The Size of the Opportunity

A long-time ‘supporting’ category in travel retail, food (including confectionery) can play an even greater role in reshaping and driving the industry forward, through the recovery phase and beyond, says Nestlé. The idea that food can become the number one purchased category is one that is built on a solid base. Food & confectionery combined already represents the second most purchased category in the sector (purchased by 30% of shoppers pre-crisis compared to P&C at 48%) and is the leading driver of cross-category purchase (source: m1nd-set).

Food #1 cross category driver

The key question is: why is food growing strongly in the global domestic market and not in travel retail? How can we translate domestic market growth rates into the travel channel? We need to rethink and reappraise the category and adapt and tap into changed consumer/shopper needs and occasions, says Nestlé.

Importantly, the fundamentals are there to support a new view of our channel’s importance. As noted by Bain and Castlepole Consulting at an APAC Dialogue webinar last March (organised by APTRA and The Moodie Davitt Report), retail is destined to become more than 50% on average of major airport revenues in time.

Retail revenue is critical to industry recovery

Bain & Company Italy Partner Mauro Anastasi said (in that webinar) that the shape of the airport business will change permanently, with even less aviation income and more from non-aviation sources in future, although he noted that profitability could still mirror pre-crisis levels with adjustment to the business model. “There will be a need for a change in strategies at airports, embracing competition and marketing to establish strategic partnerships. In non-aviation, we’ll need to redesign and update footprints, develop a new category and brand mix, with more convenience-focused F&B, focus on omnichannel, CRM and the digital real estate.” The focus needs to fall on increasing passenger penetration through reimagined retail design and better understanding of a new consumer to bring about a more profitable collective future, he added. These views chime with Nestlé’s vision for the future role of food in the channel. According to Stewart Dryburgh, “Non-aviation has been called out in a big way and this redesign of the footprint that was happening already strikes a chord with the work we are doing at Nestlé. What we did before won’t deliver on the potential that exists. So a core focus is to redesign the retail proposition and increase penetration.”

New opportunities: Changing consumer needs

The other core fundamental that is evolving quickly is consumer needs and expectations. Post-crisis we are seeing shifting attitudes to price, for example among global consumers. Many are becoming more financially prudent with 60% (according to an EY study) saying they have cut back on spending due to the economic situation. Food provides affordable options that can address this consumer need and convert these value-conscious passenger into shoppers. With 55% of purchase decisions made pre-travel it is critical to engage consumer before they travel and deliver on the omnichannel expectations that are expected as standard. Engagement at all stages of the consumer journey ( pre, during, post) is vital. While we see great strides in digital innovation it remains a challenge for all parties in the Trinity, says the brand owner. Delivering an authentic Sense of Place is another key consumer expectation and an objective for the Trinity. Carrying the right range of local products in stores to respond to this need will be a significant factor in how travel retail succeeds in future.

Then there is the consumer desire for sustainability in products and store environments. According to a TFWA Sustainability Study,

78% of consumers said sustainability was important to them,

with 71% saying it influences their buying decisions. That reinforces what our industry knows – that this will be a vital area in which we must significantly improve.

The continued rise of emerging market populations as a force within tourism and travel retail demands consistent review of the retail offer and its appeal to the tastes and needs of this changing passenger mix.

New opportunities: A shifting passenger mix

While confectionery has been a widely purchased category across recent decades, it is noticably less so among Chinese travellers who do not have the same ‘sweet snacking habit’ as Western consumers. The wider food category does however represent an opportunity to tap into their desire for global brands and formats not available in their local market or for local food offerings. Reflecting on each of these opportunity areas, Dryburgh says that “travel retail is superbly positioned to deliver products which critically offer accessible price points to drive footfall into the stores. In addition local foods drive sustainability credentials and deliver a true Sense of Place.” These changing fundamentals can aid the march of food to become the #1 most purchased category. By reimagining food in its totality, the industry can recruit a new cohort of shoppers. How will that happen? By leveraging Nestlé’s VERSE (Value, Engagement, Regeneration, Sense of Place, Execution) model – the subject of our next section.

Spotlight Series – November 2021

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