Keynote interview
“If you want to understand what we do, it’s important that you walk the stores, meet the people, see the culture at work and discover the nuances of each location.” Morpho Travel Experience CEO Adriana Echandi sums up why our recent visit to Costa Rica (as well as Colombia and Chile) was important if we were to communicate the story of this creative, dynamic Latin American travel retailer, now in its third decade of operations.
Sitting with Echandi and Strategic Development Director Marcela Villalobos Moya at company headquarters near the capital – and heart of its operations – San José, we reflect on a whirlwind tour that has taken in thrilling flights in 12-seater aircraft over both Atlantic and Pacific coasts in Costa Rica and spectacular views of the active volcanoes that ring the capital city region.
I’ve been on a visit to the stunning La Paz Waterfalls & Gardens, fed a toucan, come face to face with a sloth, learned the art of coffee blending and sampled the simple but joy-filled cuisine of Costa Rica. A visit to Chile was no less memorable, with winery visits and magnificent seafood cuisine offering a taste of that great country alongside an extensive airport tour in Santiago.
The choice of Santiago for a visit was no accident; it is one of Morpho’s most significant airport markets, with the company commanding a strong presence across both domestic and international terminals. A game-changing project, The Plaza, will enhance the entire airside departures experience in the international terminal once it opens in November (see next chapter on the new developments in Chile).
Adriana Echandi: Leading the next exciting chapter at Morpho Travel Experience
Echandi says: “We are proud of our success in Costa Rica, our home, but in coming years Chile will be even bigger for us.”
Achieving success overseas – something Morpho aims to bolster with new contracts – carries real meaning for the management team beyond just securing new territory.
Echandi says: “To have growth stories in 11 markets and to become as established as we have is very important. We introduced a new business model to each place that works. That means we went in and understood the culture, didn’t lose the essence of the people, the Sense of Place, and we built those elements around the customer journey.”
Sense of Place and delivering experiences tailored to the particular audience of travellers in every location is the core of the Morpho strategy.
Echandi says: “We are different because we investigate each country at a high level of detail to understand the tourists. We have a very strict policy of choosing only high-quality products that reflect the local region, with reliable supply and good logistics for efficient replenishment.
“It takes a lot of work. Our business development team has to go out and find those partners that typify the region but can also deliver in creating items made for the airport market. Locally we aim to strike the best relationships with producers who we can represent in these locations.”
The partners range in size, but many are dependent on the income supplied by Morpho’s access to airport travellers.
“We buy from these partners through the whole year, and some of these artisans only work with us now as the volume of work is so high.
"We are mid-sized and are big enough to invest with the airports, but also small enough to be an individual partner to each artisan"
“With one jewellery client we were doing US$10,000 at first but it is an adaptable category and now we are making orders of US$500,000. It makes sense for everyone.
“The Comunidad Latinoamericana de Artesanos (CLA) is a collaborative platform promoted by Morpho Travel Experience. CLA works hand in hand with artisans from Latin America to connect them with the world through the power of communication, digital media and attracting new generations into our history and legacy.
“The platform helps them to tell the history behind their products and innovate in certain processes to increase the social and economic impact in their communities. Latin America is the colour and textures behind each landscape, the essence of its people, a cultural legacy to the world through the voice of its artisans.”
Morpho works in other ways with niche manufacturers across categories, offering platforms for suitable products from windbreakers to deep sea fishing items that resonate with tourists. Other items are mass-produced (such as key rings in China), while many of the branded textiles and t-shirts are made in Peru but designed in-house and produced by Morpho, so the company maintains control over quality.
This last element is one that sets Morpho apart from many other duty free or speciality retailers. Because it designs and develops products, its finances blend retail and wholesale components, which helps profitability. In large markets this scale is an advantage, with economies to be made as retailer and supplier; in smaller markets or entry to new markets with one store or only a few, it makes operating profitably more of a challenge.
The food & beverage business is becoming an important platform for Morpho as it extends its reach (San José Juan Santamaria Airport, Costa Rica pictured)
In doing all this, the company’s highly sophisticated logistics base close to San José is also a strength, ensuring high levels of availability, alongside its chocolate factory (50 tonnes per month produced) and coffee making facility (200 tonnes).
The bottom line is that differentiation and tailoring for each markets works for the airport and for the consumer.
Echandi says: “We know what sells in each market. We use our know-how over 22 years to feed into the designs. We also know that if we differentiate product, then we sell more. We have many hotel stores so there is some duplication in Costa Rica for example, but in Colombia where we have no off-airport stores, every product is exclusive, and cannot be found elsewhere in that market. It sets us apart.
“We present this in our RFPs, where our own organisation and network supports what we do at retail.”
Take it slow: The sloth has become a national symbol, instantly recognisable to those that have spent a few days visiting Costa Rica, and is depicted across product designs and in stores. The Moodie Davitt Report President Dermot Davitt is pictured (centre) in the main Morpho departures store at Juan Santamaria Airport with Strategic Development Director Marcela Villalobos, CEO Adriana Echandi, Director of Retail Alberto Perez Ibarra and F&B Director Byron Mora.
Focus on Latin America & Caribbean
By geography, although Morpho has had some conversations about expansion to other markets, for now the focus is firmly on Latin America & Caribbean, where there remain many airports that offer opportunity, across retail and dining.
Echandi says: “We can integrate any business around the airport or the journey of the passenger. And within the journey of the passenger that can be street locations, resorts, hotels or airports. And there is space for that in Latin America still. We don’t have to go all the way to another continent to achieve this. That will be our path to growth for the next five years.
“We don’t know if an international company will knock on our door and ask if we can help them in their market? If there is a perfect match then we won’t say no, but it’s not what we are seeking. We have our expertise here.”
The drive to grow will be aided by even deeper integration of Grupo Arribada, within which Morpho accounts for more than two-thirds of turnover. Today Grupo Arribada is firmly in acquisition mode, seeking adjacent and related services that will allow it to become even more embedded in tourism infrastructure in the locations in which it operates.
Café Britt and Britt Shop led the original movement of the group into airports and remain brands in their own right. Britt today supplies the rest of the business and is an innovator in coffee, chocolate and other products. The Café Britt name, developed as a coffee shop brand, is franchised for a fee by Morpho in airport locations and by sister Conceptos Gastronomicos in street locations. In each case, the retail arm pays market rates for supply by the Britt network. Delika Gourmet is the other strand of that wider business.
Although each part of the group operates independently, these adjacencies benefit the whole.
And across the business, the team talks about the ‘DNA’ that springs from the Costa Rican culture, education, work ethic and hospitality.
Echandi says: “We know how to have the best of each culture in our products. We can go to the home of the best artisan of lapis lazuli in Chile and say this is made by this special person, and he only sells us this one thing. But the chain of people to get this to market is complex, it involves many people and takes time.
“With the artisans, you have to often explain to them how to do an invoice, say, or how to create the structure to just start up. I don’t think other retailers are doing this, not to the same extent, as some of them are just too big. It’s too much trouble. But that is our business and that is what we do best.
“We are mid-sized and are big enough to invest with the airports, but also small enough to be an individual partner to each artisan.
“We are also flexible enough to change quickly and we do that where necessary. After all, this is just us. We have a board of directors but don’t need that sign-off to change one store or have a conversation with an airport.
“We are agile, we take decisions fast, and we cannot function in anything other than in this human way. We have a structure but we are not over-structured.”
That’s not to say that challenges don’t exist. Aside from lifting revenues and EBITDA this year, a key task is to reduce inventory built up during the pandemic.
Echandi says: “We had both local and overseas inventory (the latter mainly China-made goods) and all of that coming together presents cash flow issues. So we set up a task force in every country to reduce our stock by 30%, which lines better with our growth and cash flow strategies.”
Cash flow is important too given funding needs for new projects and how the company is leveraged. “We are selling well and as long as that continues we have good credit lines available but you always need capex as you grow.”
Scaling back up as new team members join is a positive sign of post-pandemic progress and growth but it presents its own difficulties to management.
Adriana Echandi: “We are agile, we take decisions fast, and we function in a human way”
Villalobos says: “Training is obviously vital yet while we have a very experienced senior team, across the business 56% of people have less than one year with us. That’s is a pandemic effect as we went from over 2,000 people to just 400 and now back above 2,000 again.
“We are all here a long time but many people from the shop floor to the back office are not used to our processes. That all takes time and energy. We have hired specialists in training to help us, we created an app where people can learn the fundamentals, whether it’s service or expenses or new product lines. That is a big job but it’s necessary.
“We also have people who moved up to middle management from the shop floor and while we encourage that, it is not easy. We have to give knowledge to the new people and to those we promote to new roles in every country.
“Our number one goal is to deliver the best possible experience but all of these matters take time to get right and they need to be delivered.”
Morpho Travel Experience revenues
(Expressed in thousands of US$)
Echandi adds: “COVID showed us that you do need financial reserves as a back-up. But we also never doubted that travel would return or that our business model would not be viable. It was clear to us that things would come back quickly, and with empty spaces at airports, that there would be opportunities. And that’s how it has turned out.”
Morpho aims to develop deeper partnerships with airports as it develops, leaning on its two decades as a retailer and recently gained F&B experience. In its two-decade-plus history, the company has never failed to extend or renew a contract apart from a handful where it stepped out because the conditions were unworkable. It continues its drive to build today, led by Commercial Director Ronaldo Herrera.
Each time it does renew a contract, it aims to become a little more efficient, balancing rent rises with tweaks to its cost of goods where possible, or ensuring the airport meets it halfway on helping the company be more productive, whether that is around warehousing or supply, or simply creating space for staff to change to take their breaks, something not every airport makes easily available.
The company's Corteza headquarters close to the Costa Rican capital
Currently the average length of contract is around five years at airports, though it is seven in the key Chilean market, and ten in the Mexican hotels business.
“We like long-term contracts and airports know that we’ll innovate all the time because the traveller comes first,” says Echandi. “You have to maximise the sales over any contract term through innovation and new design, evolving the offer and push the boundaries as partners. If we are just a company that rents space, we are going nowhere.
“But we have demonstrated a high level of partnership. In Chile we stayed open in the pandemic for basic items; it was also a time of desperate social crisis with people sleeping in the airport. Our teams were there working, and built a kiosk selling water, snacks and essentials, not as a viable business but as a support for the airport.”
The ultimate goal, where possible, is to become part of the wider airport experience, not just a retailer. In Antigua Morpho has played a role in developing the airport; in Santiago The Plaza project is a service to travellers that goes far beyond just stores or restaurants.
“At certain airports, a combination concession of F&B and retail would be a positive move, not necessarily a master concession but with more integration,” says Echandi.
“Whatever form it takes, we want a deeper relationship. When we go somewhere new we don’t just stop once we arrive, we keep going. We aim to be the best commercial partner for airports or hotels, but also to even go beyond being a commercial partner.
“Many of the airport groups know us now very well and see how easy we are to work with. We could see a time when we even become part of the bidding by airport groups when new airport infrastructure concessions arise,” says Echandi.
“We work with many partners who now see what we bring to the table and what more we can potentially do. Not only that, but we can work with governments to promote the country and be part of the tourism infrastructure, where it is possible. That’s how we see things moving ahead.
“We started with a small kiosk and we are now a mid-sized travel retail player. We adapt easily and we work fast. We are 22 years in but really we are only in the middle of our story.”
August 2023