Sodexo’s shift to focus on foodservice led to a strong performance in the fiscal year 2024

Sodexo, France-based foodservice and facilities management provider, has shifted its focus to foodservice as of late. And it’s paying off. The foodservice provider released its fiscal year 2024 results on Wednesday and the company reported a solid performance. Organic growth for a company as a whole was 7.9% which was driven by the strong performance in foodservice which grew at a rate of 9.3%. Foodservice now accounts for 66% of the company’s total revenue.

“2024 has been a year of structural transformation with two decisive steps to further focus the Group: the spin-off of Pluxee and the unwinding of the cross-shareholding with Bellon SA, returning the proceeds to shareholders,” said Sophie Bellon, Sodexo’s CEO, in a statement. “With our simplified structure, reorganized by geography, as a pure-player in Food and FM services, we are mobilized on enhancing our operational execution to drive profitable and sustainable growth.”

Notably, Bellon put the the rumor that Sodexo is in discussions to acquire Aramark to rest during a conference call with investors on Oct. 23, 2024. She confirmed that they are not in discussion with Aramark.

Earlier this year, the company announced a spin-off of Pluxee, its benefits and rewards services business with the goal of focusing and simplifying the group.

In the U.S. organic growth for the year was 8.7% driven by the continued return to the office and a strong performance in hospitals and with Sodexo Live!

North America did see a bit of a slowdown in Q4, said Sébastien de Tramasure, Sodexo Group chief financial officer, during the call. However, overall, the growth for the company in the U.S was strong in most segments.

Business and administration saw organic growth of 11.8% due to new business, pricing, the continued return to the office and the performance of Entegra, Sodexo’s food group purchasing organization. Sodexo Live! had a particularly strong year with growth of 23.4% thanks to event spending and passenger accounts in airport lounges. New contracts also contributed to the year’s success. The education segment grew 4.2% due to price hikes and increased meal counts, despite some challenges through contract reduction.

And the healthcare and seniors segment grew 5.1% thanks to price increases, strong new contribution and retail growth in hospitals. The challenge for this sector was senior site closure.

In Q4 the company noted easing of food inflation in Europe but a slight increase in the U.S. Labor inflation, however, decreased slightly to about 4.5% globally.

The company has put a lot of focus into its branded offerings this year. For instance, Kitchen Works revenues were up 45% and Modern Recipes’ were up 30%.

These branded offerings are on target to make up about 50% of food revenues next year, said Bellon, in the call to investors.

“We are transforming our offers and ways of working, particularly with our branded offers as well as innovative off-site production facilities and new distribution options to provide more attractive choices for our consumers, flexibility and better consumer engagement for our clients,” she said.

Sodexo is leaning into AI to enhance decision-making, automate workflows and drive smarter data-driven strategies, Bellon said during the call.

The foodservice provider also made progress on its sustainability goals this year. The company’s direct renewable electricity consumption is 73%, which surpassed the goal of 60% for the year, which puts Sodexo on track to reach its goal of 100% by 2025.

When it comes to greenhouse gas emissions, the company has also made progress on reducing its emissions. The year-on-year Scope 1, 2 and 3 reduction in Greenhouse gas emissions was -2.5 for the fiscal year 2024. The absolute reduction compared to 2017 was at -16.4. Sodexo’s sustainability plan follows four different levers: sustainable supply chain, low-carbon meals, responsible use of energy and the fight against food waste.

“I'm proud of this achievement. They reflect our total commitment to creating a safer, more inclusive and sustainable future for our employees, consumers, clients and all our other stakeholders,” said Bellon.

One challenge throughout the year was contract retention, which was at 92%.

“Retention at 92% was disappointing after a strong performance last year at 95.2%. This year, as you know, was impacted by the loss of a global FM contract for 60 basis points. Adjusted for that, retention would have been close to 95,” said Bellon. “I’m not happy with the overall retention in fiscal year '24. We have made several changes in terms of people and processes to rapidly increase retention back up to 95%.”

The team expects to see organic growth between 5.5% and 6.5% for the fiscal year 2025. The company estimates that this growth will be driven by contribution from net new businesses, pricing and positive volume growth fueled by increasing demand for new or upgraded services, as well as higher attendance in corporate services.

“We will drive further efficiencies and support margin improvement by our disciplined commercial approach, investments in data and digital, supply management optimization, deployment of our branded offers, and scaling of new production and distribution models, combined with rigorous cost control and reinforced efficiency of our support services,” the company stated in a press release.