Stories of massive growth potential for foodservice in Europe have cut little ice with leading food manufacturers. Restricting themselves to an overly cautious response, the food companies are passing up the opportunities on offer from a $300bn European foodservice market enjoying annual growth of around 2.75%, far outstripping the 0.7% put up by the retail sector.
The consultancy Promar International warns it is a watchful approach that could prove dangerous. Low risk equals low profit (in a sector in which profits are already hard to achieve) and this will spell trouble for overall profitability as foodservice takes a greater share of stomach.
So far, it is clear that the vast majority of food manufacturers have failed to take a full role in foodservice and remain strongly focused upon the otherwise stagnant retail market. Manufacturers complain that foodservice poses too many challenges. Not only is it less organised and more fragmented, but its customers are generally smaller, their requirements more diverse and there are fewer opportunities for branding. But, as the foodservice sector grows and restructures, both commercial and non-commercial operators are crying out for greater commitment from manufacturers. It is a view echoed by players throughout Europe.
“In speaking to foodservice customers across Europe, it is felt that large manufacturers have shown little interest in foodservice. Foodservice operators recognise that logistically it’s a nightmare. But they are confident of the potential that it holds for their suppliers as the sector consolidates and the operators themselves get larger and more professional,” says Elizabeth Cochrane, from Promar International, an international strategic consultancy to the food industry.
Opportunities to enter the sector more profitably are growing. Manufacturers can leverage their power and expertise in consumer understanding to help foodservice customers. Building on their knowledge of the food sector in general, suppliers can anticipate and research customer needs to find out which products will satisfy them best. “Manufacturers who can commit to the foodservice sector with innovative and customised products and an added value service offering will be welcomed by foodservice operators”, Cochrane says. “Without working closely and constructively with the foodservice operators, the problem of profitability is not going to be resolved”.
Promar International is currently undertaking a strategic study on Profitability in Foodservice in Europe, due for completion July 2000. For further details, please contact Sandy Livingstone, Business Development Consultant, Promar International, Tel +44 (0)1635 43363, Fax +44 (0)1635 43945.
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