Catering for Change

14 April 2008

With the global launch of a new logo and name, Sodexo confirms its focus is on food and facilities management. Jane Fenwick talks to Phil Hooper about the company’s plans in the corporate and public sectors

IN POLITE CIRCLES DROPPING AN ‘H’ is not seen as something to advertise. But in the case of Sodexo, dropping its ‘h’ is a deliberate step forward in the moderisation of its image and its positioning as a food and facilities management company. The ‘h’ is being dropped around the world to ease the spelling and interpretation its name - the ‘...ho’ in ‘Sodexho’ was too often associated with ‘hotel’ services.

As Phil Hooper, Director Corporate Affairs at Sodexo explained, “We now position ourselves as a food and facilities management company. That’s a big leap from the ‘catering organization’ formed from Gardner Merchant which changed its name to Sodexho. We took the decision to move towards facilities management in 2000, and adopted the tag line ‘catering and support services’. This signaled to the market and employees that we wanted to do more than just catering.”

In the UK alone, Sodexo is a £1bn organization with some 35 per cent of its turnover not related to food services at all. Five years ago this proportion was just 10 per cent and cleaning and housekeeping were ‘bolted on’ to the core food service. This year, Hooper predicts that 40 per cent of Sodexo’s turnover in the UK will be from non-food services. Globally the Group aims to deliver 40 per cent of turnover from non food services by 2015 as part of a 10 year strategy, and demonstrating how far the UK operation is ahead of the rest.

As Hooper explained much of this transformation was in response to client demand, but Sodexho has been converting clients to more services, mostly soft services including catering, cleaning, reception, post, reprographics, grounds maintenance and security, with just one third being ‘hard’ FM services. Very few Sodexho contracts are now for food service only, Hooper commented. “A milestone for Sodexo was winning the Glaxosmithkline contract for non-food services which was part of a package with the food services. This broke the mould and we have grown the partnership over time. It was also beneficial in opening up the pharmaceutical market to Sodexo with contracts coming from Pfizer and other companies in the sector.”

The larger and more complex the outsourcing challenge the more it appeals to Sodexo. “This does not mean that we are never going to supply support services to smaller organisations,” qualified Hooper, “but we play to our strengths in both the private and public sector. There is a trend among large organisations that come to market for the UK, pan-European or international outsourcing to provide more services. Currently, we are predominantly in soft services but we want to provide more hard services in the future. We have developed partnerships with hard services providers for one-off and groups on contract, and we are looking to acquire in the FM sector M&E services for national and international contracts.”

He continued, “It is a constant challenge for us. Our heritage is in catering and 65 per cent of our business is still in that area. There is no doubt that FM will continue to grow. There is a lot more to be outsourced in FM than in food service activities which are about 90 per cent outsourced in the corporate sector. We have been careful not to just do ‘everything’. We stick to the things we are good at or partner with others.”

Currently in the UK, Sodexo’s traditional business in the corporate services sector accounts for just half of its activity. It has a growing public sector client base in PFI particularly in the defence and healthcare sectors. It is here that Sodexo has seen its business develop both in scale and scope. As Hooper explains, “We gained our expertise in the healthcare sector first with contracts for large hospitals and consolidation of smaller facilities. The defence sector followed. The trend for large complex contracts in this sector played to the strengths of the company. In the Colchester Garrison PFI we are responsible for estates management, catering, mess management, accommodation, cleaning, garrison amenities such as sports facilities – in effect the life support system of a soldier in the garrison. It took a long time to bid and win, but the turnover is £18m per annum for 30 years. Part of the consortium at Colchester, Sodexho has gained an expertise and understanding of the market, which led to its being selected as a subcontractor for the Allenby Connaught PFI”

The Allenby Connaught PFI won by Aspire Defence Ltd in 2006, will provide modern living and working accommodation for some 18,000 military and civilian personnel in the Salisbury Plain and Aldershot Garrisons. More recently, Sodexo has been selected as a sub contractor for the Defence Training Review in Wales, another large and complex military contract.

Education could be another sector ripe for Sodexo’s skills. It already has a large presence in schools catering but it is still deciding on how it can operate within the Building Schools for the Future (BSF) market. Hooper says, “Our dilemma is that we can operate the Gloucester school meals contract to 250 establishment in the county, but scaling down to one project for BSF requires further thought to meet our business model in terms of profitability.”

The prison sector has proved successful for the company through its Kalyx custodial services arm that runs prisons built under PFI. Sodexo currently operates Forest Bank in Manchester, Bronsfield in Feltham, the first women’s prison to be constructed in 100 years, Peterborough prison which opened two years ago and Addiwell, a prison under construction in Scotland. According to Hooper, “It is a market we are keen to develop. We see ourselves as a service provider with a social conscience and we’re keen to demonstrate our ethos. We currently have a small number of sites but each is a large and complex business.”

Currently chairman of the Business Services Association (BSA) as well as chairman of the Food and Service Management Forum of the British Hospitality Association, Hooper is keen to ensure that the Government realizes the value that outsourced service providers bring to the delivery of public services, and to counter negative headlines. Although the argument for outsourcing has largely been won in the private sector, he feels it is still necessary to convince the present and future Governments to continue to outsource services. “One of the reasons we are in the BSA is that we want a strong association to say to this Government,” argues Hooper, “We have to keep demonstrating the value innovation we bring to the market to grow this sector.”

Chairman at a time of change at the BSA, Hooper explained that the appointment of Mark Fox as its new chief executive is part of a strategy to raise the organisation’s profile, have a voice in Government, make it aware that its members employ 650,000 in the FM sector in the UK, and to influence legislation earlier. “Our worst criticism would be that ‘ we didn’t know about you! We want to help Government deliver its objectives and progress key issues such as health, well being, skills development are among the things the Government is interested in.”

Hooper continued: “We are feeding over one million people a day. Influencing people’s diet and eating habits is important to us. We encourage people into healthy eating by offering choice and advice through our Healthwise programme. However, localization of sourcing is a challenge to companies like Sodexho. We provide scale and economies of scale but to some clients we have to demonstrate the capability of using local services and local produce. We can do this but it comes at a price and sometimes this is not understood by the customers. We have been asked to provide organic food for certain contracts and we are happy to do this but there is a significant premium to this over non-organic foods, although this may change over time.”

If proof be needed that Sodexo is thinking outside its historic food service comfort zone, then its recent association with the Rubgy World Cup in France last year is an example. Responsible for the ticketing, hospitality and travel packages for corporate clients attending the event from anywhere in the world, Sodexo pioneered a ‘groundbreaking package’ that was such as success that the International Rugby Board has re-awarded them the contract for 2011 in New Zealand. Sodexo has a long history of involvement in international sporting events including the Commonwealth Games in Edinburgh and Manchester, The World Student Games in Sheffield and the Sydney Olympic Games. London 2012 is within its sights, a project whose scale and complexity would play to Sodexho's strengths.