility or a dinner in restaurant.

LINES AND ISLES

The most interesting catering facilities and decisions on organization of space are found in particular in the offices of class ? and ?. In business-centers, the operators conduct experiments on organization of customer flow. Like in restaurant industry, catering companies also fall over free flow. However, both in Sodexho and in Compass Group they note that the most efficient is to combine distribution line and isle system (3-4 islands). “This is of the key trends during last years, tells Nicos Antoniadis. - Setting free flow is very costly: you need a bigger space and extra personnel, and free flow with distribution line actually helps to empty queue. In particular, this principle is applied for new Sodexho's catering facility in the office center “Towers on Embankment” in “City” complex, the biggest Sodexho's site.

In addition to catering facilities, as a rule, they set cafeteria. «In corporate catering facilities the lunch time is limited, typically it is somewhere from 12 am to 3 pm, and in other time you can get coffee with a dessert or buy a sandwich”, says Irina Baeva. In catering facility “Towers on Embankment” the café is located right opposite distribution lines and islands, and in some buildings, café can be found on other floors or in the hall. Brand facilities are still rare. For example, ready food shop “Prime” for several years offers triangle sandwiches to Ernst&Young staff. Rostic Group in the office building of VympelCom in addition to catering facility organized Moka Loka.

Nicos Antoniadis is convinced that “Brand facilities is our future. In Europe Compass Group opens in the office buildings café Ritazza and sandwich shops Upper Crust. Frequently this type shops is the place of business appointments. Besides, a brand café is more attractive compared to a faceless shop”. This trend can be seen in other catering segments also. For example, brand shops are available in MGIMO (Rostic Group) and MGSU (Grabli). According to “FoodService Europe” columnist Bruce Whitehall, several brand shops opened in one of the main London hospitals at the end of 2005, in particular Starbucks.
Often the catering facilities are visited by the personnel of the companies, which offices are located in the same building. According to Irina Baeva, one can hardly come there from the street, besides, you should be aware of the existence of the catering facility. Security is one of the obstacles. At the same time, in Moscow we can see now a new format of catering facilities, which the experts in catering from Rosinter Restaurants Holding mention with regard to office lunch in particular. This refers to the project type “Vilki-Lozhki” (Forks&Knives) of Novosibirsk restaurant holding Food Master and Moscow's “Pel'meshki”. “We are also thinking of establishing something of this format, as it is optimal for those who like to get out from the office for lunch,  says Vadim Sterzer, Director of Corporate Food Department of  Rosinter Restaurants Holding. - The main guest flow in these catering facilities is at midday”.

PLANTS

Plant catering has its own geography. If the office catering is concentrated mainly in Moscow, where the concentration of business-centers is the highest, the plant catering is popular in S.-Petersburg, Moscow region and Leningrad region. New plants appeared first at the territory around these two capital cities (as a rule, with foreign capital), where they started to organize food at European standards. Several dozens of FMCG and food products were transferred to the Russian territory since mid 1990-s.

The first catering agreement with the plant was signed by CorpusGroup. In 1997 the company looking for new experience started expansion from Moscow to S.-Petersburg. “That was the time of our regional expansion. Now we realize how premature our attempts were: the development of industrial catering requires much more efforts compared to food in business-centers”, says Sergey Vilensky. Today CorpusGroup offers lunches at various plants and factories, including meet processing, breweries and confectionary. Sodexho also has an impressive list of clients. Mega Foods also provides meals for the plants' personnel. The list of clients of Compass Group includes Ehrmann (Moscow region).

In late 1990s - early 2000s major plants started to think of optimization of business-processes. «Today the companies are focused on their main type of activity and try to be mobile and transparent. Many of them are getting ready or already declared IPO, sign deals with international companies, and this is all not possible without a clear business structure, explains Irina Baeva. - New generation managers come to these companies, and under new leadership they try to get rid of non-profile ballast. It is typical for the plant, when on payroll there are, say,  3-4,000 people whereas only 1,500 are involved in production”. For the company it is sometimes more convenient to take out the personnel of catering facilities from their staff list and have them managed by an external company. If outsourcing several years ago was a gimmick and scared with high cost, today the agreements with catering operators are concluded by more and more plants.

CorpusGroup and Sodexho note very high number of requests. “New generation top-managers are more serious with regard to the food issue and they realize that the company pays for high-quality services”, says Irina Baeva. CorpusGroup has the most extended regional coverage. Oleg Lobanov's company has already landed its forces in 28 Russian regions and now collaborates with oil, chemistry and machine building facilities (70% turnover of CorpusGroup is in particular focused on services to the plants). “For us exit to a new region starts with signing of agreement with a large plant. There is no use to open an affiliate in clear field”, says Sergey Vilensky. This is how CorpusGroup found itself in Maginotogrsk, where the country's biggest metallurgical enterprise is located - Maginotogrsk Metallurgical Plant.

Sodexho signed its first contract a year and half ago. Today the company supplies food for RUSAL staff in Bratsk and Sayanogorsk. “We have never set the task to ourselves to gain a regional market at any cost. We are very careful to all our steps, we analyze the profitability and, which is more important, long-term contract relations”, explains Irina Baeva.

Unlike business-centers, where the catering facilities introduce new catering culture, food facilities were always present in the plants. A steel-maker or an engineer simply has no alternative to satisfy hunger within 60 minutes. For example, most of Maginotogrsk Metallurgical Plant personnel need to go 2 km distance from the gates to the place of work, therefore one could hardly dream of lunch in «café on the other side of the street». And with tea and home sandwich no worker is able to stay long.

However, the catering facilities, which are provided after signing the contract with catering operator, leaves much to be desired: obsolete tables and chairs, cracked edge glassware, 20-year old equipment, outdated refrigerators and  ovens, cooks and waiters having no idea how to feed people in a different way. During last 15 years, all big facilities invested in modernization of their production capacities, not new kitchens. Therefore, before signing the contract between the catering operator and the plant is preceded by long negotiations. Not a single catering company can offer lunch for some 30-40 rub. and invest in training of personnel and renovation of  catering facilities. The profitability of industrial catering is 6%. “Of course, it is incomparable with restaurants, where profitability is 30-40%, but for global catering industry 6% is a normal indicator, says Sergey Vilensky.

Organization of plant catering has many reefs. According to S. Vilensky, under this low cost of lunch it is extremely difficult to design the process line and resolve the problem of supplies. Moreover, for harmful production there are specific requirements: people should be provided with fats. However, all problems can be resolved, if both the contractor and the client want to set catering in a professional way. “It is important to look for the opportunity of cooperation rather than load on us the equipment repair needs, explains Irina Baeva. - Sometimes the plant provides donation for lunch to the staff, sometimes they share the cost of repair, in some cases they reduce the rent. In fact, there are plenty options”. For example, in plant catering facilities in Bratsk and Sayanogorsk, where RUSAL covers food for all personnel, the number of lunches is accounted using plastic cards issued for the staff, and all settlements are done using a special computer program.

Like in business-centers, at the plants the catering operators not only manage the catering facilities, but render other services also. CorpusGroup in parallel develops cleaning. Sodexho offers a range of services involving non-profile asset management (technical maintenance of the buildings and constructions, cleaning, office support services (reception, processing and delivery of correspondence, telephone operators, etc.).

REMOTE SITES

Catering facilities are also needed at remote industrial sites. The experts allocate this activity to a separate segment of catering, as usually there is no chance to organize a stationary catering facility in this situation. Hot lunch is required to be delivered by certain time. In Russia this type of catering operation is available in Sakhalin, where a number of Russian and international companies develop oil fields. The main operators there are Sodexho and Compass Group. Besides, Compass Group has engaged its US office in Alaska. According to Irina Baeva, not only oil companies started to express their interest to this service last year.