Catering

IIndustry Data

 

Corporate sector:

The corporate catering industry is characterized by activity of hundreds of manufacturers supplying thousands of meals each day. The industry is highly competitive.

Private sector:

There are a relatively large number of active companies in the market. According to estimation, there are currently approximately 750-800 active catering services in Israel not including reception facilities. There is a relatively high turnover rate for small companies.

 

Customers: Target Market and Its Size, Market Segmenting

 

Corporate sector:

Large corporations, factories, and other institutions that providing their employees with warm meals. They have concluded that it is not profitable to operate kitchens and therefore provide their employees with catering services. Some organizations that utilize catering services are Israel police, the electricity company, Airfields Authority, Amdocs, Pelefon, Tel-Aviv University, nursing homes, etc. Many kibbutzim and other places operating kitchens reach an agreement with the catering service in exchange for usage of kitchen facilities thus reducing customer cost.

 

Private sector:

There is a yearly average of approximately 200,000 functions in Israel (the number of functions is not necessarily affected by the security/economic situation, which mainly affect prices). Each event caters for an average or 150-250 people. This data does not include events for less than 100 people and home functions. Most functions are private (weddings, brith, etc.)

 approximately 30 thousand weddings are conducted yearly (approximately 16% of all functions)  weddings are a significant percentage of total function revenue due to the large number of guests and the high meal price in comparison to other functions.

 

Competition

Competition in the industry is high and is introduced mainly by similar companies, according to market segmentation. 

 

Corporate sector:

There are small, medium, and large active businesses in the industry according to the following segmentation:

 

Number of meals per day

Market percentage (in meals)

Company type

Over 6,000

40%

Large corporations

2,000-6,000

25%

Medium businesses

Up to 2,000

35%

Small businesses

In addition, the corporate sector also competes with restaurants located in industrial areas, as some employers have meal voucher arrangements with these restaurants (practiced mainly among high-tech companies.)

 

Private sector:

Private catering companies can also be segmented according to size: revenue of large companies is approximately 10 million NIS per year.
Revenue of medium companies is approximately 2.5 million NIS per year.
Revenue of small companies is up to 1 million NIS per year. Most private sector businesses are defined as small and medium sized. Additional competition stems mainly from reception facilities that provide catering services as well as restaurants and private chefs offering catering services for small functions.

 

Marketing resources

Corporate sector:

Most marketing resources are channeled to advertisement in professional literature and yellow pages. In addition, catering companies use direct marketing methods. Large customers usually choose their catering company by tender.

 

Private sector:

In the private sector, marketing methods include print advertisement in wedding guides.

Many catering services advertise in local print and by distributing flyers. 

Some companies participate in periodic wedding exhibitions.

Incorporation in the favorites section of reception facility websites. (Frequently in exchange for commission)

Reputation is a significant marketing method. In many cases, advertisement is conducted by word of mouth.

Establishing a website and registration/advertising on other relevant sites.

 

Financing

Industry Revenue and Profitability

Revenue in the corporate sector is determined according to consumed meals in addition to a set reserve percentage. In some cases such as kibbutzim or large companies, the diner pays a portion of meal cost.

Cost of a single lunch serving including meat and not including beverage ranges between 15 NIS at kibbutzim to 35 NIS at private companies.

In the private sector, revenue is calculated by multiplying the meal price by the number of guests at the function. Number of guests at a regular meal can be calculated by multiplying the number of waiters by 35 (average number of guests served by a single waiter)

 When serving a cocktail meal, the number of waiters should be multiplied by 55.

Revenue per waiter is the cost of the meal multiplied by the number of guests served by him.

Meal prices vary according to a menu composed by the customer and in most cases range between $40-120 per meal.

 

Profitability and prices

Corporate sector:

Average raw profit rate is 40%.

Operational profit rates in the corporate catering industry range between 5-7%.

Low operational profit stems from the difficult competition which caused a decrease in prices. These operational profit rates have resulted in many companies not being able to reach operational profitability.

Meal prices in the corporate sector range between 15-35 NIS according to meal components.

 

 

 

Private Sector:

Raw profit in the private sector is approximately 75% of revenue. 

Net revenue (before tax) is estimated at approximately 28% of revenue. 

 

Typical terms of payment

Corporate sector:

Vendor credit ranges between EOM+30 to EOM+60. New businesses will be required to pay in cash or arrange securities.

Customer payment terms are determined according to tender and usually range between EOM +30 to EOM +90.

 

Private sector:

Vendor credit ranges between EOM+30 to EOM+60. New businesses will be required to pay in cash or arrange securities.

Customary payment terms for customers: an advance is usually paid when reservation is made, and the rest paid in cash on the event’s day. Due to competition, some companies offer more flexible payment terms, especially during off-season.

 

Licenses and certifications:

  • Local authority licensing is required, in order to operate a business in the industry, in addition to a manufacturing license, a Ministry of Health license, and a sanitation inspection.
  • Kashrus: all meals in the corporate sector are kosher a private catering service may decide whether they wish to hold a kashrus certificate.

Tips:

  • It is recommended to thoroughly investigate competition in order to identify trends and prices as early as possible. This examination can be conducted relatively easily in this industry.
  • A kashrus certificate is a major consideration and is important to many customers. A kosher catering service must compose its menu according to kashrus requirements, pay an inspector, and may not be operated on Saturdays and religious holidays. A non-kosher service, however, may lose many customers who only eat kosher food.
  • It is recommended to consult with your local Business Development Center regarding business establishment and operations.

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