Approaching both the end of the year and the end of the decade, we think it might be useful to look back at how the catering industry has fared over time. For those of you who are relatively new to the industry, the recent years may offer the most relevant comparison, but we like to take the longer historical view as well. Please note that many of these comparisons are based on anecdotal evidence, since most caterers won’t know exactly how their years will end up until the end of the calendar year.
Catering is a somewhat cyclical business, subject to the vagaries of the economy as a whole. Despite some clouds on the horizon relating to trade wars, ballooning deficits, and other problem areas, the overall U.S. economy has continued to hold up. It is continuing the longest run of prosperity in the modern era, starting at the end of the Great Recession in 2009. This has been the longest period of uninterrupted growth. However, it is certain that this expansion will not last forever, and we are already seeing signs that the U.S. economy is slowing at least somewhat.
Based on informal discussions with various caterers around the country, at this point it looks as if 2019 will end up with a slight decline in the rate of growth compared to the last several years, though revenue will still be up from 2018. The average interim growth of the caterers we have spoken to is about 3%. This is above the level of growth of the overall economy, though not by much. Of course, there are exceptions to this trend, with some caterers coming in well above this benchmark, while others are seeing revenue as flat compared to 2018.
The full-service caterers we have spoken to who book long lead time events such as weddings and other life cycle events are mostly very confident about 2020. Many are reporting advance bookings pacing well ahead of the same point last year.
During our discussions, we ask caterers about the different areas of their business. Catering business analysts sometimes look at the industry as an undifferentiated whole, though of course it is made up of many different components.
Corporate delivery catering
This sector continues to grow, as many companies use in house foodservice to help with both entertaining clients and maintaining employee morale. The challenge in this sector, as has been the case for the past several years, has been new competitors entering the market—for example, restaurant operators using ghost kitchens for production. However, many of the restaurant operators are really competing in the meal delivery business, which is not the same as corporate catering.
Corporate full-service catering
This sector was hit the hardest during the downturn 10 years ago, and some areas still have not recovered. But marketing related events have come back strongly over the past several years, though some individual event budgets are still not what they used to be. Employee morale and celebratory events are also part of this niche, though this particular category has probably had the slowest recovery over the past decade.
Gala catering
Fundraising galas have always been an important component of the catering industry, and the number of caterers with venues sufficiently large to compete with hotel ballrooms for galas has increased substantially in recent years. For 2019, we have heard from a few gala caterers that some guest counts were coming in below expectations in the first half of the year, but that for the fall gala season the counts are improving and sometimes exceeding projections.
Wedding catering
Weddings have always been the single largest market for caterers, and this remains the case even in a softening economy. Many of the wedding specialist caterers we have spoken to, whether on or off premise, have told us that 2019 was a slightly down year. This was the result of a combination of somewhat fewer bookings, as well as slightly lower guest counts. However as mentioned above, many caterers are reporting strong advance wedding bookings for 2020, and even some for 2021.
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Social catering (besides weddings)
This is another recession resistant area of catering, with much entertaining associated with life cycle events – bar and bat mitzvahs, quinceañeras, first communion parties, etc. These events are going to happen even if there’s a downturn, and so far in 2019 these events have been reliable generators of revenue for caterers.
Full service private home catering
This is a catering niche that is often occupied by boutique caterers and, and as such tends to be most frequently seen in the parts of the country where there are many wealthy clients – even those with personal chefs will often use caterers for larger home events. With the concentration of wealth in the US approaching its highest levels ever, this business continues to thrive.
Retail catering
This refers to limited or self-service catering often done on a takeout or delivery basis. This is a budget alternative for those who have the need to entertain groups or guests, but do not have the resources to hire a full service caterer. Some studies have been done which contend that this is the second largest catering revenue silo, only after wedding catering. But it is a crowded market, with many full and limited service restaurants, specialty food stores, grocers, and even warehouse stores competing in this space. This business tends to be countercyclical, with some catering buyers trading down from full service to retail catering if they are feeling financial pressure.
Overall, the catering industry seems to be holding its own, though some types of catering are clearly doing better than others. If 2020 is the year that the next downturn in the economy finally arrives, let’s hope that it is short and shallow. But one thing that we do know is that the catering industry is resilient, and will bounce back from whatever happens.
