Chief executive officer, Compass Group
Born: October 14, 1948, in United Kingdom.
Education: Westminster College.
Family: Son of Sidney William Bailey and Joyce Mary (maiden name unknown); married (wife's name unknown; separated); children: two.
Career: Gardner Merchant, 1964–1985, food service manager, then later executive director; 1985–1991, president of U.S. subsidiary; 1991–1992, managing director of contract feeding business; Nutrition Management Food Services Company, 1992, executive vice president; Compass Group, 1993–1994, group development director; 1994–1999, CEO of North America Division; 1999–, CEO.
Address: Compass Group, Compass House, Guildford Street, Chertsey, Surrey KT16 9BQ, United Kingdom; http://www.compass-group.com.
■ Michael J. Bailey had a long career in the food service industry: from his first job as a canteen chef he rose through the ranks to become the group chief executive of Compass Group, one of the world's largest catering and franchise food-brand companies. Bailey helped turn the small UK-based catering company into an international market leader; Compass Group became an FTSE 100 company with over 375,000 employees in 90 countries and annual revenues of more than £10 billion.
Bailey originally left school at the age of 15 because he was fed up with classes; he quickly found a job as a canteen chef at a Ford Motor Company facility in the United Kingdom. He also served as a chef for British troops stationed in Afghanistan. Bailey eventually returned to school, graduating from Westminster College in London and attending a number of additional classes and lectures on business topics.
In 1964 Bailey moved to the large catering company Gardner Merchant and slowly worked his way up the corporate ladder.
He started out as a food service manager; in 1985 he became the president of the company's U.S. subsidiary, helping it increase in value from $40 million to $225 million. In 1991 Bailey became the managing director of Gardner Merchant's contract feeding business. In 1992 he left to become an executive vice president of Nutrition Management Food Services Company in the United States.
Bailey then joined Compass Group in 1993 as group development director. Compass Group evolved out of the company Factory Canteens, which was established in 1941 in the United Kingdom to provide the compulsory hot meal that was guaranteed to wartime munitions workers. Acquired by Grand Metropolitan (later Diageo) in 1960, the firm became Grand-Met Catering before being relaunched in 1984 as Compass Services. Compass Group was then formed from Grand Metropolitan in 1987 as a management buyout, listing on the London Stock Exchange in 1988.
In the early 1990s Compass Group was almost wholly a UK-based concern, with 99 percent of its business being done in the United Kingdom; the remaining 1 percent consisted of catering for a remote Alaskan site. The UK market was entering a period of recession so the company decided on a program of overseas expansion. Compass Group acquired both Scandinavian Service Partner and Letheby & Christopher, the UKbased sports and events food-service provider, in 1993.
Bailey was a key player in Compass Group's new strategy. As group development director he brought into existence the branded food-service subsidiary New Famous Foods, which sold both the company's own brands—such as Ritazza, Upper Crust, and StopGap—and franchised brands such as Burger King. The use of branded products proved to be a great success for Compass: familiar brands offered the consumer security and a set of expectations that would be consistently fulfilled; if quality was maintained, satisfaction with the brand would grow.
Compass developed Ritazza, its international café brand, to branch out into the growing market for espresso and gourmet coffee. In 1998 only a single outlet sold Ritazza coffee; by 2004 the brand was being sold in 20 countries at over 1,600 locations, including airports, universities, hospitals, and shopping malls. The StopGap brand provided European customers with American-style convenience-store products, including snacks, confectionaries, books, magazines, and even gifts and greeting cards. Sales of StopGap products spread quickly across 13 countries; the brand was sold in the education, health-care, travel, business, and industry sectors.
Bailey was instrumental in the 1994 buyout of Canteen Corporation from the U.S. company Flagstar. At the time Canteen was the largest vending company in the world, and its acquisition opened up new opportunities for the marketing and distribution of Compass brand products. Compass Group acquired other companies as well, such as Eurest International in 1995, which specialized in the delivery of meals for business and industry as well as in offshore and remote-site service, such as for the armed forces.
Bailey became chief executive of Compass Group's North America Division from 1994 to 1999, during which time the division nearly tripled its sales and profits. Bailey moved back to the United Kingdom in July 1999 when he was appointed group chief executive. As CEO he was to oversee the complicated merger and subsequent demerger of Compass with Granada, which forged the world's largest food-service company.
The hospitality and media company Granada wished to shed the hospitality side of its business, and Compass was interested in the food-service portion of that division. The merger brought about by Bailey was rather complex and at first caused some shareholder confusion, especially due to uncertainty regarding the share price. A straight sale would have come with a large tax bill, however, so a plan to merge the two companies was put into motion, creating Granada Compass. The companies then demerged, with Compass retaining the hospitality portions of Granada; the arrangement saved Compass over £1 billion in taxation.
As Bailey told FoodChain Magazine , "What we were left with were the existing Compass businesses plus Granada's very successful Sutcliffe Catering business and motorway and roadside food-service outlets—and a hotel portfolio valued by the market at approximately £3 billion" (May/June 2001). Yet many shareholders were unhappy with the merger, seeing Compass's entry into the hotel industry as a potential liability; in response those assets were later sold for over £1.4 billion.
Bailey saw growth and globalization as the keys to the contract food business. In an interview with the Wall Street Transcript Bailey noted that clients were looking for a single point of contact—a company that could provide all of their foodservice needs in all of their locations without any hassle and could deal with any problems or issues that might arise. Through continued expansion and increased diversity within the framework of contract food, Bailey deemed Compass able to deliver such service.
Greater size gave Compass the ability to leverage purchasing and the flexibility clients demanded—as well as savings in terms of economies of scale. Bailey noted that the contract food market was vast, with plenty of room for further growth. As new manufacturing concerns were born in developing countries, the demand for employee meals grew. Bailey felt Compass to be ideally positioned as an established, reliable, global outsourcing food caterer that could provide all of the services required by new customers.
Bailey offset international expansion with reductions in overhead costs. Under his leadership Compass sold off many of their physical assets in order to focus on the core business of food service. While Compass needed to retain depots, vehicles, and vending machines—as well as restaurants in airports, museums, and stadiums—the largest portion of the company's business remained outsourced contract catering, where the equipment and premises of others were used, which reduced overhead costs. Bailey told Food Chain magazine, "Essentially our business is about providing a better-quality service cheaper than a self operator" (May/June 2001).
Bailey saw employee happiness and motivation as key in Compass Group's service-oriented industry. A share-investment incentive was launched in 2001 to help employees "share in the success" of the company; the scheme included a share savings plan for all permanent employees. Compass introduced a "great ideas" competition to reward innovative employees, with a prize of one hundred shares. Such promotions created additional challenges, however, when share prices fell upon the announcement of the merger with GrandMet. A dropping stock value had the potential to demotivate employees, so Bailey introduced a biannual video in which he personally explained the business results of such occurrences to staff.
An example of the innovative branding and marketing undertaken by Compass during Bailey's tenure was the Moto brand. One of the assets gained by Compass after the merger/demerger with Granada was a chain of 47 motorway service stations. These had reputations as poor-quality, overpriced rest stops that relied on the captive nature of the motorway-bound consumer. While some considered these stations to be a liability, Bailey saw them as a goldmine. The stations were given total makeovers in terms of image, product lines, and service, and renamed Moto; Compass found these stations to be the perfect sites at which to sell more of its branded products. Familiar goods at standard—not gouging—prices counteracted the negative assumptions customers had previously held with regard to motorway outlets.
The most popular feature instituted at Moto was the continual maintenance of clean restrooms. The company found that the majority of their customers headed straight for the restrooms. Dirty facilities could easily turn customers away from food; when restrooms were clean and hygienic, motorists were more likely to stay and eat. The changes to the motorway service stations were modeled after the successful Italian autostrada rest areas, and the name Moto was chosen to evoke an association with those popular stops.
Commentators remarked that Bailey had statistics at his fingertips and could always offer facts and examples from his long history in the food-service business to support his case in an argument. Throughout his career Bailey remained passionate about food. He loved to cook—and eat—and knew he was not alone. He told the Mail on Sunday , "People will always want to eat. All that stuff about us living off pills is nonsense. It will never happen in my lifetime" (January 6, 2002). In Bailey's opinion the demand for food would be a constant if not increasing need, and he helped Compass to satisfy an ever-growing portion of that demand.
See also entry on Compass Group PLC in International Directory of Company Histories .
Bailey, Michael, "Compass Group PLC, CEO Interview," Wall Street Transcript , August 27, 2001, http://www.twst.com/ceos/cpg_l.html .
Carlino, Bill, "Flik International Corp.: Walking the Fine Line between a Family Operation and a Growing Corporation—Compass Group USA," Nation's Restaurant News , March 2, 1998, http://articles.findarticles.com/p/articles/mi_m3190/is_n9_v32/ai_20354009 .
"From office chef to global sandwich maker," The City Interview, Mail on Sunday , January 6, 2002, also available at http://www.thisismoney.com/20020106/nm42477.html .
O'Hanlon, John, "Broad Compass—Part One," Food Chain Magazine Online , May/June 2001, http://www.foodchainmagazine.com/0106/01-compass.html .
——, "Broad Compass—Part Two," Food Chain Magazine Online , July/August 2001, http://www.foodchainmagazine.com/0108/ad_compass.html .