How Sodexo is strengthening its growth amid rising food prices
“The level of services in the number exceeded the indicator of the first quarter of the fiscal year 2019.” These words were said by Sodexo Group CEO Sophie Bellon after the announcement of the group’s results for the beginning of 2022-2023. “Strong Start” turnover announced by the group increased by 6.33 billion euros 20.2% between September and November 2022. Figures that should continue to grow in 2023, organic growth of between 8% and 10% is expected. Surprising news when you find out that there is collective catering in France “He lives in a very tense situation”According to the National Collective Catering Association (SNRC).
After two challenging years due to the Covid-19 pandemic, which has led to an increase in remote working and the cancellation of many events, Sodexo has seen its turnover drop by up to 10%. Therefore, the good numbers presented by the group raise questions about its strategy.
First, the peculiarity of the Sodexo model is that it is based on significant investments abroad, particularly benefiting from the favorable exchange rate between the dollar and the euro. With a total of 422,000 employees worldwide in 2022, it is the second largest private employer based in France. Thus, its growth in North America is 15.7%, and in Europe it is only 5.9%. In France, the group relied on strong negotiations with its customers to pass on inflation to its prices.
Adapt and transfer costs
Also, number 1 in collective catering in France knows how to behave in the context of inflation. “Inflation management is not a new phenomenon for Sodexo. Our teams are able to control the impact by establishing mitigation plans in coordination with clients, especially through negotiations.”, – says the company. Sodexo factors 4% to 5% of inflation into its prices.
Although inflation on the average basket in collective catering will reach 16% in autumn 2022, it is not a necessary measure. In addition to these talks, the group claims to be redesigning the distribution of its food by replacing some products like those of its competitors. , by changing the number of components or limiting food waste. Sodexo did not want to disclose its turnover in the French market, but said it remained low compared to 2019, indicating that profitability in this market is lower than the international level.
Sodexo international betting
Because the strategy of expansion in 53 countries of the world where the group is present has allowed it to get a lot of income. Lhe is Marc Rolland, Chief Financial Officer of Sodexo, Noting that major French competitor Elior owns 50%-60% of its business in France, Sodexo only has 13%. The desire to expand abroad paid off, as the group was able to pass on price increases more easily from France. For example, the UK immediately indexes inflation to food costs. On the contrary, the French treaties are designed to limit this growth as much as possible. A situation Sodexo condemns:
“Profitability levels in public markets, and particularly local authority contracts, are still affected by price revision mechanisms that have little to do with cost growth. »
Prioritize other segments
In detail, the company’s turnover increased by 20% ” on-site services”, is its main activity sector. An increase due to the mass return of workers to offices and events. But this is not the best performing sector. The company presented a 28.2% increase in turnover for “privileges and rewards”, i.e. restaurant vouchers, gift vouchers… An area that does not represent its main activity, but remains the most profitable area.
Sodexo is also betting on the “Corporate and Sports & Leisure” sector for 2023. Since the group is one of the official sponsors of the Olympic Games to be held in Paris from July 26, 2024, the strategy will continue in the coming years.
