The growth of impulse sales, of course, causes problems for foodservice operators because their business model is based on a mark-up typically 2 or 3 times the cost of the food served. This mark-up is needed in order to cover the labour, cooking and other overhead costs that caterers bear (and which do not apply to the same extent in the retail environment).

Foodservice operators are reluctant to replace this high mark up with the 30% mark up typically applied to retail products because they see it as erosion of their margin. But the lower mark-up is necessary otherwise the selling prices of snack products in foodservice outlets will be far higher than the price of the same product in the shops.

There are ways to overcome this. For instance, by developing snack SKUs which are destined solely for the foodservice sector and which therefore do not bear direct price comparison.

But this misses the point since, as we have argued, the global margin available to the out of home sector is declining as the sector increase its share of total food expenditure.

And what is the point? It is this: foodservice operators are becoming retailers and have to adjust their margin expectations accordingly.

Snacking in the Out of Home Market

top