Operations

Event spending, return to offices gave foodservice providers a boost this year

Aramark, Compass Group and Sodexo all suggested that food costs have improved this year, but labor costs remain more of an unknown.
employees eating at work
Growth in the Business and Industry sector fueled sales for foodservice providers in 2023. | Photo: Shutterstock.

Foodservice providers reported strong sales last year as workers returned to the office and consumers spent money at events. And inflation is improving, too. 

Philadelphia-based Aramark reported a 10.1% increase in organic revenue growth in the U.S. for its foodservice business, for the fiscal year 2023. The company cited improvements in its events business, as people attended concerts and sporting events. People returning to work also boosted its workplace foodservice business. 

Another large foodservice provider, Compass Group, had similar results. The U.K.-based company said its North American organic revenue growth was 17.4%, in its 2023 fiscal year. Like Aramark, it cited improved business from events and from people returning to work. But it also saw sales growth in its education and healthcare businesses. 

Meanwhile, Paris-based Sodexo echoed the sentiment that events and a return to office boosted sales last year. The company reported 13.9% organic sales growth for the fiscal year 2023 in North America. Sales grew in all segments but were boosted by Business and Administration which saw a 23.4% increase in organic growth.

The foodservice providers all saw easing inflation. Aramark noted that trend, particularly in its education and correctional businesses. The company expects inflation to ease over the next couple of years.

Inflation improved in October, John Zillmer, Aramark's CEO, told investors last week. And he said operators have done a good job adjusting to higher costs.

“And I think we're largely through it. And so now, we're really at a place where I think we have kind of a new normalized operating model and a new normalized menu structure, we don't see the need for additional changes there,” said Zillmer, who added that supply chain challenges have also normalized.

“And so, our people are really able to go ahead and structure the programs the way customers want them,” he said.

Compass also saw easing inflation last year, particularly in terms of food prices as labor inflation remains high.

“Last year, we had blended inflation of around 8% or so for the full year. Currently, it’s sitting around 7%. Food is moderating a bit in some different places. Labor is remaining persistently high,” said Palmer Brown, Compass’ CFO, in a call to investors on Nov. 20. “As the year progresses, we could foresee further moderation on the food side certainly in certain pockets. I think the labor is one that’s still a bit more of an unknown.”

Compass said the recent spotlight on weight-loss drugs, such as Ozempic, has not impacted the business but could be a positive trend for the company.

“Look, just on the weight-loss drugs, I think what we’re seeing is ever more interest and excitement around wellness and nutrition. And we think that’s a really important trend for us. We’re probably the biggest employer of nutritionists on the planet as well as the biggest employer of chefs,” said Palmer.

When it comes to recruitment levels, Compass Group saw improvement in 2023, ending the year with over 600,000 employees globally.  

“I think what that tells you is we’ve weathered the sort of post-Covid storm as it were on recruitment levels,” said Dominic Blakemore, Compass Group’s CEO. “We’re also seeing a significant fall in the amount of agency or temporary labor that we had to use as we reopened sites. That means that we’ll start to train people in our core processes and get the benefits of consistency and continuity over time.”