Interview with Michel Landel, CEO of Sodexo

September 18, 2009   Sodexo's CEO sets the new course for the group. An interview with Michel Landel, CEO of Sodexo.
 
In Les Echos, Michel Landel redefines its business lines and accelerates its diversification.
 
“We are inventing a new business” 
 
As CEO of Sodexo since September 2005 and as a member of the Board of Directors since last January, Michel Landel reflects upon his strategy in an interview with “Les Echos”. The focus of the group on services for businesses and organizations has been consolidated, he explains, with a positioning which is “clear” which makes Sodexo “a provider of global solutions which contribute to quality of life.” As a result, Food and Facilities Management services has been re-named “On-Site Service Solutions” and Service Vouchers and Cards becomes “Motivation Solutions”. Michel Landel intends to make Sodexo the “global leader” in Motivation Solutions. At the same time, this international heavyweight (€13.6 billion in total sales and 355,000 employees in 80 countries in fiscal year 2007-2008) is developing Personal and Home Solutions, he notes.   
 
It is now four years since you became Sodexo CEO.  Has the magnitude of the economic crisis led you to revise your strategy? 
 
Our vision has not changed. What guides us, and what has always guided us, are the needs of our clients. They seek with us ways to improve their productivity, the retention of their employees and their attractiveness. We have confirmation of our conviction that quality of life is a source of progress for individuals and contributes to the competitiveness of organizations. We're in the process of inventing a new business and our position is clear: Sodexo is a provider of solutions that improve quality of life: for employee motivation, the effectiveness of business processes and organizations as well as the sustainability of their infrastructure. We are moving up the value chain: we are a strategic partner to our clients, we create an offer, we manage it and we implement it.  As part of our global offering, we want to be the direct operator for at least two thirds of the services provided, complemented as needed by appropriate specialized partners.
 
To better express this unique positioning, we have decided to rename our two major service activities: Food and Facilities Management services is now “OnSite Service Solutions” and Service Vouchers and Cards becomes “Motivation Solutions” which includes our Restaurant Pass, Gift Pass and Childcare Pass. This activity is an absolutely essential part of our offer.  The potential of our markets is considerable: 650 billion euros for On-Site Service Solutions, 130 billion euros in Motivation Solutions.   
 
The reference to Foodservices, historically Sodexo’s main business, has disappeared.  Does this signal an evolution in the development of Sodexo? 
 
The reference to Foodservices and to services no longer corresponds to the needs of our clients who are asking us to extend our offer. There is a groundswell of demand around the world, in hospitals, universities, businesses and defense. Our business is no longer only Foodservices.  We are, for example, experts in the maintenance of high-end medical equipment. Yet, we still generate 72% of our revenue from Foodservices. We are experts and we will continue to reinforce our leadership in this area, which is an important part of our offer. It is one of four pillars of our development strategy, the others being: developing our On-Site Service Solutions; becoming the world leader in Motivation Solutions; and expanding our Personal and Home Solutions offer. Do you know that in the United States, in over 63% of surgical procedures, patients return home the same day and need home services? To respond to this need and to complete our offering in the Seniors segment, we are interested in providing non-medical services in the home. We have just completed the acquisition of Comfort Keepers, number two in this sector in the United States. In the U.S., 95% of the population over 65 years of age lives at home. The potential is thus enormous.   
 
This is also a change of clientele?
The place of the consumer in our business is becoming increasingly important. A large part of our development will be more directly with them. It also is the direction of the positions we have taken in concierge services.   
 
Returning to Foodservices, do you have a goal in terms of balancing its weight in the business portfolio of Sodexo?

In 2005, we said that as part of our Ambition 2015, we wanted to increase the share of services other than Foodservices to around 35% to 40% by 2015. We are maintaining this goal, but as you can imagine, we do not have full control over the timing.  More broadly, we are reaffirming our medium-term objective to generate average annual revenue growth of 7% and reach an operating margin of 6%.   
 
You reaffirm your commitment to Service Vouchers and Cards at a time when Accor, your main competitor, is planning to leave. Are you interested in Accor Services?
Obviously, we are watching closely what is happening at Accor. But at this point, nobody knows what will happen. It is premature for me to answer. That said, Accor is and will remain a major competitor with which to be reckoned.  I would add that Accor Services has chosen to highlight prepaid services. But for us, "prepaid" is only a means of payment. What interests Sodexo foremost is the benefit delivered to the client. This is why we talk about Motivation Solutions.   
 
Sodexo generates almost 40% of its revenue in the United States. What is the impact of the crisis on your business there? What is your position in the debate on when the crisis will end?
I have already said that 2010 will be a tough year, but Sodexo is still growing, even if it will probably be modest. It will take time to reduce the debt of American households and certain businesses and states. Additionally, unemployment is still rising. The global economy has long relied on U.S. consumers. They now need to save. The source is currently dry and I do not see consumption in Asia picking up the slack in the short-term.   
 
In the short-term, have you reviewed your goals for the year 2008/2009?

We just closed our accounts and will not publish our annual results until November 10. However, I remind you that during our last financial communication in July, we indicated that we were in line with our objectives.