US$10 billion in ten years: Reigniting category growth
Nestlé International Travel Retail (NITR) General Manager Stewart Dryburgh sat down with The Moodie Davitt Report to give his take on how the ambitious ’10 in 10’ vision can be achieved.
For a decade from the mid-2000s, the confectionery and fine foods category rode the crest of the travel retail sales wave, achieving an eye-catching average annual growth of around +9.7%. However, from 2014, that impressive growth began to slow, with the yearly figure hovering around the +1% mark since that time.
With ACI forecasting an annual passenger growth rate of +7.1% into the coming decade, Nestlé International Travel Retail (NITR) started to ask itself what the confectionery and fine foods category could do to reconnect with traffic increase percentages – following similar growth levels it calculated that a target for the category of US$10 million could be achieved in about ten years, approximately doubling the present market value.
Following a major Nestlé research project with m1nd-set, NITR identified the key drivers which will be essential to achieving this, revealing its ‘10 in 10’ vision at the ACI Commercial and Retail Conference in Reykjavik and later at TFWA Asia Pacific in Singapore this year.
NITR General Manager Stewart Dryburgh has built up a deep knowledge of the confectionery category from a career of senior roles with Nestlé spanning more than 20 years. He believes that the “ground-breaking” research provides a platform for the main stakeholders involved in the category: brand owners, retailers and airports.
He says: “The travel retail industry has enjoyed monumental growth over the past 15 years – much of that in line with increases in passenger traffic and, of course, the Asia Pacific travel explosion. Given the size, diversity and challenges of the market now, it will be a challenge – but we do believe the target we have set is achievable within ten years.”
Reflecting on the slowdown of the confectionery and fine food category growth Dryburgh asks several key questions: “Why has this happened? What’s changed? But most importantly, what are we going to do about it? How are we going to reignite the growth of this exciting category? Our vision, and the drivers we have identified, points the way forward.”
“The commonalities of the core category drivers exist across all countries. The question is, how would you execute those for that particular nationality?”
He says that the central force to achieving the target is category players connecting back into a deep understanding of what consumers are looking for. “A number of our biggest customers are talking about the importance of localness and therefore the ability to connect up our brands to the consumer in local ways across the globe.
“It’s about understanding how we connect with the relevant passengers in the relevant terminals. One of the interesting and wonderful challenges that this industry provides is that every retail location is different, every terminal is different and the passenger mix is different. We need to make sure that we have something which is effectively going to connect with the group of passengers who are travelling through that terminal.”
He adds: “The critical factor is, and given the fact that Nestlé has done this research over 34 different countries, and we have been able to map our findings from a travel retail perspective against that, the commonalities of the core category drivers that we talk about exist across all countries. The question is, how would you execute those for that particular nationality? We are trying to address that with our vision.”
Dryburgh emphasises that achieving the US$10 billion target will not be about what Nestlé does in isolation. “Nestlé needs its retail partners working with us but Nestlé or the category will need other players coming on board. All of our competitors, whether it’s Mondelez, Mars, Lindt, Godiva or others, we want everybody to embrace this thinking because in that time-honoured phrase: all ships climb on a rising tide. We want to get the confectionery and fine food tide category rising again.”
Dryburgh, while acknowledging the continuing importance of the European travel retail market on the sector, is quick to focus on connecting the category with fast-growing numbers of Asia Pacific travellers. “We have to make gains in the emerging Asian markets, not least from the growth of the outbound Chinese consumer, who is not as yet necessarily helping our category, for the simple reason that the Chinese consumer never grew up with confectionery as part of the snacking repertoire.
“So, there’s a job to be done in terms of engaging the Chinese consumer in the fun and the pleasure that this particular category can bring to them. There’s a mid to long-term game that all of us have to play but when we crack that, then there will be a lot of wind under the wings.”
So how will greater connection with the Chinese consumer be achieved? He replies: “There’s a two-pronged approach to it. One is fundamentally what happens day in and day out in the domestic market. The beauty category has been working for a long time domestically within China and they found a way to tap into the mind-set of the Chinese consumers and engage. We have to do the same with our category.
“So, it’s one, work on the domestic front and then, two, when they are out and travelling, helping them navigate what is in the category. I think there’s an appetite for it.”
The airport remains a hugely fertile ground for presenting and growing the confectionery category. Dryburgh concludes: “The airport opportunity provides a wonderful world of face-to-face interaction where you can actually put your brand in front of a consumer and we should never dismiss the opportunity of the five senses that we can allow ourselves to play within that particular environment.
“So we are sitting on something which is really quite exciting and most brand owners understand that. We must make sure it works on the bottom line for all of the key travel retail industry stakeholders, as well as delivering value to the consumer. If we make that work then we are all going to be very happy people.”
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