Executive Summary

In 1996, the UK contract catering market was valued at £2.23bn, a slight decrease of 1.3% on the 1995 value of £2.26bn. The decrease in market value in 1996 was primarily caused by a fall of 2.4% in the largest component of contract catering turnover, wage costs. Generally, however, contract catering continues to be one of the most dynamic sectors of the catering market, and its share of the total UK catering market stood at 8.9% in 1996, compared to only 7.4% in 1992.

The contract catering market has undergone rapid change in the last few years. A dramatic growth in the customer base, increased branding, increased concentration in the industry, the removal of subsidies from many staff feeding and institutional catering facilities, and diversification into other contracted services by some contract caterers, have all played their part in transforming the sector.

The strong growth in the industry is reflected in the growth of contract catering outlets and meals served. Between 1992 and 1996, the number of outlets increased by 58.3% and the number of meals served by 38.2%. The traditional market for contract caterers has been business and industry, but this sector's share has fallen from 72.6% in 1992 to 45.4% in 1996. The main growth areas have been state education, healthcare, and public catering.

Public catering sites, particularly in shopping malls and courts, department stores, sports venues, leisure centres, theme parks, and heritage sites, have broadened the contract catering market even further. Branded outlets are now increasing their penetration moving into business and industry, education, and healthcare.

As the industry has grown, concentration has also increased and, in the last few years, the UK-based companies Compass and Gardner Merchant have been transformed into global contract catering operations. The industry is still largely based around small companies, but the larger players are increasing their hold on the market and acquisition activity is likely to remain strong.

With more outsourcing of non-core activities by clients, the development of more branded concepts, and the growth in the public catering sector, the market will continue to expand. Key Note forecasts that the market will increase by 5.2% in 1997 to reach £2.34bn and, by 2001 the market is expected to be worth £3.28bn.

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