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Cost Foodservice in
China
Industry Profile
Reference Code: 0099-2337
Publication date: August 2009
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EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
Market Value
The Chinese cost foodservice sector grew by 11.9% in 2008 to reach a value of $41.7 billion.
Market Value Forecast
In 2013, the Chinese cost foodservice sector is forecast to have a value of $70.9 billion, an increase of 70.2% since 2008.
Market Volume
The Chinese cost foodservice sector grew by 1.1% in 2008 to reach a volume of 20.7 billion transactions.
Market Volume Forecast
In 2013, the Chinese cost foodservice sector is forecast to have a volume of 21.8 billion transactions, an increase of 5.3% since 2008.
Market Segmentation I
Sales made in educational locations proved the most lucrative for the Chinese cost foodservice sector in 2008, generating 72.7% of the sector's overall revenues.
Market Segmentation II
China accounts for 33.7% of the Asia-Pacific cost foodservice sector's value.
TABLE OF CONTENTS
EXECUTIVE SUMMARY 3 CHAPTER 1Market Overview 7 1.1Market Definition 7 1.2Research Highlights 8 1.3Market Analysis 9 CHAPTER 2Market Value 10 CHAPTER 3Market Volume 11 CHAPTER 4Market Segmentation I 12 CHAPTER 5Market Segmentation II 13 CHAPTER 6Five Forces Analysis 14 6.1Summary 14 6.2Buyer Power 15 6.3Supplier Power 16 6.4New Entrants 17 6.5Substitutes 18 6.6Rivalry 19 CHAPTER 7Leading Companies 20 7.1Compass Group PLC 20 7.2ARAMARK Corporation 23
7.3Sodexho 28 7.4Xi'An Catering Co., Ltd. 30 CHAPTER 8Market Forecasts 32 8.1Market Value Forecast 32 8.2Market Volume Forecast 33 CHAPTER 9Macroeconomic Indicators 34 CHAPTER 10Appendix 36 10.1Methodology 36 10.2Industry Associations 37 10.3Related Datamonitor Research 37
LIST OF TABLES
Table 1:China Cost Foodservice Sector Value: $ billion, 2004-2008 (10)
Table 2:China Cost Foodservice Sector Volume: Transactions billion, 2004-2008 (11)
Table 3:China Cost Foodservice Sector Segmentation I: % Share, by Value, 2008 (12)
Table 4:China Cost Foodservice Sector Segmentation II: % Share, by Value, 2008 (13)
Table 5:Key Facts: Compass Group PLC (20)
Table 6:Key Financials: Compass Group PLC (22)
Table 7:Key Facts: ARAMARK Corporation (23)
Table 8:Key Financials: ARAMARK Corporation (26)
Table 9:Key Facts: Sodexho (28)
Table 10:Key Financials: Sodexho (29)
Table 11:Key Facts: Xi'An Catering Co., Ltd (30)
Table 12:Key Financials: Xi'An Catering Co., Ltd (31)
Table 13:China Cost Foodservice Sector Value Forecast: $ billion, 2008-2013 (32)
Table 14:China Cost Foodservice Sector Volume Forecast: Transactions billion, 2008-2013 (33)
Table 15:China Size of Population (million) , 2004-2008 (34)
Table 16:China GDP (Constant 2000 Prices, $ billion), 2004-2008 (34)
Table 17:China Inflation, 2004-2008 (34)
Table 18:China Exchange Rate, 2004-2008 (35)
CHAPTER 1 MARKET OVERVIEW
1.1 Market Definition
Foodservice is defined as the sale of food and drinks for immediate consumption either on the premises from which they were bought, or in designated eating areas shared with other foodservice operators, or in the case of takeaways transactions, freshly prepared food for immediate consumption.
Datamonitor's definition excludes sales through vending machines and is restricted to sales in specific foodservice channels (please see channel definitions below).
Various channels have been grouped together in what is called the ""Cost sector"" - this sector is characterised by the fact that a subsidy is paid (either directly or indirectly) to one of the actors involved in the transaction, or where the final consumer pays for the food at its actual cost (as opposed to a price that adds some margin to its basic cost).
The cost sector includes the following channels - workplace locations, education locations, hospitals and welfare & services locations.
All sector values are given in Operator Buying Prices, that is the amount spent by foodservice operators on the food and drink that they serve and not the amount the consumers spend on food and drinks (Operator Selling Prices - OSPs) in these channels.
The difference is the mark up the foodservice operator adds in order to cover their other costs and generate a profit. This therefore values the sector in terms of the amount of money for which food and drinks manufacturers are competing.
Sector volumes are classed as the total number of visits by individuals to foodservice locations that involve the consumption of either food, or drink, or both. As such, if several people visit one location at once and there is only one bill (e.g. a group dining in a restaurant), the number of transactions is counted as being one for each person in the group.
Multiple purchases made during the same visit (e.g. a person buys several drinks bought over a period of time in a bar) are counted as one transaction. The purchase of drink with food in the same location in the same visit is also considered as one transaction, not two.
The sector is broken down in to four segments: Workplace; Education; Hospitals; and Welfare & Services.
For the purpose of this report Asia-Pacific is deemed to comprise of Australia, China, Japan, India, Singapore, South Korea and Taiwan.
1.2 Research Highlights
The Chinese costs foodservice sector generated total revenues of $41.7 billion in 2008, representing a compound annual growth rate (CAGR) of 14.8% for the period spanning 2004-2008.
Sales made in educational locations proved the most lucrative for the Chinese costs foodservice sector in 2008, generating total revenues of $30.3 billion, equivalent to
72.7% of the sector's overall value.
The performance of the sector is forecast to decelerate, with an anticipated CAGR of
11.2% for the five-year period 2008-2013, which is expected to drive the sector to a
value of $70.9 billion by the end of 2013.
1.3 Market Analysis
The Chinese cost foodservice sector has displayed high yet decreasing growth rates during 2004-2008. The sector’s growth rates are expected to fluctuate in the years up to 2013.
The Chinese costs foodservice sector generated total revenues of $41.7 billion in 2008, representing a compound annual growth rate (CAGR) of 14.8% for the period spanning 2004-2008. In comparison, the Indian and South Korean sectors grew with CAGRs of 4.8% and 2.8%, respectively, over the same period, to reach respective values of $4.2 billion and $2.3 billion in 2008.
The volumes in terms of total numbers of visits to foodservice locations increased with a CAGR of 1.1% between 2004-2008, to reach a total of 20.7 billion transactions in 2008. The sector's consumption volume is expected to rise to 21.8 billion transactions by the end of 2013, representing a CAGR of 1% for the 2008-2013 period.
Sales made in educational locations proved the most lucrative for the Chinese cost foodservice sector in 2008, generating total revenues of $30.3 billion, equivalent to
72.7% of the sector's overall value. In comparison, sales of foodservices made in
welfare & services locations generated revenues of $4 billion in 2008, equating to
9.7% of the sector's aggregate revenues.
The performance of the sector is forecast to decelerate, with an anticipated CAGR of
11.2% for the five-year period 2008-2013, which is expected to drive the sector to a
value of $70.9 billion by the end of 2013. Comparatively, the Indian and South Korean sectors will grow with CAGRs of 3.6% and 2.1%, respectively, over the same period, to reach respective values of $5.1 billion and $2.5 billion in 2013.
CHAPTER 2 MARKET VALUE
The Chinese cost foodservice sector grew by 11.9% in 2008 to reach a value of $41.7 billion.
The compound annual growth rate of the sector in the period 2004-2008 was 14.8%. Table 1: China Cost Foodservice Sector Value: $ billion, 2004-2008
Year $ billion RMB yuan
billion % Growth 2004 24.0167.2 2005 28.2196.5 17.50%2006 32.9229.0 16.50%2007 37.2259.3 13.30%2008 41.7290.2 11.90% CAGR, 2004-2008: 14.8%
Source: Datamonitor D A T A M O N I T O R
CHAPTER 3 MARKET VOLUME
The Chinese cost foodservice sector grew by 1.1% in 2008 to reach a volume of 20.7 billion transactions.
The compound annual growth rate of the sector volume in the period 2004-2008 was
1.1%.
Table 2: China Cost Foodservice Sector Volume: Transactions billion,
2004-2008
Year Transactions
billion %
Growth
2004 19.8
2005 20.0 1.10% 2006 20.3 1.10% 2007 20.5 1.10% 2008 20.7 1.10% CAGR, 2004-2008: 1.1%
Source: Datamonitor D A T A M O N I T O R
CHAPTER 4 MARKET SEGMENTATION I
Sales made in educational locations proved the most lucrative for the Chinese cost foodservice sector in 2008, generating 72.7% of the sector's overall revenues. Sales of foodservices made in welfare and services locations generated 9.7% of the sector's aggregate revenues. Table 3:
China Cost Foodservice Sector Segmentation I: % Share, by Value, 2008
Category % Share
Education 72.70%Welfare & Services 9.70%Hospitals 9.50%Workplaces 8.10%
Total 100.0%
Source: Datamonitor D A T A M O N I T O R
CHAPTER 5 MARKET SEGMENTATION II
China accounts for 33.7% of the Asia-Pacific cost foodservice sector's value.
In comparison, Japan accounts for 57.4% of the sector's value.
Table 4: China Cost Foodservice Sector Segmentation II: % Share, by
Value, 2008
Share
Geography % Japan 57.40%
China 33.70%
Rest of Asia-Pacific 3.60%
India 3.40%
South Korea 1.80%
Total 100.0%
Source: Datamonitor
D A T A M O N I T O R
CHAPTER 6 FIVE FORCES ANALYSIS
The cost foodservice sector will be analyzed taking companies offering contract catering and related services as players. The key buyers will be taken as organizations outsourcing their foodservice functions, and food wholesalers and distributors as the key suppliers.
6.1 Summary
In this sector, there are a moderate number of medium and large buyers, which
strengthens buyer power. The cost foodservice sector is generally a low-margin, labor
intensive business. The barriers to entry are moderate: they include development of
supply chains, and compliance with regulations such as food hygiene.
The main substitute is for customers to handle their own foodservice function in-
house. The degree of rivalry within the sector is strong as customers can switch from
one player to another with relatively low switching costs and players themselves can
quite easily increase capacity.
Power
6.2 Buyer
In this sector, market players include multinationals such as Compass Group and
Sodexo, as well as many smaller companies. Buyers will include corporate, healthcare, education, and other organizations; many of these are medium-sized or
larger, enhancing their buyer power. Players in this sector can differentiate themselves not only in areas such as food quality, but also by offering additional
services. For example, Sodexo offers laundry, housekeeping, and similar services to
many of its customers.
Forward integration of foodservice players into any of their clients' diverse operations
is generally unlikely, which strengthens buyer power. Switching costs are moderate,
but often include the difficulty of terminating a contract prematurely. For example, the
contract for a one-off booking may specify that clients must pay some or the entire
fee if they cancel after a certain date; and it is common for foodservice outsourcing
contracts to be fixed-term, with terms of a several years. For some customer groups,
such as businesses or universities, cost foodservice is not central to their activities,
while others, such as hospitals and residential care facilities, would find it difficult to
function without some kind of institutional catering since many of their own clients are
incapacitated - although this service can be provided in-house, and often is. Overall,
buyer power is assessed as moderate.
Power
6.3 Supplier
The foodservice supply sector in China is fragmented, with many small independents distributing products to foodservice players. Foodservice companies are generally low-margin businesses, and need to source good quality food at low prices.
Risks associated with supply chain disruption, or the inability of a competing supplier to offer food of appropriate quality, increase switching costs. Overall, supplier power is assessed as moderate.
Entrants
6.4 New
The Chinese sector has shown dynamic revenue growth in recent years, which makes it very inviting for new entrants. It has been open to foreign players for several
years, indicating lighter government regulation. Foodservice players can enter China with low capital outlay - as they will typically operate from their customers' premises,
the main expenditure is on catering equipment and similar items.
On the other hand, foodservice is a low-margin business, and new entrants may face
larger, established incumbents, either third-party or in-house, that already benefit from scale economies such as purchasing power. A significant problem for new entrants to this sector is establishing a reliable supply chain. The cold chain, for example, is often poor outside the major cities. Overall, the likelihood of new entrants
in the sector is assessed as strong.
6.5 Substitutes
Substitutes for outsourced cost foodservice vary from client to client. Business customers may simply choose not to provide any onsite catering, with their employees free to use home-made food or profit foodservice outlets instead.
Here, the price of the substitute (effectively zero) and switching costs are highly favorable to customers. Many institutional customers are obliged to provide food for
their own clients, but may opt to use in-house catering rather than outsourcing to
third-party cost foodservice operations.
Overall, less than half of the global contract foodservice spend is outsourced. The
costs and benefits are more finely balanced in these cases. Overall, the threat of
substitutes is assessed as moderate.
6.6 Rivalry
The Chinese cost foodservice sector is quite fragmented, with many small players, although some larger companies, including Sodexo and Xi'an are also present.
For a typical company, foodservice is central to its operations, and it is easy to increase capacity by taking on more staff, without the need for extensive training.
Strong sector performance over the past five years weakens rivalry, as players need not strive so intensely to maintain their own share. Overall, the degree of rivalry is moderate.
CHAPTER 7 LEADING COMPANIES
7.1 Compass Group PLC
Table 5: Key Facts: Compass Group PLC
Address: Compass Group PLC, Compass House, Guildford Street,
Chertsey, Surrey, KT16 9BQ, GBR
Telephone: 44 1932 573 000
Fax: 44 1932 569 956
Website: https://www.doczj.com/doc/06117631.html,
Financial Year-End: September
Ticker: CPG
Stock Exchange: London Stock Exchange
Source: Company Website D A T A M O N I T O R
Compass is a food catering and hospitality company. The group provides foodservice for customers at offices, schools, universities, schools, healthcare institutions, offshore and remote sites. The group has operations in 55 countries worldwide spanning North America, Continental Europe and Asia Pacific.
The group operates its business in six market sectors namely: business and industry;
healthcare and seniors; education; sports and leisure; fine dining; defense, offshore and remote sites. The revenues generated in these six market sectors are divided among two business divisions: contracts and vending.
The group's Eurest, Bon Appetit and Restaurant Associates subsidiaries operate in the business and industry market sector. Eurest provides food service to customers at their workplace including cleaning, grounds maintenance, reception, security, switchboard, customer helpdesk, mailroom services, retail units and partnership purchasing. Eurest's clients comprise local, national, and international organizations as well as state and regional governments.
Morrison, Crothall and Medirest are the group's subsidiaries in the healthcare market sector. They provide food, nutrition and dining services to the healthcare and senior citizens' food markets across the world. Medirest provides its services in Continental Europe, UK and rest of the world (excluding North America). Crothall works alongside with Morrison in North America.
The group's subsidiaries, Scolarest and Chartwells are international companies in the education market sector. They meet the food and nutritional needs of students, from preschool infants, through primary and secondary school to higher education.