A Big League Player in a Very Competitive Business

Mike Buzalka

Sports concessions and catering can be glamorous. How many foodservice providers get to work Yankee Stadium, after all?

But underlying the glamour, there are harsh fiscal-and operational realities. Concessionaires serving the sports and entertainment market must find ways to grow without necessarily depending on simply adding new accounts on a regular basis. Meanwhile, same-site sales are hugely impacted by customer counts that in turn are influenced by factors totally out of the concessionaire's control: the home team's on-field success, the popularity of the individual event, the attraction of the venue itself, even the weather.

Spartanburg, SC-based Centerplate is one of the major catering and concessions services providers to this segment, and it has sought to meet such challenges in a number of ways. Strategically, it has diversified its operations across different kinds of facilities. It has also added new non-food-related services like venue management, merchandise sales and facility design, and it continues to leverage new technologies that can speed service, cut costs and add value to its offerings. On the culinary front, Centerplate has developed a chef culture that has produced distinctive, upscale menus and dining environments at its sites; these in turn enhance and emphasize each client's brand.

"I think this is a great business to be in," says President/CEO Janet Steinmayer, "and I think its a great time to be in the business because interest in the kinds of things we are doing with food and merchandise is really intense right now."

She sees the company becoming more a part of the business of clients rather than merely an adjunct service provider.

"A lot more of what we do now is about entertainment," Steinmayer explains, "so we have an opportunity to help clients build and enhance their brands in what has become a very competitive sports and entertainment market. We are approaching our business as a boutique customer service, and we're dedicated to making the experience at each particular venue very much about that venue, that team or that client."

Centerplate's clients currently include six major league baseball parks, 10 NFL stadiums, three (soon to be four) NBA and NHL arenas, and over a hundred minor league ballparks, spring training sites, college sports venues, civic arenas, convention centers, music amphitheaters and racetracks.

In over 35 years in business (see sidebar on p. 28), the company has evolved along with the sports concession sector that remains its core business and still accounts for almost two-thirds of its net sales. When it was founded back in the early 1970s, the concessions business was a rudimentary enterprise focused on beer, soda, hot dogs, game programs and the "peanuts and Cracker Jacks" of "Take Me Out to the Ballgame" fame. It was an era in which the company's former moniker, Volume Services, Inc., described the business perfectly.

Today, while many of those items remain staples—sometimes in upscaled incarnations—customer expectations have skyrocketed along with prices, player salaries and facility debt service costs.

To meet the expectations of this new environment, Volume Services became Centerplate in 2003 in order to emphasize how it had stepped up culinarily as well as operationally and technologically.

Business Concentration
The economics of the big-time sports concessions/ catering business are simple and, frankly, brutal. Big clients drive big revenue numbers, but they also contribute to an unavoidable lots-of-your-eggs-in-one-basket situation for concessionaires. Centerplate is typical in this regard, with the bulk of its revenues coming from a handful of large clients, primarily big league sports teams, although, unlike most of its major competitors, it does not operate extensively in other segments that can even out revenue generation in off years.

The company's crown jewel client is the New York Yankees, which alone accounted for almost $65 million in fiscal 2005 net sales, or about 10 percent of Centerplate's total. Two other clients accounted for another 10 percent, and seven others for another 20 percent. The company's 20 largest clients generate about 60 percent of its annual net sales, with the rest coming from more than a hundred others.

Such concentration of business means concessionaires maintain extraordinarily close relationships with their major clients, bonds that often go back decades and are generally difficult to breach (Centerplate's relationship with the Yankees, for example, stretches back over 40 years). This factor, combined with contract terms that can run as long as 20 years, make conversions fairly rare unless there are unusual circumstances—a new facility, a franchise move or league expansion.

Centerplate has used these windows of opportunity to grab a greater foothold in NBA and NHL arenas, a market in which until a few years ago it held only one contract, the Palace at Auburn Hills, home of the NBA's Detroit Pistons, the current league attendance leader with more than 22,000 fans a game.

To the Palace, Centerplate added a second NBA contract in 2002 when the Hornets franchise moved from Charlotte, NC, to New Orleans Arena, where the company was the concessionaire.

In 2000, it broke into the NHL by winning the contract for the expansion Minnesota Wild and their new Xcel Energy Center Arena home in St. Paul. Next fall, Centerplate will add a second NHL client when the New Jersey Devils move to their new arena in Newark.

In the next few years, a number of major sport teams currently not served by Centerplate are expected to move to new facilities, possibly creating opportunities for more contract additions. On the other hand, some of the teams expected to move soon also include some Centerplate clients, most prominently the Yankees, who will relocate to a new Yankee Stadium in 2009.

Steinmayer declines to address the Yankees situation, and will only say that the company evaluates potential pickup opportunities "piece of business by piece of business." She adds that "definitely this trend to develop new stadiums has the potential to open up opportunities for a company like ours."

She notes that Centerplate recently shifted to "a more targeted kind of sales approach, which means we are looking at where we can add the most value. We are being very careful about the way we target and pursue business. We definitely want to grow and as we do that, that will diversify our portfolio even more than it is today."

Centerplate's diverse portfolio already encompasses more than 50 sports venue accounts outside the big league ballparks, stadiums and arenas.

Without major sport league tenants, these venues average under $1 million in annual net sales apiece, yet they provide a steady stream of year-round business since the mix includes minor league baseball parks and arenas as well as four major league spring training sites.

Concessions remains the primary source of revenue in this segment, but upscale operations like catering luxury suites, managing high-end concessions services for premium seats and operating in-venue restaurants are growing in importance, even at the minor league level.

Meanwhile, catering, food court management and event planning and marketing activities at more than 30 convention centers generate an average of more than $5 million in net sales per account. The core of Centerplate's convention center business is a group of 10 major venues like the Washington, DC, Convention Center, the San Diego Convention Center, the National Trade Center in Toronto and New York's Jacob K. Javits Convention Center.

Filling out the client portfolio is a group of around 30 entertainment sites ranging from motor speedways and racetracks to music amphitheaters and even a zoo. With services ranging from both basic and highend concessions services to catering and the operation of onsite restaurants and food courts, these are not inconsiderable pieces of business, netting nearly $2 million in sales on average.

Working Without a Net
Almost all of Centerplate's business is done on P&L contracts, some with a profit-share component that stipulates the client commission be based at least in part on a set percentage of the profits. This puts the onus on the company to develop and deploy initiatives that can generate greater per-customer sales, both to keep the growth going, and to mitigate any drops in customer counts.

As part of the strategy, Centerplate has focused on extending the menu to embrace distinctive local cuisine as a way of individualizing the culinary experience at each site in both its general concessions and its premier dining and catering operations. While it maintains some cross-venue internal brands, it prefers to develop brands specific to the buildings that reflect the region.

This effort is augmented by licensing agreements with high-profile local brands. These may be packaged products like the Francis Ford Coppola line of fine wines that are available at a branded kiosk outlet in AT&T Park in San Francisco, near where Coppola has his winery. They could also be local street food favorites, such as the Carl's Steaks stand that serves a regional favorite cheesesteak at Yankee Stadium.

Coppola wines may be fine for some, but many fans still want the old favorites when they attend sporting events. Given today's sports economics and the concessions prices it dictates, that would be a hard sell without major upgrades in both the quality of the product and in the way it is delivered.

To better deal with that, Centerplate a few years ago undertook an exhaustive examination of its core concessions offerings, doing exacting tastings and comparisons to come up with the products that would best provide premium choices for fans looking for traditional favorites.

That ballpark staple, the chicken tender, was a particularly difficult one to nail down, says Bob Pascal, vice president of sales and marketing.

"Tenders just out of the fryer taste a lot different than even five minutes later," he says. "We worked with the manufacturer on everything from the cut of the breast to the marinade to get it right. We finally settled on a Japanese panko bread crust that best preserved the taste and consistency."

Freshness is a must these days, he adds, and that is driving Centerplate's rapidly expanding repertoire of exhibition cooking concepts, from sushi stations with chefs fresh-rolling product to fresh-tossed salad and pasta stations and grills preparing kobe beef burgers to order.

Upscaling isn't confined to the majors, either. As premium seats and suites proliferate through the minors, customers there also elevate their expectations.

"They expect the extra service even though it's a minor league park," says Corporate Executive Chef Brett Lewis. "They are suite holders just like everybody else in other venues and they expect to be treated that way."

Even at the grandstand level, where family-friendly prices have traditionally been a major selling point for minor league sports, the expectations regarding food quality have been raised.

"People just don't accept the old foil-wrapped hot dogs and burgers coming out of the drawer any more," notes Blair Rasmussen, regional chef for the Northwest and executive chef for the operation at Vancouver Convention & Exhibition Centre in Vancouver, Canada. "So being able to prepare that hamburger in front of them, put it on the bun and hand it to them—that's the direction we're going in as many locations as we can."

"Unfortunately," Lewis intejects, "some of the places are designed for that hot dog in a drawer, so it requires a little more thought, a little more design, to do the fresh preparation."

Design and Technology
That has Centerplate working with a Seattle-based design firm called M3 to upgrade some of the foodservice facilities where it operates. It is part of an expanding portfolio of services.

"While we necessarily focus on food," Pascal summarizes, "we really want to be a guest experience solutions provider for our clients. That includes everything from helping them design the kitchen, the brand, the club or the common area, to helping them design their marketing and sales plan and training their own staff."

Beyond Food
Another service: helping ballparks, stadiums and arenas with a lot of open dates market themselves as meeting sites to groups and businesses. "These places sure beat simply going to the hotel barroom once again," notes Pascal. "We want to see how we can best help clients make that case."

To facilitate that process, Centerplate has assembled a 25-person customer advisory board of prominent meeting planners, and it regularly gets them together to pick their brains.

"We're trying to get deep insight into our clients' clients," says Pascal. "We want to work with them on things like how to structure and communicate offers and how to work with local convention and visitor bureaus, so that when a Microsoft or Anheuser-Busch holds their annual meetings, we can get them possibly to come to one of our sites." The company is also turning to technological solutions to some of the problems generated by the need to offer more and better services. Recent examples include a high-tech beer-dispensing system called TurboTap that not only pours a perfect brew every time, but pours it up to four times faster than tradtional taps. TurboTap has been installed in most of Centerplate's major league baseball and NFL sites, as well as at select other major accounts.

Another initiative: a credit card POS technology from the Australian firm Quest Retail Technology Pty, Ltd., that processes transactions in a few seconds and also supports touch-pass and loyalty card programs.

With Quest, Centerplate hopes to reduce the cash payment drag on check averages while providing a customer-friendly payment alternative that can be used not just at concession stands but in in-seat ordering programs where the card could be processed quickly on a handheld wireless terminal. Currently, in-seat ordering and delivery are confined to premium seat holders but Pascal sees a day when technology might extend the service to general admission seats.

Centerplate was managing merchandise retailing at its sites since the Volume Services days, but more recently the company has stepped up its efforts in this area with a more comprehensive program that includes facility design consulting and even merchandise design.

When the Detroit Pistons qualified for the 2004 NBA Championship series, the company developed commemorative products it marketed at concessions stands for maximum impact.

Centerplate also built a 4,000-square-foot flagship Yankee Team Store in previously unused space in Yankee Stadium that is open year round, making it a high-volume fan and tourist destination.

Nevertheless, it is its food operations that remain its core, and it's one the company takes very seriously.

"I think what we're seeing now is that food has become such an important part of the guest experience, that when you look at these venues, you'll find we're touching the guest more often and more deeply than anything else," Pascal says. "We are a very strong component in the way that the guests' perception of a particular venue is created."