Inside Track by Peter Martin
Big food retailing always has the capacity to inspire admiration and just a little fear in the restaurant and foodservice business. Sometimes it can spring a surprise too. Foodservice operators appreciate that supermarkets potentially pose the greatest competitive threat in the out-of-home food market. The best players also understand the opportunities that might come from working with the big multiples – either through getting their own branded products onto supermarket shelves, whether it's Starbucks coffee or Nando’s sauces, or by operating branded café and restaurant concessions within retail sites. The areas where foodservice and retail come together promise to be some of the most fertile for capturing more consumer spend. For example, among the foodservice fraternity, M&S Simply Food is consistency held up as a concept to watch and learn from. Its ability to provide quality take-away and cook-at-home solutions puts it up there in the Pret a Manger league. Not surprising then that Compass, the world’s biggest caterer, which operates the brand as part of a franchise deal with Marks & Spencer, is investing so heavily to put Simply Food stores onto railway stations and motorways across the UK. So it’s a bit of a surprise for those on this side of the food business that Philip Green, the retail entrepreneur bidding to buy Marks & Spencer, has been so dismissive of Simply Food, suggesting he might even want to scrap it. Retail analysts have also raised questions. Mark Dorgan, of PA Consulting, is quoted in The Grocer magazine as saying that: "Gone are the days when consumers aspired to afford the superior quality of M&S food." Perhaps they don’t travel by train enough and witness the queues every night at the stores at Victoria or Waterloo stations. The Waterloo Simply Food is said to take the equivalent of £10m a year in sales. There’s not a restaurant operator in the land that wouldn’t die for that level of turnover from that size of site. Perhaps retailers are harder to please? Mark Dorgan further casts doubts by saying: "Consumers now buy an eclectic range of products in every category, at various prices, to meet different needs for quality and price at different times." But surely Simply Food isn’t about the weekly shop? It’s about what restaurant, coffee shop and sandwich bar operators know all about. It’s about the "occasion" – buying for a specific need, whether a sandwich on the way to work, or a ready-meal on the way home. Perhaps Simply Food should be run by a foodservice player? If Philip Green did decide to sell, Compass might be among those interested? The other event this year to startle the foodservice business has been the sale of another, though more quirky, example of the retail-meets-foodservice crossover, Fresh & Wild. The organic supermarket chain, with six stores in London and one in Bristol, has been bought by Whole Foods Market, a US health food group quoted on the Nasdaq exchange. What’s astonishing is the price: a cool £21m. Last year, Fresh & Wild had sales of £17.6m, and like-for-like growth of plus 10%. Market insiders suggest that Wagamama, the trendy noodle bar chain currently deciding whether to float or sell, will reach a high price when it changes hands later this year, but even it won’t attract those sort of multiples. Perhaps restaurateurs really are in the wrong business? Whole Foods Market, which has sales of $3.1bn in its 146 stores in the United States and Canada, believes the UK and Europe is ready for a specialist healthy food retail offering. UK retail analysts are sceptical, pointing again to the big supermarkets existing commitment to organic foods. Time will tell, but with that level of investment, it will be hard to ignore. And the moral for foodservice operators? The food retail sector is always worth watching closely for trends, opportunities and a very different perspective on selling food.