Arena Savoy Lecture 2016
As the leading foodservice agency we will always be found at the regular Arena events, keeping abreast of the latest news and gossip and networking with friends and colleagues. This Monday was no exception, as we headed to the Savoy to hear from Ken McMeikan, CEO of Brakes. The Arena speakers are of course always very informative, but to hear from the man at the helm of Brakes in the wake of the Sysco acquisition was certainly something of a draw! The evening began with bubbles and a selection of delicious canapés and then it was through to the River Room for the main event.
Ken McMeikan was introduced by Andy Kemp of Bidvest (which must have been a little strange for them both as direct competitors), who outlined his distinguished career which started in the Royal Navy and progressed through senior roles with Tesco, Sainsbury’s, Greggs and then of course onto Brakes where he took up the role of CEO in March 2013. Then it was time for Ken to take to the stage and address the audience. It was a polished and well researched piece, the key take-outs of which are below:
1) Brakes – Their market share is 21% in the UK, 6% in France and 14% in Sweden, serving 200,000 customer sites across Europe. They combined their IT systems and are now completely multi-temp having invested £125m in infrastructure. 2015 was a big year with the purchase of Fresh Direct (the national fresh food wholesaler) and Davigel from Nestle which extended their market share in Spain, Belgium and Luxemburg, and doubled their French market share. Then this year, having been on the brink of floating, they were at the very last minute purchased by US food giant Sysco in a $3.1bn deal which will complete in July and which is likely to signal further growth for Brakes as a pan European player offering further scale and efficiencies to the business.
2) Eating Out – Over the past 30 years the market has seen excellent growth at around a 3.5% compound annual growth rate with continued growth forecast. The growth in eating out is being driven by population growth which is predicted to increase by over 4.5m over the next decade, whilst a record 12.5m women are in work, creating 60% of duel income households with less time to cook. Also the influx of tourism which peaked in January 2016 with a record 2.5m visitors to the UK – over 6% more than in 2015. Indeed in 2015 it was estimated that there are 1million more adults eating out and that more people are eating out more often than ever before, but interestingly spending less as eating out becomes a lower ticket meal occasion, with generation Y key to this growth in eating out. And when eating out, 38% of adults say that food quality is the most important factor when choosing an outlet. Sadly, there is still an incredible failure rate for food businesses as 2014 saw 22,000 new business open but a staggering 20,000 close representing a high churn rate. It is of course still a positive growth, but more is needed to help businesses thrive in this sector as foodservice offers real promise for growth over and above retail.
3) Growth Trends – Well unsurprisingly Ken identified fresh produce as a growth trend (having bought Fresh Direct) which links in with the consumer demand for high quality. Also, fast casual and food on the go, along with locally sourced products and the demand for provenance which they are focusing on via their 25 regional distribution hubs. In Scotland alone they currently buy £75m worth of Scottish sourced products and intend to grow this to £120m by 2020.
4) Closing the Gap – Ken believed that when he started with Brakes that foodservice was 10-15 years behind retail but believes the gap is closing and will continue to lessen as foodservice companies make the most of advances in technology including ecommerce, data analytics around tracking orders and the rise of internet penetration which is forecast to hit 7.6billion in 2020.
5) Three Risks – He also identified three key risks to the industry: cost challenges, skills shortage and obesity. The first is of course top of mind with the National Living Wage taking the over-twenty-fives onto £7.20 per hour with a view to rise to £9 per hour by 2020. It is estimated that this may result in the loss of 60,000 jobs across the hospitality sector. These unintended consequences are something he believes could have been avoided with greater government consultation with businesses and may very well result in hikes in prices. The skills gap has long been talked about and with 51% of catering colleges seeing a downturn in enrolment and 11,000 chefs needed by 2020 (according to the recent People 1st report) and 870,000 staff needed to simply replace those leaving the industry there is likely to be a substantial experience gap on the horizon. It could be that the industries potential growth could be limited by lack of people and relevant skills, therefore we need to attract good people into the industry by making a career in foodservice more enticing, which it should be as few industries offer such an opportunity for creativity and entrepreneurialism. Finally health and nutrition is key both to our nation and our sector with 400,000 deaths in the EU attributed to excess weight. Six out of ten of us are overweight and over 30% of children are overweight or obese. The sugar tax has of course hit the headlines and personal accountability must play some part, but Ken argues the industry must do its part and help to reduce hidden sugar in food much like they have done with salt and trans fats. Companies must take a proactive role and help us overcome the obesity crisis.
6) Meals & More – Ken believes passionately that businesses should help the less fortunate. It is true that ‘hunger is born of poverty and inequality not food scarcity’, as global food production is 1.5 times enough to feed us and globally the statistics on the amount of food wasted is terrifying at around a third. In the UK 1 in 4 children will only have a hot meal in school which highlights the importance of the free school meals programme. However, in school holidays children are going hungry which is one of the reasons Brakes has launched its charity initiative, ‘Meals & More’ offering regional clubs to feed children after school and in the holidays. In September 2014 it had raised £370,000 through 31 suppliers to help feed hungry children who for whatever reason were not getting the right food to help them thrive. If you’re interested in supporting this initiative you can find out more here: www.makelunch.org.uk/blog/meals-more
7) What I love – When it comes to foodservice there’s a lot to love, but Ken picked out these key points: the most amazing people, a heritage of food innovation leading retail, changing consumers experience’ with food from around the world and helping to build the high street brands of tomorrow. All in all a dynamic and exciting industry.
8) Four Predictions – The UK eating out of home market will grow to be more like the US, accounting for over 50% of all food consumed (in 2014 it accounted for 42%). Casual dining will continue to grow and help to make our high streets more attractive. Under 30s / Gen Y will be hugely important to market success and technology will be key to reaching them. Finally, (and perhaps this is a hint at the future of Brakes?) Ken sees more consolidation in the market ahead as bigger players buy up smaller ones to generate growth.
Ken then went on to face some challenging questions from the floor where we saw his personality and quick thinking come to the fore. His opinions? Well on Brexit, unsurprisingly for the CEO of a pan-European company he’d prefer to avoid uncertainty and stay in (as the thought of renegotiating all those trading agreements isn’t an attractive one) – but with no crystal ball it’s too close to call. On leadership, the way ahead is to listen to colleagues and customers and develop a plan for leaders and future leaders around the outputs (as they have). On procurement vs. quality, purchasing well is key as customers want the best price without compromising on service, quality and innovation (easy said!). On the future of foodservice, he sees technology playing a greater role in the kitchen with gains in efficiency from using pre-prepared food and even robots for basic tasks. And finally on the Sysco purchase, he feels Brakes would have suited floating well and have offered an opportunity for investors to buy into a growth sector but the Sysco synergies and cultural match is a good one and he sees a bright future with increased scale and opportunity ahead.
Having digested Ken’s food for thought it was time to enjoy a fabulous meal prepared by the team at the Savoy and finished off with an impressive cheese board from sponsors Futura Foods. Well done to Lorraine and the team at Arena on another outstanding event and to Ken on an informative talk at a very interesting time!