Sodexho Alliance SA

views updated

Sodexho Alliance SA

3, avenue Newton
78180 Montigny-le-Bretonneux
France
(33) 1 30 85 75 00
Fax: (33) 1 30 43 09 58
Web site: http://www.sodexho.com

Public Company
Incorporated: 1966 as Sodexho SA
Employees: 250,000
Sales: FFr 41.1 billion (US $6.9 billion) (1998)
Stock Exchanges: Paris
Ticker Symbol: Sodexho
NAIC: 72231 Food Service Contractors

Sodexho Alliance SA is the worldwide leader in food and management services. In an aggressive acquisition and expansion drive during the 1990s, the Marseilles, France-based services giant has seen its payroll explode to 250,000 employees and its revenues jump from FFr 11 billion in 1993 to FFr 41 billion in 1998. The company currently operates in some 66 countries, through nearly 19,000 operating units. More than 84 percent of the company’s sales are achieved outside of France. The United States is the company’s single largest market, contributing more than one-third of the company’s annual sales, through the company’s subsidiaries and through its 49 percent share of Sodexho Marriot Services Inc., the US $4 billion food and other services giant created in 1998 through the merger of Marriot Inc.’s and Sodexho’s North American food services operations. Other principal markets include France (19 percent of annual sales); United Kingdom and Ireland (22 percent); and the rest of Europe, including Eastern Europe (18 percent). Both the Asian and Latin American regions contribute five percent to Sodexho Alliance’s annual sales.

Sodexho Alliance’s operations fall under three primary categories. In Food and Management Services, Sodexho Alliance has built the leading worldwide position, overtaking chief rival Compass, of the United Kingdom. The company’s core business, Food and Management Services, supplies clients in the corporate, administration, public and private school, health care, university, and other markets, including prisons and other detention centers. This division’s Prestige group offers fine dining and conference and related services to the hotel and restaurant industries, museums, cultural centers, and conference centers. Sodexho’s Food and Management Services division also has built more than 25 years of experience as a provider of services to remote locations, such as offshore oil platforms and other industrial sites. Food and Management Services contribute some 97 percent of Sodexho Alliance’s annual sales. Of this figure, some 53 percent of the company’s sales are contributed by the business and industry sector; the health care and education markets contribute 21 percent and 19 percent, respectively, and remote site management activities fill out this segment with four percent of total company sales.

The company’s two other main activities are its Sodexho Pass service vouchers and cards operations and the company’s River and Harbor Cruise division. Sodexho Pass holds the number two global position in the management and distribution of service vouchers and cards, for such products as dining and groceries, gasoline purchases, school supplies, toys, pharmacy and other medical services, and many others. The company distributes more than one billion vouchers and cards per year through a client base numbering nearly 90,000. Sodexho Pass represents two percent of Sodexho Alliance’s annual sales. The company’s River and Harbor Cruise division, contributing the remaining one percent of the company’s total sales, is the world’s largest operator in this market segment, with a fleet of more than 40 boats operating in New York, Boston, the United Kingdom, and France. The company’s River and Harbor Cruise subsidiaries include Spirit Cruises in New York, Catamaran Cruisers in the United Kingdom, and Bateaux Parisiens in Paris.

After a number of strategic acquisitions, including the 1995 acquisition of the United Kingdom’s Gardner Merchant, which doubled the company’s size at that time, Sodexho Alliance captured the lead of the North American food and management services market with the merger of its North American operations with those of hotelier Marriot International. The merger created Sodexho Marriot Services, Inc., with 100,000 employees and annual sales of more than US $4 billion. Sodexho Marriot Services is listed on the New York Stock Exchange under the symbol SDH.

Sodexho Alliance continues to thrive under the active leadership of chairman, chief executive, and founder Pierre Bellon. The company’s stock trades on the Paris stock exchange, joining the prestigious CAC 40 listing in 1998.

Founding a Food Services Giant in the 1960s

Pierre Bellon founded the food services company Sodexho SA in Marseilles in 1966 with FFr 100,000. Bellon did not enter the food services industry without experience, however. Since the turn of the century, the Bellon family had been a prominent name among the cruise ship and luxury liner industries. Bellon sought to bring the family’s expertise onshore. Sodexho was created with the original mission to supply food services to collective organizations, such as businesses, schools, and hospitals.

Bellon’s ambitions quickly looked beyond France. In 1971 the company was awarded its first nondomestic contract, across the border in Belgium, providing food services for hospitals in that country. The company would continue to expand its activity throughout Europe over the next decade. Sodexho also would begin to diversify its activities, while remaining focused on its core food services operations. In 1975 the company added a new service, providing food and other management services to large construction sites and offshore drilling platforms under its Remote Site Management division set up for that purpose. Early contracts saw the company enter Africa and then the Middle East.

A new piece in the Sodexho puzzle was added in 1978, when the company began its service vouchers operations. These vouchers, which would provide prepaid coupons—and, later, so-called smart cards—ranging from restaurant dining to gasoline purchases to medical prescriptions fulfillments, were first introduced in Belgium and Germany. The voucher operation proved so successful that the company quickly rolled out its Sodexho Pass subsidiary services throughout much of its growing operations. Another area of expansion combined the Bellon family’s past experience with Sodexho’s expertise: the company launched its own series of river boats and harbor cruise ships, serving such waterways as Paris’s Seine River.

By the start of the 1980s, Sodexho had determined to launch the company on a truly global scale. Although its operations had remained in large part limited to the French and western European markets, in 1980 the company launched its first subsidiaries in the North and South American markets. Sodexho would make particular inroads in the Chilean and Brazilian markets; in the United States, too, the company established a strong presence.

To finance its continued expansion activities—which would bring the company on the acquisition trail in the mid-1980s—Sodexho went public in 1983, selling shares on the Paris stock exchange. Bellon, however, retained the controlling share of the company he founded. Beyond maintaining Sodexho’s independence, Bellon now sought to impose Sodexho as one of the world’s leading food services and management services businesses.

In the mid-1980s, the company began making the series of acquisitions that would lead it to worldwide leadership in its industry. The company’s initial acquisition, that of Boston-based Seiler, a vending machine and restaurant business, was made in 1985. This was followed soon after by the purchase of Food Dimensions, based in San Francisco, and complemented by several other U.S. acquisitions. These businesses later were regrouped as Sodexho USA and included the company’s Spirit Cruises subsidiary, which brought Sodexho’s river and harbor cruise ship operations to such U.S. markets as New York, Boston, and Seattle.

Going Global in the 1990s

The late 1980s saw a crash in the hotel and hospitality industries, which, coupled with a worldwide recession in the early 1990s, would bring a number of food services companies on the market. With its traditionally low-debt, independent position, Sodexho would continue to accelerate its growth by acquisitions. Not all of its attempts were successful, however. After gaining a 20 percent share of Wagon Lits, Sodexho nonetheless lost a bitter battle for full control of that major European services provider to rival French company Accor. Sole consolation for Sodexho was its benefit from the resultant rise in the value—and sale—of its Wagon Lits shares, which added an additional FFr 400 million to its profit sheet in 1993.

Despite the loss of Wagon Lits, Sodexho was far from abandoning its dream of vastly increasing its size. Bellon recognized that increasing competition in the industry, the heavy debt load of many of Sodexho’s competitors, and the need for some groups to restructure their operations would bring still more acquisition opportunities among the world’s leading food and management services companies. Sodexho’s next attempt to acquire an improved position in the industry came with negotiations to acquire Britain’s Gardner Merchant, the restaurant and food services arm of the Forte group. Sodexho abandoned that attempt, however, when Bellon decided the purchase price would be too high.

Company Perspectives:

Our purpose: Our company is a community that includes our clients and customers, our employees and our shareholders. Our purpose is to exceed their expectations. To achieve this mission, we focus on responsible growth in sales and earnings, while contributing to the economic health of the countries where we provide our services. Our mission: To create and offer services that contribute to a more pleasant way of life for people, whenever and wherever they come together. Our goal: To be the benchmark wherever we offer our services, in every country, in every region, in every city, and for every client. Our core values: Service spirit. Team spirit. Progress.

In the meantime, Sodexho continued to strengthen its position in North America—in particular, taking, in 1994, a 20 percent position in Corrections Corporation of America. At the same time, the company was stepping up its international presence with entries into a number of new markets, including Japan, Russia, Africa, and much of Eastern Europe; in total, Sodexho added 25 new markets in less than three years, bringing its international presence to more than 60 countries.

Sodexho’s next big growth chance came again in 1995. Once again, Gardner Merchant, which was in the process of detaching itself from the Forte group, came into Sodexho’s view. This time the marriage was consummated: for a purchase of some UK £500 million, Sodexho doubled its size, adding Gardner Merchant’s FFr 10 billion per year in annual sales to Sodexho’s own FFr 11.2 billion, and creating one of the world’s leading food and other services firms with more than 100,000 employees. As icing on the cake, Sodexho acquired in that same year the Swedish management services sector leader Partena. The double acquisition placed Sodexho as the world leader in the food and management services industry.

With nearly FFr 25 billion in 1995 annual sales, Sodexho barely took any time to integrate its new acquisitions before completing a new significant merger, of Brazil’s Cardápio, the third largest service voucher provider in the world’s leading market for service vouchers. Also in 1996, the company merged its Sodexho USA operations with the U.S. operations of its Gardner Merchant subsidiary, creating the fourth largest food service provider in the United States.

After acquiring Universal Odgen Services, the leading U.S.-based remote site services provider, Sodexho changed its name to Sodexho Alliance in 1997. Sodexho Alliance would end the year with nearly FFr 29.5 billion in sales. One year later, the company would take a new leap in revenues. In March 1998 Sodexho agreed to a merger with Marriot Management Services, the food and management services wing of the Marriot hotels group. Sodexho’s and Marriot’s North American service operations were merged together to form Sodexho Marriot Services, Inc., the U.S. market leader. The merged company, in which Sodexho retained nearly 49 percent, was listed on the New York Stock Exchange.

Buoyed by the merger, which swelled Sodexho’s annual sales to more than FFr 41 billion by the end of its 1998 year, Sodexho also was granted a listing on the prestigious CAC index on the Paris bourse. Back in Europe, Sodexho continued to cement its position, through organic growth, but also through acquisitions, including the early 1999 acquisition of Spain’s GR Servicios Hoteleros, which gave Sodexho the leadership position in that country’s catering market. As the company pledged to continue its expansion, both through acquisition and internal growth, Sodexho also was preparing to branch out into the still larger global services market. Under the leadership of Pierre Bellon, Sodexho appeared likely to achieve a strong position in that market—without sacrificing its treasured independence.

Principal Subsidiaries

Bateaux Parisiens (France); Bay State Cruise Company (US); Cardápio (Brazil); Catamaran Cruisers (UK); Gardner Merchant (UK); Kelvin Aberdeen (UK); Luncheon Tickets SA (Argentina); Partena AB (Sweden); Siges (France); Socorest (Congo); Sodex Corporation (Japan); Sodexho Gardner Merchant (Australia); Sodexho Marriott Services Inc. (US; 48.5%); Sodexho Prestige (France); Spirit Cruises (US); Van Hecke (Netherlands).