Whither B&I?

Photography by John Lawn

Top executives representing the B&I interests of the “Big 3” management companies discussed the challenges facing that segment at SFM’s national conference. The panel was moderated by Gerald White, president of Gerald White & Co.

Amajor highlight of the SFM national conference was a “State of the Industry” panel featuring three top B&I executives.

On stage: Rick Post, Compass Group's CEO of Contract Foodservices; Ira Cohn, President of Aramark's Business and Industry Group; and Mark Bickford, President of Sodexo's Corporate Service Solutions.

After two years of a grueling recession, all three looked ahead to an economic recovery in 2010. We've distilled some of their key remarks here…

On the new economy

Post: The fact is, we are in a new economy. It's here, it isn't going away, and it has forced many organizations to re-examine the way they need to grow. Some, unfortunately, tried to cut their way to greatness. If you look at the 9.7 percent unemployment rate, that is difficult enough. But what a lot of us felt this summer was the “under-employment” rate — companies giving associates furloughs, free days, flex hours.

Some other challenges…Cutbacks in discretionary spending, with more Americans skipping breakfast or lunch. Reduced client spend: if you are relying on catering revenue, it's a trap. Our competition on the street is also hurting and looking to steal our customers.

“We spend a lot of time talking about a specific generation— Gen Y—but even within that generation there is a great deal of diversity.”

Cohn: It's also important to realize the decline we've faced is an acceleration of what B&I has been going through for years, the decline in 1000-plus employee locations. A recovery will not mean an employment recovery in large corporations — new jobs will be created mostly by small businesses.

The opportunity is to understand how to support our large company clients and make them feel good even under this intense pressure to increase productivity, to make their environments more appealing and comforting to workers who are being asked to do much more with fewer people.

It's also to recognize that clients are going to a more distributed workforce: smaller locations, home offices, unique locations. We need to learn how to service those people and give them access to services that historically were not available in such locations.

Bickford: To Ira and Rick's points, there has been fundamental change and we will all have to do things differently. I would add that instead of a “Build it and they will come” approach, we have to ask, ‘Why don't we have 100 percent participation?’ and look much harder at finding innovative ways to increase participation at our units, to capture a larger share in our existing environments.

On a new generation of customers

Post: When you think about appealing to the millennials you find they are very demanding. Transparency is non-negotiable for them: they want to know what they're eating, what they're tasting, where it came from. They think in groups and are big users of interactive technology. As Mark mentioned, there is always a percentage of customers we do not reach. I think that with this group, reaching out to them via technology and convenience and high speed is a unique opportunity.

Cohn: Millennials as a group collaborate to a much greater extent than previous generations. We have to help companies establish the collaborative work environments millennials like and help clients do the things they need to do to retain them. It may mean environments that are more nurturing because they expect reward and recognition to come more quickly than we are used to.

Bickford: When corporate clients do begin to re-hire, the positions will be filled by Gen Y individuals in many cases. A key issue is to ask if we really understand this group as customers and also as employees. I think it's very important to make sure we have enough representation from this group on our own teams. That is key to better understanding them.

Concerns about health and wellness

Cohn: As we seek to understand our future customers, we all have the luxury of tracking individuals as they progress through their life cycles. It is fundamental to take what we learn and match our initiatives against the realities of what people will buy.

“We are in a new economy. It’s here, it isn’t going away, and it has forced many organizations to reexamine the way they need to grow.”

The big challenge we face with nutrition, obesity, sodium: everyone knows what is right but very few people do what is right. We are always assuming it is not the individual's responsibility, but rather is the organization's responsibility or the government's responsibility.

This creates a complex problem: we have to be very careful about taking what we learn about the consumer's habits and measuring that against, and in some cases marrying it with, what we desire at a societal level.

It is a desired state to have less obesity, to have a smaller carbon footprint. But reaching those goals may conflict directly with what the consumer actually wants or is willing to pay for.

Because we are with people starting with small children in schools, moving with them through higher education, to sporting and entertainment venues and into the workplace, we represent a large proportion of their away from home food spend. We have an obligation to educate and enable people to make the right nutritional decisions in terms of their health.

If we don't, it will be regulated. And if it is regulated, it will be problematic for everyone. Right now we have the opportunity to offer alternatives to legislation through education and our offerings. It is in our best self interest and in the interest of society to do so.

The challenge of diversity

Bickford: I know I speak for all of us when I say that gender and racial diversity has had a profound impact on our hiring practices and menus. It's important not only from a social perspective but also from a business perspective.

We are focusing on who our future employees will be, at what is important to them, and trying to adapt the way we run our organizations and businesses to respect cultural differences.

We spend a lot of time talking about a specific generation — Gen Y — but even within that generation there is a great deal of diversity in terms of expectations.

It is very easy for us sitting here to speak to this conceptually, but where it really makes a difference is to cascade that thinking down through your organization so all your employees, including those on the front lines, understand that.

Post: When you look at trying to create clearer paths from the front lines to the management ranks, it starts with us to set the pace in terms of inclusion. There may seem to be a lot of loyalty in our organizations right now, because people are afraid to jump. But next year, when unemployment levels off — and it will level off — there is going to be a war for talented labor.

If you are not clearing the path for your good people, if you are not reaching down to them and guiding them and treating them right, you are going to lose them.

On cratered catering

Post: There are some signs catering may be coming back, but the lesson is we have to make sure we don't depend on it. You have to look at your accounts meal by meal and customer by customer and drive your business that way.

“The big challenge we face with nutrition, obesity, sodium: everyone knows what is right, but very few people do what is right.”

Bickford: To me the irony is, why did we become so dependent on catering? Its high gross profit was always part of the business model and it just became a staple in the contracts and as an expectation. We now find ourselves in different times and as it was stripped away, it exposed the weakness in the overall model.

Also, to Rick's point earlier, employees are still pooling money for birthday parties, but they are calling pizza trucks and the competition is coming in the front door. They're not coming to us because our model is a corporate catering menu that is pre-defined in price and has little flexibility. So there is an opportunity for us to market very differently.

Cohn: It wasn't just us who over-relied on catering. The contracts we won and negotiated with many clients depended on it as part of efforts to limit subsidies.

As an industry, we as clients and providers became dependent on catering and have a mutual responsibility to deal with the consequences as it has declined. Circumstances sometimes dictate that you rebuild the business model — that is a big part of the flexibility we all have to understand is required in our provider-client relationships.