Value is the first element among the VERSE pillars. Value is not just about the price that you pay but about the bundle of benefits that the consumer receives. It is about the feeling the consumer has after the purchase, encompassing not only great brands but also exclusive products, service, experiences and more. Stewart Dryburgh says: “People want choice, they want to be surprised. And that is what we aim to deliver. “With regards to the food category, confectionery was, is and will continue to be its beating heart, but we will create incremental value by taking other strongly growing sub-categories within domestic markets (e.g. coffee) and translating them into growth opportunities in travel retail.” That means taking a much more holistic view of what food means.

Food is underperforming in travel retail

A glance at what is happening outside travel retail shows that food is underperforming within travel retail compared to domestic markets. Even P&C and wines & spirits over time are not performing as well as food in domestic. In fact with the exception of P&C (source Generation) most major categories are showing declines over the five years pre-crisis. This discrepancy – where food’s growth outside travel retail is not being replicated within it – is a concern but also a clear opportunity, says Nestlé.

“The starting point for this is the focus we give to confectionery alone.” says Dryburgh. “In domestic markets, confectionery accounts for 7% of packaged food sales. In duty free it accounts for 77% of packaged food sales. Now confectionery was, is and will continue to be a core element of food in travel retail. But we are missing out on the opportunity remaining in the 93% of non-confectionery food in domestic.

“We need to reprioritise food. We have to acknowledge that there is one overarching food category with three sub-categories, each of which has a distinct role. There is confectionery as the traditional core. Secondly, we can strategically add global brands in categories such as coffee or infant nutrition, with leading brands to the fore. Finally, by tactically exploiting the significant power of local food products, we can add another layer of growth.”

Unlocking the potential of food

The travel retail industry already has a compelling tale to tell about the potential – and value-adding power – of food brands in its recent history.

Milk powder ­– one-third of a billion US dollars in Middle East travel retail in ten years

Over the past decade the milk powder category in the Middle East, led by top brand Nido, has delivered over US$370 million in sales in travel retail alone, says Nestlé. Nido is the premium brand in this segment for sub-continent shoppers and is a superb example of how valuable the understanding and meeting a real consumer need can be. Dryburgh says pointedly: “Does it take the same margin as on other goods? No, but as a retailer would you rather have 50% of over one-third of a billion dollars, or 65% of nothing? At a time where we are rebuilding the connection with shoppers, milk powder and Nido are a great testimonial to how propositions beyond confectionery can create incremental value in food.” The same, says the company, can apply to other categories, from biscuits to spreads, through Nestlé and through its peers. It’s about broadening the portfolio, from coffee to infant nutrition, by leveraging global brands with unique formats that may be established in some regions but perhaps not yet in others.

Exciting growth opportunities exist in food

These sub-categories can be pivotal in unlocking spend with passengers from the high growth emerging markets for whom the current offer is not yet optimised. They can also offer new formats and exclusive products to consumers from developed markets.

Premium brands will unlock these new opportunities

How might this work? A glance at the coffee market and the number one instant brand, Nescafé, offers a clue. World-leading brand Nescafé Gold has not even been launched in many territories but for some travellers could play a similar premium role to Nido, even as a channel exclusive, says Dryburgh. In another example, Illuma, an infant formula would engage the Chinese consumer with a super-premium product. Dryburgh says: “There are global and regional brands worth billions of dollars in untapped sub-categories of food that could drive footfall and catapult sales forward. We can ensure more value creation, beyond confectionery, by taking these strongly growing sub-categories within domestic markets and translating them into growth opportunities in travel retail.”

Spotlight Series – November 2021

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