Power Source

Catering business is now far from original English term “catering”. Allover the world this means not only food delivery and restaurant catering service. Sale of ready food «just-in-time» at  large events, as well as catering service for passengers,  clients of  transport companies is of great interest for mobile catering industry. However, the lion's share in this market turnover is taken by the companies specialized in organization of fixed catering facilities.

LUNCHTIME

Restaurant catering remains one of the most profitable types of catering. According to the data provided by consulting company Growth Technologies, its profit margin is 25-30%. At that, only 5% of all clients use this service, spending $58 million per year. And this is quite reasonable, according to Alexei Lumnov, analyst of Amiko Consulting: an average $50 bill in case of restaurant catering (reception, banquet) is eight-ten times more expensive compared to traditional lunch in a stationary business-centers facility - the share of the latter is about 70% of the market turnover value.
Several dozens of catering operators are ready to offer business lunch to Moscow firms, but only five companies share 60% of the market: Sodexho, Mega Foods, LunCh, Brizol and Master Food.

Sodexho of France has taken strong positions over last 14 years. Along with Potel & Chabot, which is specialized on restaurant catering service, it came to Russia in early 1990-s with major foreign clients, taking the role of forager for the advance forces of the army in offense. According to Amiko estimates, upon the results of 2006 Sodexho has taken control of 26% of Moscow market, which potential capacity is evaluated by the experts of the same company as $1 billion.

Compass Group PLC of England, the world leader of catering industry, which earlier paid little attention to the Russian market, noted the growth potential. Over last three months it was negotiating on the purchase of a share in Cantina City, a Russian company, which is not even among the first dozen of the market players (based on the information from the market players, analogue negotiations were held by Compass with Mega Foods, with no success). We should note that Compass Group, which annual turnover accedes $21 billion, is already represented in Russia with Eurest, its affiliate company. However, its positions in the local market are far from the leadership.

DEVELOPER ROAD

About 1 million sq.m of office space is built in Moscow every year - more than in any European city. Every year there are offers for 5,000 companies. "All of them are potential clients of catering operators", says Alexei Lupov. Considering the fact that the segment of class A offices in the Russian capital city is practically full (all of them have their own catering facilities), the situation with the centers of class B and especially C is different. Their total number in Moscow accedes 1,500, and catering is organized only in 5% of them, at best. Mainly thanks to active commissioning of the new business-centers of class B and C, the catering market was growing by 50-60% per year during last three years.

This growth is inspired by enhanced lunch allowances provided by the companies. According to Sodexo EurAisia, average lunch allowance provided by the employers in Moscow business-centers is about 180-250 rub., and 100-120 rub. at the plants. The struggle for the most generous clients inevitably leads to damping. In addition, in order to get a large long-term order, the companies decide to invest the amounts, which sometimes seem outrageous for establishing of the catering facilities. E.g., according to Nikolai Bondarenko, Director of Mega Foods' customer relations, some catering operators implement finishing of catering facilities at their own expense. "In average this may need up to $500,000, says N. Bondarenko. “ In order to ensure return of such investments you may need up to five years. For any operator this term of work with one client is critical".

NON-PROFILE GUESTS

$170 million aggregate turnover, according to the forecasts of Amiko Consulting, is the result of operations of Moscow catering companies in 2006. This is more than twice growth compared to last year and absolute record for the entire market history. Such growth rates are far from expectations in the traditional segment of restaurant service. Maybe, it explains the interest to catering, which is demonstrated by famous restaurateurs. Catering projects are implemented by Rosinter Group; Gurme Catering and Novikov Catering appeared at the market, with Arkadi Novikov specializing on restaurant catering.
According to market players of traditional segment of restaurant service, increased profitability at high rate of return makes this business very attractive. In particular, Rosinter Restaurants Holding is engaged in restaurant catering service, as it provides catering service for the offices and plants. Today the company has nine points of service in various office centers. However, according to Valeria Silina, PR-Director of Rostics Group, catering is only an additional business direction of Rosinter Restaurants.

The market leaders see no significant effect on their status from such projects. "Our businesses are completely different. It is enough to see the menu dynamics in restaurants and in corporate catering facilities. It is completely different system of organization and expenses", says Galina Dudrova, Sodexho EuroAsia's  PR-manager. Nikolai Bondarenko is more categorical: "Restaurants will fail if they try to enter our niche of corporate catering. To earn here, you should provide service to dozens of thousands of people per day". At the same time, N. Bondarenko accepts that restaurants have more chances for success in case of event catering. "But not among the clients of catering operators, he clarifies, as big the clients prefer to use the services of banquette service of their permanent partners offering their services under more profitable terms and conditions".

At the same time, catering operators have already experience serious losses due to activities of traditional restaurateurs in their market - for the time being only staff losses. For example, Potel & Chabot has lost its manager Jose Carvalio, who left in February for Novikov Catering. They say, a significant part of staff of the French   operator also changed the employer. The advance of the newcomers to the market, as usual, starts with the struggle for professionals. 

Sodexho EuroAsia
The Russian branch of international company Sodexho Alliance, which occupies the second place among service companies in the area of outsourcing, during last 14 years managed to retain the leader positions at Moscow catering market.
Market share in 2004: 20 % (Share in Moscow market in monetary terms)
Market share in 2005: 23%
Strategy: strengthening of the leader positions through provision of catering services with other services provided by the group.
TACTICS: pursue comprehensive approach: apart from catering provide cleaning, building maintenance and administrative services (call-centers, distribution of internal correspondence, etc.). However, the main incomes are received from organization and services in stationary catering facilities in business-centers and offices of big companies, as well as organized lunch delivery network (banquettes are organized for permanent clients only).
PROBLEMS: insufficient growth rate of the business due to low corporate culture in the Russian firms, which, according to the company, underestimate the importance of organized food for their staff members.
RESULT: the company provides services to 5,4 million people per year. (The number of clientele is based on the forecasts for 2006 (for both cases the estimates are provided by Amiko Consulting)
NEW GOALS: make its business-portfolio more balanced via increased profits from non- catering directions, in particular, facilities management services.

Mega Foods
In late 1990-s was set up as a bakery, but later, when there was a bulk order for organization of corporate catering, the company concentrated its efforts on catering. Today the services in office catering facilities provide 60% of Mega Foods' turnover.
Market share in 2004: 11% ((Share in Moscow market in monetary terms)
Market share in 2005: 23%)
Market share in 2005: 12%
Strategy: enhanced profits from the business at the expense of new production technologies, conservative price policy: the company principally avoids any price wars).
TACTICS: in order to minimize the risks and get an additional income, the company develops ready food delivery and restaurant catering service - 30% and 10% in the turnover, respectively.
PROBLEMS: serious problem for the company is damping from the side of the competitors and advertisement of cheap business-lunches from the side of traditional restaurants and café, distorting the customer perception of "the prices of high-quality lunch".
RESULT: the company provides services to about 2,7 million people per year. (The number of clientele is based on the forecasts for 2006 (for both cases the estimates are provided by Amiko Consulting). Now the company manages 51 catering facility and increases their number. For example, recently the company has won tender for organization of corporate catering for MTS.
NEW GOALS: development of regional projects, including S.-Petersburg and Ukraine. In the nearest future, the company plans to launch manufacture of ready and intermediate products for retail network.

LunCh
It is a member service company of Corpus Group owned by Oleg Lobanov, a famous restaurateur. It is the only catering firm, which has developed a special brand for business-centers ("Launchhall").
Market share in 2004: 8% (Share in Moscow market in monetary terms)
Market share in 2005: 9% (Share in Moscow market in monetary terms)
Strategy: focused on business-centers, assuming that their share in the profits from catering will grow every year. The company plans to limit its business development to Moscow and S.-Petersburg.
TACTICS: rather than field catering (which represents a minor percentage in the turnover), the company prefers the services to stationary corporate catering facilities, which provides 41% of the clientele. The company develops free flow, a new service based on self-service catering, organizes associate services - from product vending to sale of periodicals and flower orders.
PROBLEMS: lack of qualified production staff at labor market creates certain difficulties for the company in finding appropriate staff. RESULT
RESULT: the company provides services to about 1,8 million people per year. (The number of clientele is based on the forecasts for 2006 (for both cases the estimates are provided by Amiko Consulting).  In 2006 opened the first self-service catering facility under brand "Launchhall".
NEW GOALS: development and promotion of new catering brands, extending the services in the segment of business-centers through organizing restaurants and cafes at their territory.

Fusion Management
The company was set up in 2005 through merger of international holding Fusion Management Inc. with Brizol, one of the biggest national companies in catering market.
Market share in 2004: 6% (Share in Moscow market in monetary terms)
Market share in 2005: 7%(Share in Moscow market in monetary terms)
Strategy: intends to grow through business diversification, as well as extend the geography of sales.
TACTICS: the group develops several catering directions. In particular, there is a special division providing the services to the major part of clients with average budget  in Moscow and S.-Petersburg (Brizol Advanced), and the companies operating exclusively in business-centers of class ?. It also develops catering (restaurant "Shakespeare") and extends its presence in the Russian regions. Apart from catering, the company is engaged in trust management of hotels and rest houses, apart from real estate sites operator services. With regard to stationary facilities, Fusion Management opens cafeteria and order boards.
PROBLEMS: the company noted unfair competition applying PR-methods, which are doubtful in view of business ethics.
RESULT: every year provides lunches to 1,4 million people at 75 stationary  catering facilities. (The number of clientele is based on the forecasts for 2006 (for both cases the estimates are provided by Amiko Consulting)
NEW GOALS: the company intends to extend its presence in   Moscow region and some other regions.