This Key Note Market Report examines the UK contract catering market, which has continued to show healthy growth. In 2001, market value increased by 7.6 percent at current prices to £3.51bn. While market growth in 2001 was slower than the three previous years, the contract catering market still out-performed the total UK catering sector.

Contract caterers have usually depended on the business and industry sector for most of their business. This is still the largest sector, but business and industry sales now account for 47 percent of all sales compared to 60 percent in the mid-1990s. The majority of all meals served in business and industry are supplied by contract caterers. Education is the second-largest sector, with contract caterers increasing their share in all age groups in recent years — pre-school, nursery, primary, secondary, further and higher education. Individual secondary schools can now deal directly with caterers. Government initiatives directed at the NHS have led to improved menus and service for patients, with contract caterers taking an active role in many of these changes. Healthcare still offers considerable potential for growth, although the demands for catering 365 days a year and often 24 hours a day require specific expertise and resources.

The leading contract caterers have moved increasingly towards catering for the public in shopping malls and centres, on the railways, airlines, transport terminals, at the roadside, and at various leisure and cultural venues. Travel catering is the largest area of this public catering market but suffered in 2001 from a reduction in the number of travellers. The smallest market sector `other contract catering', which includes catering for central government and local government departments and services, prisons, remote sites, construction sites, and the Ministry of Defence (MoD).

As well as diversification into catering for the public, the other major initiative amongst the leading players has been the spread of facilities management services. The introduction of integrated contracts for major clients bring together various support services (catering and non-catering) in one package. The leading players, led by Compass Group PLC, Sodexho Ltd, Aramark Ltd, Initial Catering Services Ltd, and Avenance Catering Group Ltd, continue to re-enforce their positions through acquisitions of smaller, independent competitors, but many smaller, companies still operate in the market, often offering niche or premium services to specific client groups.

The prevailing economic conditions at the beginning of 2002 showed some signs of a slowdown, but forecasts for the future suggest stable economic conditions in the medium term over 5 years, which points to steady growth for the contract catering market over the same period. The contract catering market is likely to outperform catering as a whole, as organisations continue to find the attraction of outsourcing non-core functions such as catering a bonus to share prices and management time. The overall market will also grow as premium and customised catering services develop.