Chairman Pierre Bellon tells the Sodexo success story
After completing my studies and military service, I joined the little ship supply company founded in 1895 by my grandfather and developed by my father.
A few years later, I made two observations to my father:
- First, the ship supply business in Marseille was declining and in the long run was doomed.
- Second, I wanted to be independent. I felt I could accomplish something on my own and wanted to create my own corporate food services company.
My father, who was very perceptive, simply replied: "You're right." That's how I created Sodexho in Marseille in 1966: with a few thousand francs and a single company restaurant. The business grew very quickly, and today Sodexo:
- Generates €13.6 billion ($20.4 billion) in revenues
- Employs 355,000 people
- Operates 30,600 sites
- Is present in 80 countries
I would like to tell you how we achieved this.
Sodhexo's success has been built on 4 cornerstones:
Our philosophy
In the 1960s, the role of private companies was not widely recognized in France. Even so, I wanted to create my own company. When I asked myself why, the answer was quite clear to me:
"A company is a community of clients, employees and shareholders. The purpose of my company will be to satisfy the needs of all three stakeholders."
However, I soon realized that their needs were contradictory, which is still true today. Our clients, for example, want to be served four-star meals for the price of a sandwich. In addition, our employees never refused a salary increase nor our shareholders a dividend increase, by telling me, "Keep the money to develop the company."
I decided that the only way to satisfy the needs of clients, employees and shareholders was through organic growth.
First, organic growth demonstrates that we are meeting the needs of our existing clients since they choose to remain with us. It also enables us to guarantee our employees secure jobs and possibilities for advancement. Lastly, shareholders would rather invest in a company that is growing and will provide a better return on their capital.
So before creating Sodexho, I made a wager that today seems outrageous, "My company will be a growth company.".
I shared my commitment to growth with new employees as they joined the company. Today, they are given a management card that sums up our philosophy.
When thousands of people share a commitment to growth, it can be done.
Our client focus
The second explanation for Sodexo's success is our customer centered philosophy.
Although I believed that there was a large market for food services, I was reluctant to get into a business that sold inferior products. At the time, employees of French manufacturing companies sometimes went on strike to protest at the low quality of their lunchtime meal.When I finally decided to start my business, I had a very clear vision - I would improve the quality of meals served in French companies.
Our customer centered approach involves a commitment to:
- Retaining our existing clients and adapting to their changing needs. Nurturing client loyalty was therefore the first step in ensuring our growth. And the best way to build client confidence and speed our development was to guarantee safe, high-quality products and to innovate constantly.
- Identifying new clients and new segments. We realized very quickly that schools, hospitals, retirement homes, and large onshore and offshore work sites all had needs that had to be satisfied. Every time we opened a new client segment, we discovered new possibilities for growth.
- Winning new geographical markets. After Marseille, we expanded into Provence, the Bordeaux area, the Rhône-Alpes region and Paris. We were number 1 in France, and set out to conquer Europe and the other continents.
- Increasing revenue on existing client sites:
We introduced an expanded range of food services, including catering, vending, branded products and take-out sales.
We offered new services, thus allowing our clients to outsource all services that were not part of their core business to a single partner - Sodexo.
The third reason of our development
Our team members are the third of our growth drivers. When the business was young, I knew all site managers and their families personally, but that was no longer possible once we had about 40 restaurants. I realized that I couldn't do everything myself.
That's why I hired people who were better than I was and whose skills complemented my own. At the time, there was virtually no unemployment in France and large companies immediately hired all recent graduates.
When young people asked me about their career plan, I replied "We haven't got a plan, I trust you and I'm giving you responsibilities. Take them and go - you to Bordeaux, you to Lyon, you to Paris, Belgium, Italy, or Spain. You'll devise your own career plan."
And that's exactly what's happened. Sodexo is a machine that creates entrepreneurs. In fact, we've built the company together.
95% of our people work on our sites. Their skills and dedication play a mission-critical role in satisfying and retaining clients and customers. Every day, they're out there on the front line, making Sodexo's reputation. We're dedicated to recognizing their achievements, strengthening their pride in the Group and showcasing the value they create. Our mission of "improving the quality of daily life" gives meaning to everything we do, in order to make life more pleasant for others. To allow employees and senior executives to share in the Group's performance, we have developed employee stock ownership plans and stock option programs.
Very early in our history, we defined three core values that are shared by all Sodexo team members: service spirit, team spirit, and spirit of progress. These values underlie our corporate culture, bond our teams together and inform our strategic choices.
Our ability to finance growth
Because we started with very little capital, I was faced with a dual challenge, which was how to develop a company:
- With very little money
- Without losing our independence
My goal in remaining independent was to ensure the long-term viability of our purpose, our values and our strategic vision. That's we have always deployed a simple, highly disciplined financial policy that:
- Focuses on businesses that are not capital intensive. Our investments represent less than 2% of total revenues.
- Develops businesses that generate negative operating working capital, meaning that create cash flow. In addition, we improve cash flow by focusing on reducing receivables.
So we have made Sodexo a success by committing to growth, focusing on the client, showcasing and rewarding our people, and maintaining financial control over our growth and development. Along the way, we've experienced a large number of failures too, but that's inevitable when you take risks. A simpler way of explaining our success is to say: "The sum of our successes is slightly greater than the sum of our failures."
Our international expansion
We developed into a global enterprise for 3 reasons:
- First, I traveled a lot and enjoyed learning about new countries and cultures. As soon as Sodexho had become a national company, I started to dream about making it an international company.
- Second, with the improvements in air travel, telecommunications, trade and financial exchanges that occurred 30 years ago, we understood that the world was there for the taking.
- Third, we realized that even if France was the world's fourth largest economy, it accounted for less than 1% of the global population, and Sodexo's growth potential is proportional to market size. So it wasn't hard to see that our future was mainly outside France.
It would take too long to explain our strategy, but I would like to mention two developments that played a very important role in our international growth.
The first was my meeting with Bill Fishman
In early 1970, the company was 4 years old and still just a small, regional operation. I received a phone call from an American, who said,
"Mr. Bellon, I'd like to meet you in Paris.".
"Well, who are you?", I asked.
"I'm the CEO of Ara Services (currently Aramark), the world's leading food services provider, I'm coming over in my private jet and I'd like to meet you.".
So I agreed, but I was very surprised.
I had no idea how he could have known about us in Marseille because we were completely unheard of. What's more, I thought that the French had invented the food services business.
So I went to Paris, and Bill said:
"I want to buy your company.".
I replied, "Maybe we should get to know you a little better.".
He invited us to the United States. The deal was wide open, since he was determined to win us over. We stayed about two weeks and got to see a company that was at least 250 times as big as Sodexo.
Our visit had 3 major consequences:
- Firstly, we went back to France with a suitcase full of procedure checklists, strategies and pictures.
- Secondly, having seen such a big company, I was convinced that we should stay in the business because apparently it had enormous growth potential.
- Thirdly, although I'd been young at the time, I had happy memories of the Americans landing in Italy, southern France and Normandy. And I knew that if US food service companies debarked in Europe, they would overwhelm us. So my strategy was simple - I would move as quickly as possible into markets where the Americans were not present. That's how we got our start in Belgium, Italy, the Middle East, Africa, Brazil and elsewhere.
My meeting with Bill Fishman made us more ambitious. I've often said to him since then: "Bill, in fact you're responsible for Sodexo's growth."
The second involved opportunities for acquisitions and alliances
By the 1990s, we were the world's fifth-largest food services company. We realized that most of the industry leaders were part of larger groups, mainly hotel companies. Britain's Gardner Merchant belonged to Forte, Marriott Management Services belonged to Marriott International, and Partena in Sweden was also part of a hotel company. To compete globally, these companies needed to refocus on their core business and that meant selling their food service businesses, which they saw as secondary.
In 1995, we acquired Gardner Merchant. We'd started from scratch in the UK and Gardner Merchant was 40 times as big as our local subsidiary. You can't compete with somebody who's 40 times as big as you. So we decided to acquire Gardner Merchant. Toward the end of the year, we had an opportunity to acquire Partena, which operated in Sweden, Denmark and Norway, three countries we hadn't had time for. So we acquired Partena.
Similarly, Marriott Management Services was five times as big as our North American subsidiary and we knew that Marriott International was interested in selling the business. Initially, we created an alliance with the Marriott family. Then, in July 2001, we acquired the remaining shares.
With these acquisitions, we became No. 1 in the United States, No. 2 in the United Kingdom, and No. 1 in Scandinavia. Without them, we wouldn't have developed an integrated global network. And since our main clients and suppliers are global companies, these acquisitions have made us highly competitive. Excluding commercial restaurants, we are the world's leading food service provider. We are also No. 1 worldwide in the Healthcare and Education segments, No. 2 in Business & Industry, No. 1 in Remote Site Management, and No. 2 in Service Vouchers and Cards.
These two examples explain our international development, achieved in part through acquisitions. Our main objective, however, is to continue to expand through organic growth, because it is the best way to meet the expectations of our clients, our employees and our shareholders.
Pierre Bellon tells the story of Sodexo.
