The big interview: Different solutions for difficult times

Sodexo’s acquisition of Fooditude is the clearest signal yet that life may not return to normal after Covid. Jane Renton speake to Fooditude founder Dean Kennett about the deal...

In economic terms we are in winter, a Kondratieff winter to be precise. The one defined by the eponymous Soviet economist who died in a Stalin deathcamp for highlighting capitalism’s capacity to self-correct (witness the jumping on green bandwagons by some of the world’s biggest global conglomerates). According to Kondratieff, economic winter comes in cycles every 80 or so years and endures for a generational 25 years, when institutions decay and the young are rebellious and full of righteous indignation. The last time it occurred, it resulted in the Great Depression, the rise of fascism and World War II. So, fasten your seat belts, we could be in for another bumpy ride.

Covid has pushed those shifting tectonic plates still further apart. It has also been the backdrop for three notable deals in the contract catering industry sector this year: CH&Co’s acquisition of Vacherin on the eve of the first lockdown in March; the takeover of Bartlett Mitchell, announced in October by WSH, the holding company behind several foodservice brands, including BaxterStorey; and the majority stake taken in Fooditude by Sodexo, announced in early December. While all three mergers appear to suggest a new wave of industry rationalisation, Sodexo’s move is arguably the most significant in that it also suggests that the traditional catering contract model is under attack.

Fooditude is the company originally established by Dean Kennett in 2005 under its former brand name, Just Hospitality. London-based, it operates a high-quality delivered-in flexi-catering service to offices from a central production unit in Bermondsey, confounding previous notions that such set-ups provide inferior catering to the in-house model. Whereas many of Fooditude’s clients provide meals to their employees for free, the more traditional contracts, which may still be subsidised but to an increasingly diminishing degree, are generally paid for by the employee.

Competitors might argue that Kennett’s business model is uniquely vulnerable, especially in this Covid downturn, or rather industry “permafreeze” as Kennett describes it. He does not run his business on a series of three- to five-year contracts like most who cater to City clients. Clients can scale their commitment to him up or down or even walk away. But catering traditionalists might be in for a rude awakening. There are clear signs that those existing contracts are being renegotiated to more flexible variations to take account of greater levels of home working.

“No-one wants to talk about long-term contracts, and that is working to our advantage because employers don’t really know whether there is going to be a third, or even fourth wave,” he says. “Companies are going to look at their monolithic kitchens, which even on resumption of office life are still likely to remain underused or even unused for a considerable time because of social distancing requirements.”

The growing certainty that greater levels of flexibility will remain a feature of professional life will mean employers having to work harder than ever at attracting in staff into their buildings for training and development. “So, rather than a subsidised mediocre canteen that is only 30% full at lunchtime, they will increasingly look at pop-ups, which are free for employees and are convivial and fun,” says Kennett. “Those are the conversations we’re having now with a stream of potential new clients.”

While he won’t be drawn on who those potential individual clients might be, they extend beyond much of Kennett’s original tech clientele, which includes Yahoo, Netflix and Twitter. Many of them are professional services firms, including stockbrokers and trading houses, where there is a pressing need to keep teams collaborating in-house and batting ideas amongst each other as much as possible.

There is no hubris in any of this, however. Kennett freely admits he and his company have endured a rough ride like virtually everyone else in hospitality. He has had to make hard business decisions, something than cannot have been easy for the thoughtful, reflective chef, who likes nothing better than to develop and foster the careers of his teams. Having nearly lost his then fledgling company in 2008 when his chief backer, an Icelandic bank, went bust owing him considerable sums, he not only moved to the delivered in model of catering, but also did everything in his power to futureproof his business.

At the outset of the current pandemic, with so many business offices closed, Kennett’s main production base in Bermondsey was only operating at between 30% and 40% of capacity. While work dried up in the spring, they fundraised and opened a community kitchen making some 400 to 600 meals a day for vulnerable and deprived people in the surrounding areas – eventually serving in excess of 37,000 over four months. Fooditude has long established connections with charities such as FoodCycle, OLIO and FareShare, and with campaigners such as Sam Vacciana, who the company previously worked with to train young and often homeless people to become chefs.

By September, Kennett was hopeful that business would start to resume, but those hopes were dashed with the announcement later that month of a ban on gatherings of more than six people, putting the kybosh on plans for any significant return to office life. “We had people on furlough since March preying they would be called back to work and, even though we were not operating on anything like normal capacity, we still had costs associated with that,” he explains.

Redundancies became an inevitability. Kennett felt compelled to let people go, including some long serving members of his senior team. He had handpicked them all personally. “I told my senior team to brace themselves,” he recalls. “I told them the working world they knew had disappeared and would not be coming back anytime soon. It wasn’t going to be pleasant.”

In the event, the headcount has dropped from 150 to 40, a ratio not akin to the shedding of staff Kennett was forced to make in 2008 when his then much smaller company shrunk from 30 staff to just three. In essence, Kennett peeled back his company to its very core, including his biggest overhead, his staff, effectively ‘permafreezing’ what was left so that the business could survive this series of Covid knocks. He believes those reductions in headcount have been widely repeated elsewhere in the contract catering sector. “If anyone tells you otherwise, they are not being entirely truthful,” he asserts.

But unlike other relatively smaller players, Kennett and his company had attracted the attention of Sodexo, as well as other large operators. “We were getting a lot of interest from other big guys about our business model,” he says. “They had been watching us from the side. ‘Had we considered being acquired?’, they asked us.”

But Sodexo was deadly serious, and in March the giant embarked on a more formal approach. “My first reaction was to wonder what the hell they saw of interest in us,” Kennett recalls, adding that he had hitherto not really planned to relinquish any stake in his company. “I didn’t see myself as a sell-out merchant.”

Sodexo, which was not the first to inquire whether Fooditude might be up for acquisition, had already, to some degree, staked its claim in the delivered-in office catering concept. Interestingly, Sodexo had already adopted a delivered-in catering concept in France. As then divisional managing director Nicola Morris said at a roundtable event held by our forerunner magazine B&I Catering in 2018, the French-based company was already exploring its feasibility in the UK.

Further talks ensued, along with surprise at Fooditude’s historic gross profit margins, margins that Kennett claims are considerably higher than many others in the sector. “A lot of our competitors wanted to know how we managed to get to the size we did with those margins, while keeping our clients happy at the same time,” he says.

But Kennett has always struck me as a man who likes to paddle his own canoe. Won’t life be difficult under the helm of a company as large as Sodexo “To be frank, we didn’t need to sell. But my ambitions for the brand probably outstripped what we could achieve as a small family business.”

Sodexo is a family-owned company and, despite its considerable global size, retains a sense of commitment, something that Kennett has perceived and appreciated throughout all his negotiations. So too is the degree of autonomy they are willing to entrust to him. The delivered-in strategy also has strong backing from the very top from Sophie Bellon, one of the family owners of Sodexo.

As far as Kennett is concerned, flexible working his here to stay and so too is flexible catering, something that he has understood and refined. It is something that Sodexo wants to learn from and develop in its wider business. “I’ve always said to our clients, ‘You can turn us on and off in a flash’ – and okay, that hasn’t exactly worked in our favour at the moment, but when the tap does turn back on, whatever comes out of our kitchen is going to be our profit and is under our control,” he says.

As 2020 shows, we cannot always predict how the wheel of fortune is going to turn – but as Kennett has so clearly demonstrated, it’s the ability to turn misfortune to opportunity that really matters.