Brainfood: Behind the spin - Compass Group

THE DILEMMA

by
Last Updated: 31 Aug 2010

The world's biggest contract caterer has had a Turkey Twizzler of a year, but Jamie Oliver's criticism of Compass' low-grade school meals is just the tip of the iceberg. Of far greater concern are the investigations by the US authorities into its Eurest Support Services (ESS) arm, which, it is alleged, has been involved in improper bidding practices in its catering contracts with the UN. The UK's Serious Fraud Office is conducting its own preliminary examination. Compass has also been criticised for its aggressive treatment of UK suppliers: in November, it was forced to deny claims from three of them that it had bugged negotiations to gauge how low it could push prices. The Times also accused the firm of charging a janitorial supplier a £1 million fee for a three-year contract.

THE SPIN

Compass has started its own internal investigation into ESS's relationship with UN procurement officials, and has already fired Compass UK chief executive (and former CEO of ESS) Peter Harris. Of janitorial supplier Robert Scott & Sons, Compass said: 'The supplier in question has just signed a new contract and if it wasn't happy, it wouldn't have signed it.' Compass also points out that '95% of the UK suppliers have been supplying Compass for over four years'.

THE STRAIGHT TALK

In November, Compass reported a 54% slump in full-year profits, blaming its ailing figures on a weak UK market and disappointing profits in the business it has with the British Army supplying meals for troops in the Middle East. It has also bailed out one of its key food suppliers to the tune of several million pounds. Outgoing group CEO Mike Bailey admitted that 'the performance in the UK has been unsatisfactory. But we have gripped the issues and the turnaround of the business is under way.'

THE VERDICT

Compass hopes to raise £1 billion from the sale of its travel concessions arm Select Service Partner. The appointment of Bailey's successor by new-broom chairman Sir Roy Gardner has been keenly awaited. Investors are keeping their fingers crossed for an external candidate to cast a fresh pair of eyes over the catering behemoth. But Ivan Shenkman, MD of food purchasing consultancy PSL, told The Times: 'There is a need throughout the industry for a transparency and integrity that has been sadly lacking for the last 20 years.' Whether this catering house can reset its moral compass is another matter.

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