SSP Group, the owner of Upper Crust, is under threat after the UK rail watchdog tightened the noose in its bid to improve competition in the railway station catering market.
The Office of Rail and Road on Wednesday published the findings of a final report into the extent a lack of competition between retail providers has been bumping up costs for passengers and the taxpayer.
The findings have brought London-listed SSP Group, which owns most railway station catering space with brands such as Upper Crust, Ritazza and the Camden Food Co, into the spotlight.
Some 20 to 30 per cent of all British outlets, taking a 40 to 50 per cent share of passenger spending, are owned by SSP.
The ORR on Wednesday pushed for changes to the tendering process including the simplication of contracts for new entrants but its demands fell short of calling for an intervention from the Competition and Markets Authority (CMA).
It came after findings in December that Brits are paying a 10 per cent price premium at stations compared to the high street.
Russ Mould, investment director at AJ Bell, said the watchdog’s announcement was “bad news” for SSP.
“Selling baguettes and pasties at above-market prices has been lucrative business for SSP given its dominance in the sector. It’s been able to charge more for items as travellers don’t typically have time to shop around for deals or there isn’t a lot of choice.”
However as yet, the potential shake-up to the market has had little impact. Shares in SSP had barely moved by midday as investors backed the firm’s outlook amid booming global travel demand.
The firm reinstated its dividend in May after raking in £1.5bn in half-year revenue ahead of a busy summer of sporting events in Europe.
“Investors appear to have taken the view that SSP’s expertise and scale won’t be materially challenged, partially because it does business in many geographic territories beyond the UK,” Mould said.
SSP’s share price was already depressed prior to the news and has been since Covid-19. It is one of the few travel related companies that has yet to see its stock bounce back in the post-pandemic era.
Mould added: “Earnings have been held back in Europe due to falling margins, disruption from train strikes and other negative factors. There are plenty of issues management need to address and heightened competition would only add to the list.”
SSP were approached for comment.