INTERVIEW
Taking food centre-stage
Nestlé International Travel Retail General Manager Stewart Dryburgh gives an update on the company’s transition from pure confectionery player to food pioneer.
In 2021, Nestlé International Travel Retail (NITR) unveiled its ambition to put food in 50% of all travel retail baskets. This mission, to turn food into the #1 most purchased category has since completely reshaped the company’s travel retail approach.
In the two years since its reveal, NITR General Manager Stewart Dryburgh has been hard at work bringing this vision to life. We catch up with Dryburgh, who is optimistic about the industry reception to NITR’s Food #1 strategy. “We’re really pleased with how it has been received across the trade,” he says. “We hit a spot in time where retailers were looking for different ways to tackle the problems and exploit the opportunities in our channel.
“We asked the questions at the right point and got the research done at the right time, giving key retailers a different way to look at the category in its totality. This is a clear ambition as a starting point and then we introduced the VERSE model, as a tool, to bring that to life.”
NITR’s new roadmap for the food category is built around its five VERSE pillars: Value, Engagement, Regeneration, Sense of Place and Execution.
“The recent m1nd-set research has demonstrated that our strategy remains sound as we see food buyers have increased from 30% to 35% and nipping at the heels of beauty at 38%. Critically, we are not seeing any cannibalisation between confectionery and non-confectionery so there is real, incremental category growth.
NITR General Manager Stewart Dryburgh
“In fact, non-confectionery is the fastest-growing sub category in global travel retail. One of the key tenets of our strategy was the appeal of the category and its ability to drive conversion and footfall if prioritised and presented as well as other categories. Importantly, we see that footfall for food is not only increasing but higher than key categories such as alcohol, tobacco and souvenirs.
“Even more encouraging is that food has a higher conversion rate than all other categories with the exception of tobacco. It is currently at the same conversion rate as alcohol. We see that food has a higher conversion rate than beauty and alcohol and non-confectionery including vitamins, which is the strongest overall.”
Well-timed launch: Last year, NITR and Dubai Duty Free introduced a stand-out travel retail exclusive during Eid al-Adha celebrations
“Delivering value is so important and it is going to be much harder now with the cost-of-living crisis,” Dryburgh explains. “Engagement is about connecting with consumers in ways that are relevant to them. Regeneration is all about going beyond sustainability and not just sustaining the environment but putting in the effort to regenerate the planet. Bringing goodness back into the soil is so important as a food company, and driving awareness about the importance of sustainability and regeneration makes me extremely proud to be part of Nestlé.
“Sense of Place has always been there and airports have always been drivers of this. Nothing is more local than food – so it’s a great way to build Sense of Place. The ability to leverage the local nuances of food, whether that’s whisky in Scotland or maple syrup in Toronto, can really elevate Sense of Place no matter where you are in the world. We really want to put local flavour centre-stage with our new approach and in terms of Execution.”
Coffee and VMHS
Expanding beyond confectionery is no easy feat, but Nestlé’s vast, multi-category portfolio offers plenty of synergies to explore new categories in the channel. “No one is better placed to bring coffee into the channel and no one is better placed to blend wellbeing with food thanks to our Health Sciences portfolio,” Dryburgh says.
Coffee, and in particular Nescafé, offers plenty of geographical opportunities for NITR
“Nestlé has always been a food company,” he adds. “We started off in in nutrition way back in 1866 and we expanded into chocolate, coffee and other food categories. For us, it’s been an easier transition because we are a food company at heart.
“In travel retail, we were only focused on one slice of what Nestlé as a company has to offer. The crisis gave us an opportunity to step back, look at the big picture and see where we can expand. That compelling logic, which is based on what the consumer is telling us, is driving us in this direction – with coffee and vitamins, minerals and health supplements (VMHS) key drivers of that.
“I remember the January morning when the research came back showing this great interest consumers had in buying coffee – it was a lightbulb moment for us,” he recalls.
“There’s an opportunity to play with the coffee that is available domestically versus what you can make available in travel retail. For example, in Europe everyone knows Nescafé Gold Blend. However, in emerging markets they associate Nescafé with the Classic Blend and the red mug – and they see Gold Blend as a premium product. We can play on these differences and introduce new formats and variants to consumers who may know the brand, but don’t know that particular expression.
“Then you have VMHS – but then you get into the territory of how much can we do at one time while we’re all scaling back up? Straight away we got our VMHS project off the ground with Dufry, and we’re very excited about the early green shoots of this pilot programme in terms of how it’s being executed. Our vitamins brand, Solgar, is working really well within the industry-leading Mind. Body. Soul. concept and it’s still early days.
“One of the challenges we’re facing with VMHS, because we’ve spent the last eight or so years acquiring different businesses under our Health Sciences umbrella, is integrating operational structures and synergies. Basically, making sure that the plumbing in the back of the house is robust before expanding this on a larger scale.
While Solgar is the first brand to be trialled, the Nestlé portfolio includes a range of global wellbeing-oriented brands such as Vital Proteins, Garden of Life and Natures Bounty
“The other challenge with this sub-category is that you risk hitting regulatory hurdles across different governments including non-tariff barriers on regulated ingredients,” Dryburgh adds.
“We’re very excited about VMHS. There are some operational complexities to it, far more than coffee, but the consumer has shown there to be a demand for it. There’s a growing awareness around wellbeing, driven by the pandemic, which means there is plenty of potential to excel in this category despite the challenges.”
Amid all this change, confectionery will still be the beating heart of the NITR portfolio. “It has been, and always will be, the core of our offer,” Dyrburgh says. “Confectionery is always going to be there because people like sweet treats when they’re travelling. It’s a low-risk, low out-of-pocket category, but you can always rely on confectionery to be a good gift.
“We’re excited about the progress we’re making with the Food #1 strategy. Confectionery didn’t become a major category overnight so to build the broader food category beyond confectionery will take time too.”
Nestlé International Travel Retail and Dufry have partnered with Nestlé Health Science to deliver a global travel retail first with the trial of health and wellness brand Solgar in Dufry’s new shop-in-shop retail concept, Mind. Body. Soul.
A Powerful Partnership
Another significant development in NITR’s Food #1 journey is its partnership with creative retail agency Portland Design. “We’ve been working with Portland Design on and off for seven years now,” says Dryburgh. “In order to turn our Food #1 vision to reality, we need to bridge the conceptual to the tangible and give our partners a clear picture of what this ambition can look like in travel retail. That’s the goal of our partnership with Portland Design. It’s a work in progress – which we will be fully revealing in Cannes.
“To have something we can take to retailers will really take this mission to the next level,” he adds. “The VMHS space bridges beauty and food and so we’re hoping our work with Portland Design can show how this can be achieved on the shop floor. It’s more impactful, creates stimulus and helps people understand our ambition better.”
Like any first adopter, the transition from a dominantly confectionery player to a wider food company has been met with its fair share of challenges. Dryburgh says: “Not everything we’ve done has worked. I imagine it like this: you have the Wright Brothers trying to get their airplane prototype to launch in Kitty Hawk, which obviously took a lot of test and learns and failures too. But they knew they were on to something.
“The type of progress we’re trying to achieve takes time to evolve and you need to have a longer view – not just looking at the next quarter. After all, you wouldn’t have the Boeing 747s of today if not for what the Wright Brothers achieved back then.
“The challenges have been more internal than external,” he adds. “Externally, our customers have got it and our retailer partners, thanks to help of trade media like The Moodie Davitt Report, understand the vision too. Internally, the scale of our organisation (with 300,000 employees across different business units), means you need a little bit of magic, plenty of connections and a lot of resource to make it all work together. This means that we’ve had to be very selective about what categories and brands we are launching in the channel.”
While confectionery has proven resilient amid the numerous crises of recent years, recovery has not exactly been smooth sailing, Dryburgh says. “While passengers are returning and that’s very positive, all the players have had to deal with the rising cost of goods. Whether that be from their own materials to the transportation, manufacturing costs and even factory heating. Recovery is not linear but it’s definitely moving in a positive trend.
“In terms of numbers, the bottom line is: we have not recovered yet,” Dryburgh says. “It’s going to take time for this strategy to be meaningful in terms of top and bottom lines but the green shoots are there. So far, we really appreciate the support from the retailers who have joined us on this journey.
“The beauty of this strategy is that it’s not just us who will achieve it,” he adds. “It will take everyone in the ecosystem to bring it to life, starting from local producers through to the big multi-nationals. It’s not something we’ll achieve in isolation but something we’re looking to bring thought leadership to in the industry.”
Looking beyond local and confectionery, these other growth drivers can create synergies across the ecosystem. Dryburgh says: “Mondelez has been talking about biscuits for some time – and that can actually work well with our hot drinks portfolio. In a retail context, you can imagine how that would fit in a store of a certain size or layout. It opens up a whole world of possibilities.
“We want to stimulate debate. We’ve got a finger on the pulse of what consumers are looking for and so good partnerships are critical to bringing this to life.”
Unlocking category potential
As of Q1 2023, confectionery has become the most purchased category in travel retail, a position it shares with perfumes and cosmetics. “Perfumes and cosmetics is always going to be one of the more dominant categories – but I see all the categories working together as part of one symphony. We all have a role to play,” Dyrbugh says.
“Our goal is not necessarily to make food the biggest category in value, but the most purchased. Our job is to make sure that the retailers don’t overlook this category and that it gets the appropriate amount of attention, thought and bandwidth. To go back to that metaphor, we may not be the lead violin in the symphony – but if you took us away the whole will be less.
“We recognise the role we’re playing and that all categories play a part. However, we also need to share with retailers when there’s an incremental opportunity that we’ve not been exploiting, and that's what we’ve unearthed with our Food #1 ambition.
“When you view food with a wider lens, you start to tick boxes in sustainability, Sense of Place, engagement, increasing basket spend and delighting consumers with something unexpected. If you do that – then you’re adding something of value to the whole travel retail ecosystem. You’re adding something as ‘in addition to’ not ‘in expense of’ and if you frame it like that then there’s room for everyone to benefit.”
Spotlight Series – September 2023