Northern Foods’ move into in-flight catering in collaboration with DHL represents a significant diversification for the company and a new supply model for the airline sector which may interest other food companies. Ben Cooper reports.
When Northern Foods CEO Stefan Barden said last month that the company had invested some GBP500,000 in developing new business areas, it was clear that diversification was the order of the day. But not everyone would have predicted a move into the highly specialised area of in-flight catering.
However, once announced last week, Northern Foods’ partnership with DHL in providing in-flight catering for British Airways’ (BA) short-haul flights out of London Heathrow would seem to make perfect sense.
With its experience in providing quality prepared food at a price for UK supermarket own-label ranges, Northern Foods had the right credentials for BA, while DHL has the logistics experience and technologies to create the necessary efficiencies BA was looking for.
“We supply ready meals, sandwiches and salads for the major retailers which is really what the offering is for British Airways passengers so it’s very much a case of utilising our existing business,” says Andrew Hanson, head of communications at Northern Foods. “We have very specific skills in one area; we can use our existing sites to produce the product and DHL will manage everything in terms of the supply chain. We’re very much sticking to core skills.”
The DHL/Northern Foods partnership has been awarded one of three in-flight contracts announced by BA last week following a tender process. The companies will jointly provide catering services for short-haul flights from Heathrow for a ten-year period from 1 April 2010. BA did point out, however, that the actual contract was with DHL, but stressed that Northern Foods’ involvement was an integral part of the deal.
Like Northern Foods, DHL can also hold up the work it does with UK supermarket chains as underlining its credentials in providing efficient logistics, as Chris Jackson, global vice president Airline Logistics at DHL Exel Supply Chain, explains: “We work in supply chains that are incredibly efficient,” he tells just-food. “If you work for the likes of Tesco and Sainsbury’s in food distribution it has to be incredibly efficient, and we’ve applied that to [the] BA [contract].”
The traditional model for in-flight catering is effectively a ‘one-stop shop’, with companies such as Gate Gourmet providing a complete service of food preparation and delivery. While this is not the first move by a logistics company into the in-flight catering sector, the involvement of a food specialist so closely in the contract marks a break with the past.
BA’s general manager of catering operations, Simon Soni, told just-food that it certainly represented a departure for BA. “It’s a new departure for us; it’s not entirely new in the industry. There are other companies that do a logistics-style model.”
However, what marks out the DHL/Northern Foods link-up, Soni stresses, is the closeness of the collaboration between the food and the logistics providers. “The relationship between DHL and Northern Foods is not a pure subcontracting relationship,” Soni says. “It’s not just that DHL have gone off to buy a commodity from Northern Foods. They’ve formed a partnership themselves to bring this new idea to market. And so Northern Foods are an integral part of that process. Our contract is with DHL but the reason we’ve signed up with DHL is because it’s DHL and Northern Foods as a package.”
Soni also believes that Northern Foods’ market knowledge will prove extremely valuable. “One of the big benefits for us in being linked with a company like Northern Foods is they can bring us a lot of understanding in terms of what consumers are buying,” Soni says. “One thing we don’t have as an airline is detailed point-of-sale information as to what it is that our customers are choosing to eat”.
That said, BA has retained Gate Gourmet and another specialist, Alpha Flight, for its Heathrow long-haul and Gatwick and other airports in-flight contracts respectively. The three BA contracts combined are reportedly worth in the region of GBP1.8bn, though BA would not confirm that figure.
Jackson says DHL would be keen to work with Northern Foods on other supply contracts in the UK or even in other parts of Europe. Hanson also confirmed that Northern Foods was open to the idea of taking the collaboration with DHL further. “This is something that both companies have to prove can work but we believe it has good potential for the future and DHL shares that vision as well,” Hanson told just-food. However, he would not comment specifically on speculation that Northern Foods was looking at a similar move into railway catering.
Meanwhile, DHL says it may look to partner with food companies in other countries in similar collaborations. “We’re certainly looking for the right partner for the right opportunity,” Jackson says. “Northern Foods were brilliant for BA. It would be great if we could expand their range to cover a greater area because they’ve done a brilliant job getting us where we are. It might be on a global basis we look for another partner in another location.”
For both logistics specialists and food companies, the in-flight catering market, estimated at around EUR12bn globally, would appear to represent a significant business opportunity. And if the DHL/Northern Foods partnership does prove to be a sucessful new model for servicing this sector, other food companies may well look for a slice of the action.