Foodservice providers' sales increase as students return to campus

Sales at major foodservice providers increased at the end of 2022 as students returned to campuses across the country, people visited relatives in hospitals and fans spent more on food while attending a sporting event or live concert.

Philadelphia-based Aramark said its organic revenue increased 18% in the company’s fiscal first quarter compared with the same period a year ago. Sodexo, meanwhile, said its North American sales rose 15.7% in its most recent quarter. At Compass Group, North American sales rose 23%.

Each of the companies cited improved traffic from foodservice sites as driving its sales last year.

John Zillmer, Aramark’s CEO, told investors in February that increased student enrollment, better staff presence and more events on campuses drove sales in the company’s education sector, which offset declines from last summer’s end of government-sponsored school meal programs.

He also said that its sports and leisure business was helped by higher prices and more per-capita spending, as well as “a more robust event calendar.” Sales at Aramark’s workplace business rose 40% as more people returned to workplaces and bought more on-site meals. Prices also increased and the company generated new business last year.

Aramark’s healthcare business, meanwhile, generated stronger sales in part from more frequent visitors to hospitals.

Both Sodexo and Compass in their earnings reports suggested similar benefits in the U.S. Sodexo said its sales gained from a higher level of attendance in the workplace, in stadiums, in convention centers and in universities.

Compass Group saw strong performance in the business and industry sector as employees continued to return to the office, and in the sports and leisure segment, where participation rates were high.

Inflation, however, also created challenges. Zillmer said Aramark is working to improve efficiency and increase prices to “counter persistent inflation."

“We continue to work closely with clients to tailor solutions that meet their needs, leveraging our extensive supply chain network and are constantly monitoring evolving market conditions for opportunities to benefit from improving pricing and product availability trends,” he said.

To support growth, Aramark has turned to agency labor, especially in the higher education sector.

Aramark is hopeful for continued global supply chain stabilization, which has allowed the foodservice provider to incrementally transition to preferred sourcing. So far, this stabilization has helped mitigate rising food costs, which was a persistent challenge throughout the quarter, according to Thomas Ondrof, Aramark’s CFO.

Ondrof noted that, on balance, he doesn’t see inflation easing dramatically throughout the year and said clients may have misconceptions on the current state of food costs.

“So, if you look under some of the headlines that you're seeing recently where inflation is slowing, it's certainly not reducing, but its rate of increase is slowing. Underneath that headline, food is persistently high,” he said. “So, we're experiencing that, and our units are hanging on to that. We're having to communicate that back to our clients because sometimes the headlines do change opinions without looking underneath it.”

Zillmer said that despite some timing issues, the company has been successful in getting the price increases that are needed, increases that he believes have not had much of an impact on the consumer.

“I would say that consumer behavior continues to remain very consistent,” he said. “Our participation rates are rising, which would indicate that customers are satisfied in our understanding of the pricing needs, if you will.”