SPECIAL CONFECTIONERY REPORT
DUTYFREEMAG.COM JULY 2021 · SPECIAL ISSUE
DISCOVER OUR BESTSELLER IN A NEW MINI FORMAT Should duty free exist? P. 9 Confectionery trends vs. temporary conditions p. 16 Lindt & Sprüngli Farming Program p. 20
Kids and grown-ups love it so
the happy world of Haribo!
Letter from the Editor
Life Sweeter S ince our last Confectionery Report issue in 2020, much has changed in the world. That was a time of enormous uncertainty and even desperation on the part of travel retail, which was collectively as an industry just beginning to come to terms with the reality of what was happening — borders were shut tight and even domestic travel was being strongly discouraged if not restricted. While the future is far from certain, we are now seeing glimmers of hope. In Europe, the UK, the Gulf region, the Caribbean and Latin America quite a few countries are beginning to open up their borders, mainly to fully vaccinated travelers with a negative PCR test. And there are signs that some travel corridors will soon begin to open up in Asia as well. In this issue, we look at what has changed in the confectionery category in travel retail. Swiss research company m1nd-set shows that the buyer in this category has changed considerably, along with whether and what that person buys. Some of these changes are now beginning the reversion to normal in tune with the passenger demographic, such as the gender disparity, while other trends appear to be solid and intensifying, such as the lowering conversion rate. Still other trends, while strong, have not yet given indication of their future, such as the decline in purchases for gifting. Two trends are undeniable, however, and both offer hope, in their own way. One, for which we have an extensive conversation with Alexander Glos of i2i China, is the importance of the Chinese traveler. While recently this importance has been mainly limited geographically to Hainan Island, as international travel returns the Chinese traveler will also return. With a population of 1.4 billion, only 13% currently have passports. If we consider what a massive global impact that 13% has, how that number is expected to grow and how the disposable income of the average Chinese person is growing in turn, we get some idea of the importance of this cohort in the coming years. Companies such as Haribo are focusing greatly on research to ensure they enter that market with no missteps. Another trend, and one that the confectionery category has been especially foresighted in, is the trend toward sustainability. It’s safe to say the pandemic has heightened the collective understanding of our global fragility, and sustainability has become much more than a buzzword — industry wide, but no more so than in confectionery. Lindt & Sprungli have taken this to extraordinary measures with their “bean-to-bar” approach. While the category has taken its lumps over the past 18 months, to put things mildly, those within are exceptionally innovative. We at Duty Free & Travel Retailing magazine cannot wait to see how confectionery companies create new items and new approaches that embrace this altered world and make it much tastier and sweeter.
JULY 2021 · SPECIAL ISSUE Global Marketing Company Ltd., 26 Pearl Street, Mississuaga, Ontario L5M 1X2 Canada. It is distributed to duty free operators and distributors in the following countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE, Yemen, Algeria, Azerbaijan, Benin, Cameroon, Cape Verde, Djibouti, Egypt, Ethiopia, Gabon, Ghana, Guinea, Iran, Ivory Coast, Jordan, Kenya, Lebanon, Madagascar, Malawi, Mali, Mauritius, Morocco, Mozambique, Niger, Nigeria, Namibia, Pakistan, Reunion, Senegal, Seychelles, South Africa, Sudan, Syria, Tanzania, Togo, Tunisia, Turkey, Turkmenistan, Uzbekistan and Zaire, as well as to duty free suppliers worldwide.
AMERICAS, GULF-AFRICA, ASIA DUTY FREE & TRAVEL RETAILING 26 Pearl Street Mississauga, Ontario L5M 1X2 Canada Tel: 1 905 821 3344; Fax: 1 905 821 2777 www.dutyfreemag.com PUBLISHER Aijaz Khan firstname.lastname@example.org EDITORIAL DEPARTMENT EDITOR-IN-CHIEF Hibah Noor email@example.com EDITORIAL AND DEVELOPMENTAL DIRECTOR Wendy Morley firstname.lastname@example.org DEPUTY EDITOR Laura Shirk email@example.com SENIOR WRITER Rebecca Byrne firstname.lastname@example.org SENIOR EDITOR Mary Jane Pittilla email@example.com ART DIRECTOR Jessica Hearn firstname.lastname@example.org
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4 JULY 2021
EXPLORING THE ART OF CHOCOLATE. THE COCOA ENTHUSIASTS TAKE CHOCOLATE ENJOYMENT TO NEW DIMENSIONS.
SCAN ME RITTER SPORT COCOA SELECTION DELUXE www.ritter-sport.com
Lead Stories 7 Travel update
A return to travel From early 2020 we have lived through a time unlike any other, many of us going from nonchalance to disbelief to watching the entire world shut down to travelers — something that quite literally has never happened before. We have (hopefully) seen the darkest days come and go; now we must forge the road forward
10 i2i Group
The future is China Since 1999 i2i Group has been helping brands to reach the Chinese consumer, and the high-net-worth consumer in particular. While lately the GTR focus has been zeroed in on the domestic duty free business in Hainan, i2i Group’s CEO Alexander Glos offers words of wisdom for riding the coming Chinese traveling tide
18 m1nd-Set analyzes Confectionery
Clear differences Travel retail research company m1ndset completed in-depth studies of consumer behavior from 2016 to present, in all categories. Following is a comparison of pre-pandemic, pandemic and early recovery consumer behavior in the Confectionery category
22 Lindt & Sprüngli Farming Program
Bean-to-bar: cocoa cultivation Designed to follow an integrated and holistic approach, the Lindt & Sprüngli Farming Program is based on four core pillars: traceability, training, community support and verification
24 Confectionery/Fine Foods report Proceed & advance For this round-up, we spoke with retailers in three different regions to see how their confectionery and fine food sales have been throughout the pandemic, any trends they’ve been encountering and also what they foresee as restrictions begin to ease
32 Otis McAllister Update
Growing the category When it comes to maximizing sales, Otis McAllister says it’s important to find balance between the experience of global brands
Features Should duty free exist? The long wait at the border DFA Macau Update Loacker calls to action
9 14 16 27
Mondelez discusses scorecards & sustainability 28 Haribo eyes China 30 Fauchon: The art of giving 34 A holistic approach to sustainability 36
A return to travel
A number of airports offer on-site testing. Istanbul is a perfect example, with an extensive testing area open 24/7 and providing immediate results
From early 2020 we have lived through a time unlike any other, many of us going from nonchalance to disbelief to watching the entire world shut down to travelers — something that quite literally has never happened before. We have (hopefully) seen the darkest days come and go; now we must forge the road forward
by WENDY MORLEY
oth in the travel retail industry and outside of it, we are collectively getting tired of talking about the virus that has upended our lives. “Please, can we discuss something apart from COVID or our business’ recovery?” asked one person I spoke to recently. But the reality is, COVID has been a virtual atomic bomb that all but leveled travel retail. And, while it might not be easy or wise to compare misfortunes, confectionery has been especially hard hit. The category’s sales as a percentage in travel retail have decreased considerably, products have hard expiration dates and in many cases also location-specific or time-specific labeling. Now, about a year and a half after regions began to go into lockdown, we appear to be seeing a glimmer of recovery.
Testing and vaccinations
The global vaccine rollout is inconsistent from country to country, and this is undoubtedly frustrating to some, but it might help to remember that the original estimated time for just one vaccine to be approved was now. Luckily, organizations worked both together and separately to create safe and effective vaccines in half the normally required time. Testing, too, has become so widespread and easily accessible that a PCR test requirement is no longer prohibitive. The combination of testing and vaccines is incredibly effective, and this combination is bringing us to the point we are at today with many borders cautiously reopening and air traffic resuming. This is especially the case on a domestic level (as has always been expected), and now internationally as well.
The IATA travel pass will help travelers navigate the border rules of any country they might be visiting, and allows for a safe, verified way to store testing and vaccination information
Many airports are offering on-site testing, one superior example being the 24/7 testing facility at Istanbul Airport. In this 5,000-square-meter area, three highly respected medical companies offer antigen testing, antibody testing and PCR testing. Because the laboratory is located there at the airport, results are given within about 30 minutes for antigen and antibody tests, and within 90 minutes for PCR tests.
improvement, the country is beginning to approach normal at -26.2% as compared to approximately -60% in 2020. Unfortunately the same cannot be said of India, which has had a massive surge of cases in recent months. Internationally, the Asia Pacific region’s borders continue to be almost completely shut down, but other regions are beginning to open up. The key to the return Much of Europe is now to global travel as we once knew it is a high open to Americans who vaccination rate in all can prove they’ve been fully countries, whether or not they are likely travelers vaccinated, in some cases needing to quarantine until they receive negative test results, for example. As of writing, the US and UK are expected to soon announce the opening of borders to each other. And news such as this keeps coming. or reaching critical mass in vaccinations The caveat among all this good news, (with some exceptions in areas that however, is variants. have a high vaccine-hesitant population), but as a global population we must Variants understand that it is the spread of the It is because of variants — a name to call virus that creates variants. The virus does mutated variations of the virus, which are not care who it spreads to and mutates in. inevitable as the virus replicates — that In other words, if a disadvantaged country international travel has taken longer than where few people travel has low vaccinaexpected to begin resumption. The world tion rates and therefore high infection had a massive setback with the Delta varirates, that country threatens the travel ant in particular, which is more virulent industry everywhere. and more easily transmissible than the Last year, researchers predicted Gradual reopening original virus or other variants. a return to 2019 levels of domestic Some domestic markets have rebounded It is especially because of the reality travel by 2023 and international travel quite strongly. Russia’s and China’s domes- of variants that it is imperative for us to by late 2023/2024, with variations by tic air travel is up over pre-pandemic ensure vaccines roll out not just quickly region. Because of more virulent variants levels (of course this is in part because but also globally. and the continued lockdown of many of lack of international options), and Currently by far it is the most advancountries, however, this timeline might while the US is not quite at that level of taged countries that are approaching be optimistic. Many people have the opinion that we should just let the virus spread as it will, thinking that this will bring us to a point globally where we will reach herd immunity and the pandemic will end naturally as they do. Beyond the humans who will die and be debilitated by being infected, we must consider that this will inevitably create more virulent variants, which then threaten to close the world down again. It is therefore in our own personal best interest as an industry to not only get vaccinated ourselves but also to do whatever we can to bring vaccines to the world. Only then will our world’s governments feel truly confident to fully reopen. Travelers as much as travel retailers miss the former glory days of airports, even if crowded The so-called “vaccine passport” might be a contentious issue for some — in part for privacy reasons and in part because it creates what some consider an unfair tier system for travelers’ rights — but the majority of people in most countries seem to welcome it, with keen anticipation for the day they might return to a life they used to know. The IATA has created a “travel pass” mobile app, which has been in test mode for a few months now, which securely stores vaccination and testing information to share with border authorities. With this app, the information is verified and therefore the idea is that its veracity will not be questioned, making passage easier for the traveler. Additionally, as testing and vaccine requirements are not standard from country to country, this app will help the traveler to know exactly what he/she needs to do to comply with current rules and restrictions. The situation is constantly changing from country to country and from day to day, so it is imperative for travelers to remain vigilant on any updates. Newly emerging variants make the situation ever more tenuous and unpredictable, and IATA’s app, once out of beta, would be especially valuable for travelers who must navigate these waters.
PHOTO CREDIT: NANASHINODENSYAKU
8 JULY 2021
Should duty free exist?
Recently, Dubai Duty Free’s Executive Vice Chairman and CEO Colm McLoughlin requested that a thought piece published earlier this year in The Economist be sent to parties who might find it of interest, including Duty Free & Travel Retailing magazine. Here is my opinion by WENDY MORLEY
Does duty free benefit only the wealthy, as an article in the Economist suggests? Far from it.
n an anonymous piece recently published in the Economist titled “Time to End Duty Free,” the main argument was that the duty free system unfairly rewards those with the means to travel, while those without the means are left paying taxes. “… it is a textbook case of allowing an exorbitant privilege to generate unjustified profits which are then shared around opaquely. If airports need state help, especially after the pandemic, it should be paid transparently, not through tax dodges that distort economic incentives,” the article states. In fact governments are transparently funding airports, but it is not enough. It’s not enough during this crisis and it will not be enough once the crisis is over. Airports have lost virtually all revenue, whereas they are incredibly expensive to run, even when only semi-operational. Government aid will not make up for this, and certainly not over the long haul. With no duty free sales, airlines, which already operate on the slimmest of margins, would have to pay more fees. These fees would inevitably be handed down to pas-
sengers, making air travel less achievable for those with limited income. Besides, let’s call government funding what it is: taxpayer funding. Does the author think it’s better for the non-traveling taxpaying public to further support the airports? We often hear rueful reference to air travel in the past, when travelers were treated royally, with plenty of leg room, being served champagne and delicious food with real silverware. But those rueful remembrances do not take into account the cost of such air travel, which was unaffordable for all but the wealthiest of individuals. No longer is travel a luxury for only the wealthy, as the article seems to suggest. While the world’s truly poor are unlikely to get on a plane anytime soon, air travel is now possible for the majority of the world, an equalization that duty free has helped to create. This equalization of travel also creates a more level playing field for global business competition. When travel was the domain of only the wealthy, wealthy travelers were the true dictators of global tourism and business. This is no longer
the case. Those with very modest incomes are now able to visit family in the rest of the world and compete in business on a global level. Airports’ focus on non-aeronautical revenue is not just to add to their coffers; it is to be able to offer competitive pricing for airlines. Duty free is not the only relevant part of this structure, but larger international airports must attract international airlines, and duty free revenue is definitively an important aspect of the ability to attract them. This brings us to how duty free benefits a specific country. Taxes might be lost through duty free, but business is created. Local businesses all benefit from an increased ability to accept international airlines and thus travelers. This increased business and travel/tourism then creates considerably more tax revenue generation for the country. The bottom line is, the existence of duty free helps create equality in travel for business and pleasure, while bringing more revenue into the airport’s city and country, and for these reasons it should definitely continue to exist.
Chinese Travel Revolution
China The future is
The inviting architecture of Hainan Sanya International Duty Free Shop
10 JULY 2021
hina and its travelers have been the news in travel retail for years now, and with good reason. It’s difficult to overestimate the importance of this cohort. Alexander Glos, CEO of i2i Group — a multidimensional marketing company that helps brands reach high-net-worth Chinese consumers — believes if you are not focused on the Chinese consumer you are severely limiting your sales potential, period. “I think travel retail is only going to think about China in the future. It was already like that to some extent but it's going to get even more so. This is particularly the case in Asia, but even in Europe. And that's only going to increase; what we're about to experience in the next 10 years is really the true Chinese travel revolution,” he says. As travel and thus travel retail has ground to a halt the world over, China has gained importance for another reason: For the past year it has been virtually the only place where travel retail has existed at all. While the virus may have come into existence in China, the country has been relentless in shutting down its transmission. Any region with cases has been promptly and completely severed off and there has been strict — some might say invasive — contact tracing and resultant isolation. As of writing over half a billion vaccines have been administered, and the goal is for that number to reach 700 million by the beginning of summer.
Since 1999 i2i Group has been helping brands to reach the Chinese consumer, and the high-net-worth consumer in particular. While lately the GTR focus has zeroed in on the domestic duty free business in Hainan, i2i Group's CEO Alexander Glos offers words of wisdom for riding the coming Chinese traveling tide by WENDY MORLEY
It is this type of management that has helped life within China return to near-normal within months of the pandemic’s beginning, and it is this return to near-normal within China’s borders that has helped Hainan to become the travel retail mecca it has become — in addition to the Chinese government’s 2020 decision to allow a US$14,000 duty free allowance for nationals who visit the island, as Hainan is being promoted as a duty free port. Glos says while Hainan is a place travel retail operators and brands should undoubtedly be, the current state of importance in the channel is something of an illusion. “Over the longer term Sanya/Hainan is definitely developing in an Orlando type of model,” he says. “It is a vacation destination for the average Chinese family, where they can go and spend money and have a fun family experience. They can do things like go to dinosaur parks and water parks and have butterfly experiences. I would say it's a Chinese Orlando but with slightly better scenery, because you've got tropical jungle mountains and the beaches are actually quite nice.” Glos has no doubt that Hainan will continue to be the number one leisure holiday destination in China, but that does not www.dutyfreemag.com
Chinese Travel Revolution
preclude Chinese travelers from also experiencing international destinations throughout Southeast Asia, Dubai, North America and Europe. “It’s easy to go to Hainan, but it's also less exotic and more expensive, and so for travelers looking for something out of the ordinary, international destinations will continue to be very attractive. Travel abroad transfers status and face to the traveler that domestic travel does not.” He adds that while a trip to Hainan might be easy, Korea and Japan are actually much closer for those traveling from Beijing or Shanghai. The status of having been to one of those destinations is greater, and time spent at either one is less expensive than at Hainan. “And if you know how expensive Japan is, you know that’s saying something.”
don't. They travel because they want to experience different countries and see iconic places in international cities. Increasingly they want local experiences in countries around the world,” says Glos. “But shopping is an element of this; it's part of what to do while you're traveling abroad because the prices are better, the selection is sometimes better and certainly the service is always better. I think the current success of domestic shopping in China is basically a false positive. It's successful today because Chinese travelers cannot travel globally. But once the doors open again, they will rediscover why they were shopping around the world before, and they will do it again.”
Limits of Hainan
“What we're about to experience in the next 10 years is the true Chinese travel revolution,” says Glos. “Only 13% of Chinese currently have passports, which is a very small percentage. When you look at the numbers back in 2019 and 2018, there were 120 to 140 million international travelers out of China, but about 75-80% of these traveled largely to near China — Hong Kong and Macao and Taiwan. This is tremendous news for global tourism and travel retail. The Chinese are learning to travel domestically, and once they do that they're going to learn how to travel internationally.” For evidence to support this statement, Glos looks back at the US travel industry from 1945 until today. “In 1945 everybody got into a car or a train and they went to Florida or California. They drove someplace sunny to relax. They did that for awhile, but then they began to say, ‘I could take a cruise, or I could go to Hawaii.’ Once they did that, they then said, ‘oh wow I could actually go to Mexico or Europe,’ and they did that. This is what we’re now seeing in China.”
What Hainan is not, despite what many touted in discussing the China International Consumer Products Expo recently held there, is a place where high-net-worth Chinese will go luxury shopping, says Glos. Luxury shoppers are looking for much more than purchasing the item, he says. They are seeking out the luxury experience, which very much includes service. “If you’re in Sanya you have to stand in line for 30 minutes to get into the store. It’s like waiting for a ride in Disney. It’s difficult to imagine any real high-end shopper doing that.” Additionally, he adds, the selection is simply not the same as it is elsewhere in the world. Also, Glos says that Chinese who are purchasing truly high-end items are usually using an international bank account and a different currency, and prefer to make purchases outside of China. As the Chinese consumer is so important around the world, it can be difficult to lose sight of the Chinese traveling person who becomes that consumer. “I think it's a misunderstanding to assume that the Chinese travel exclusively for shopping. They
Learning to travel
Chinese-global partnerships Chinese travel retail has been seeking out international companies to partner with for a couple of reasons, according to Glos. “First to try and capture a greater position with the global brands, but I think also, increasingly, retailers are focusing on Chinese products and brands. It should be a win-win situation between both sides of the market — the Chinese traveler will gain a relationship with global brands, and popular Chinese brands will become available globally. Ultimately, global brands and Chinese brands should be sitting side by side not just in China, but around the world. i2i Group helps brands reach consumers in part through its 8.5 million followers on social media
12 JULY 2021
The tropical mountains of Hainan surround the city of Sanya
Glos says we will begin to see travel to near-China increase dramatically throughout the rest of 2021, and then begin to extend to other parts of the world. “As the world begins to open up, the Chinese will begin to travel internationally again,” he says. “After Macau and Hong Kong will come Korea and Japan. Then you’ll see travel throughout the core East Asian, Southeast Asian destinations. I think I would also put Dubai on that list. I don't know how big those numbers will be because I think probably there will be certain capacity controls; right now Chinese can go to Phuket for example, but only two flights a day are offered, one from Shanghai and one from Beijing. Those flights are currently sold out for the next six months.” His company projects that renewed global travel from China will come in phases. “The first 10% to 20% of global Chinese travelers, those that are more sophisticated and globally travel experienced, will be the first to travel internationally. Once they have traveled around the world and can share with their friends good experiences, safe experiences and the bargain deals that will undoubtedly be available to global Chinese travelers when they begin traveling, that will propel the next 20% to 30%.” Glos says this is pretty much what happened domestically in China in 2020. “In March and April of last year there were virtually no domestic travelers, less than 10% of normal. But by June you had the first 30% and by August and September you're up to 60% and 70% of normal travel — in some destinations close to 90%. By the end of 2020 numbers in some domestic destinations were exceeding 2019’s.”
While the world chomps at the bit for global travel to restart, the real story about China is not what’s going on over the coming year, but what is possible in years to come. This certainly includes opportunities offered by the coming international travel boom, but also by the opening up of possibilities simply by being visible in China. To illustrate, Glos mentions a well-known US brand that had been present in China, didn’t feel sales were adequate and so left, only to find that it also lost brand recognition of Chinese customers globally. That company is now returning to the country’s domestic market. “It’s the cost of doing business,” says Glos. “Sure they saved money by closing shop in China, but then the Chinese stopped walking through their doors in New York. You save $20 million but lose $40 million.”
Brands need to put substantial effort into being recognized by the Chinese. “The Chinese are brand conscious, but they do not have the same brand connection that we might have outside of China,” Glos says. “For example, my grandmother might have had a Cartier watch, and my mother, and my wife. The connection is there. With the Chinese, the competition isn’t just between luxury brands; it's also between some of these other brands which may not be considered luxury but really are luxury in terms of quality. Younger, more affluent Chinese travelers in particular are less connected to Cartier and Chanel and they are much more open minded, so the landscape is super competitive, and also has massive potential.”
China is undoubtedly the future of any international brand or retail company. But Glos says the marketing strategy needs to be truly global. “Chinese are globalizing, which means that they are increasingly living abroad, and their business interests are also increasingly globalizing. So yes, finding Chinese consumers in China is a good strategy, but you're also going to find Chinese consumers around the world in New York, Paris, Milano, Sydney and Vancouver.” Recognizing that your best consumer in China may also be your best customer in New York is very important, according to Glos; he adds that the product and branding message must be designed to satisfy that global Chinese consumer. “This is really the first time in the history of luxury that we have seen such a significant demographic that operates on a truly global scale,” he says. In other words, your marketing, branding, social media and communications will drive global business no matter where it is geographically located. “Your China budget might be spent in China, but it's really driving global sales,” he says, adding that brands might want to use the Mandarin language in their global marketing efforts. “The number of Chinese walking through Frankfurt airport on any given day in normal times is well into the thousands.” According to Glos, some brands are already working along this train of thought. Their advertising might be in Mandarin, for example, or they might use Chinese models in their campaigns. Westerners might just think this is simply an attractive Asian face, but in reality it’s a Chinese celebrity. This is the kind of messaging that reaches Chinese people everywhere.
wait by WENDY MORLEY
In 2018, over 24 million crossings were made into Canada by US residents, over 2/3 of whom arrived by car. In an average year, Canadians make over 39 million crossings into the US
For land border stores in Canada — which are independent small businesses — staying afloat has become especially difficult; business is down anywhere from 95% to 100% depending on the store, but they are slipping through many cracks of government aid
he world’s longest undefended border may have suffered in the aftermath of 9/11, when residents of US and Canada began for the first time ever needing a passport to cross, but never could these individuals have imagined a day when the border was actually closed. That day has come, and it has now lasted for close to 16 months. Communities on both sides of the border are suffering irreparable damage, and so is the tourism industry as a whole. As one might imagine, the border duty free stores are suffering most of all, with many of them closed altogether throughout this period. Of those few that are open, many are operating at a sales reduction of over 90%. 14 JULY 2021
An impossible bar is set
The last extension of the border closing was for one month, from June 21 until July 21, 2021. At the time, it had been reported in numerous news outlets (though uncomfirmed) that there was so much frustration on the US side that the border would open to Canadians regardless of Canada’s stance. Those reports turned out not to be true, though the pressure did appear to at least get Canada to open its borders without quarantine to its own fully vaccinated citizens, which began July 5. The Canadian government finally stated some parameters around reopening, something those in the travel/tourism industry had been begging for: the government has now stated the borders
will open for nonessential travel once 75% of the country’s eligible population is fully vaccinated. As of writing, 78% of eligible Canadians have had one dose, and 40% have had two. It looks highly unlikely that 75% of the eligible population will be fully vaccinated by the next decision date of July 21, and impossible that this number will have made it through the two-week period to maximum immunity post-jab. With some individuals choosing not to have a second vaccine at all, this might be an impossible bar to meet. Meanwhile, border communities and those in travel/tourism are at their wits’ end trying to not lose another summer … and just trying to figure out what’s going on.
Inability to plan
In a live event presented by the Tourism Industry Association of Canada (TIAC) last month, Beth Potter, TIAC CEO, stated: “Many of these businesses have been shuttered for 15 months. They had to layoff and displace over half a
million employees from our sector, and they whittled away their savings. They've taken on more debt in order to stay viable as businesses, They've already lost one summer; they don't want to lose a second summer and they certainly don't want to lose the fall. “We want the business owners to have an opportunity to start planning. If you’ve shuttered your business for 15 months there are some operational things you have to do to ramp up and get ready. You need to rehire staff, and hopefully those staff are still waiting to come back because we know a lot of them have moved on to other sectors in order to continue to pay the bills. We have to communicate with our guests. So we're asking for a plan,” she said. At the same event, Rep. Brian Higgins could not quite conceal his frustration that the Canadian government has until now completely dragged its feet. He stated that while closing the border to the US made sense while the country’s cases were skyrocketing with no vaccine in sight, that is not the case now. He said it shouldn’t really even matter at this point now many people are vaccinated, only that the travelers are vaccinated. “The vaccines that have
been approved in the United States have been rigorously tested for both safety and efficacy, and they are between 90% and 95% effective. The seasonal flu vaccine is 45% effective, so I don't know if enough attention has been placed on the miraculous success first of developing effects vaccines quickly, and secondly as safe as powerful as they are. That should count for something, and should be the basis for the opening of the US-Canadian border.”
FDFA requests help for a hurting sector
The Frontier Duty Free Association (FDFA), the association that represents the small independently owned landborder duty-free businesses, has called on the Canadian government to save the sector from closing its doors and ending 40 years of successful export to the United States. “Our border stores have been essential in building the economies of Canadian border communities and an integral part of the tourism export industry in Canada,” said FDFA Executive Director, Barbara Barrett. “We are the hardest hit of the hardest hit businesses in Canada,” she added.
What Barret calls “tight and appropriate” regulations for the duty free sector means duty free stores have not been able to shift business models to domestic or online sales during the border closure. None of their inventory has been allowed to be used for donations or returns. While other Canadian businesses have been open or allowed to adapt during COVID, the land border closure has killed these stores. FDFA has asked for specific measures to help these businesses during this time, including opening the border to fully vaccinated individuals. “I don’t know what business can be closed for sixteen months and be expected to survive without additional support,” said Barrett. “We gladly did our part to help keep Canadians safe, but it is time now for the government to step up and help us get to the other side of this. “It is a matter of fairness,” she continued. “As long as the government keeps the land border closed, we cannot do our business. We are asking to be able to survive and have a future. Our retailers and their employees did not make business mistakes or plan badly, but we closed to protect Canadians and we deserve not to be left behind and kill a 40-year-old export sector.”
Not only do Canada and US share the largest trade partnership in the world, many Americans have relatives in Canada and vice versa, making this long border closure especially difficult
DFA Macau Update
Liquor and Confectionery make up a small but significant portion of sales in DFA Macau
uty Free Americas (DFA) is well known as a travel retailer in the Americas. In the US, the retailer operates a great many stores along both the north and south borders, and also has strong presence within a number of major airports. The company has extended its root system throughout the entire region, with a myriad of stores operating in the Caribbean and South America. Outside of the Americas, DFA is established in Macau, where it has been operating a large store for over 12 years. “Since our opening, we have expanded our footprint in the current location, a couple of times,” says Jerome Falic, CEO of DFA. “We have also continuously renovated and launched several new brands in Macau.” The store is located at the Venetian Macau Resort Hotel. It is the number-one location in Macau. Over 30 million people pass through this store each year, according to 2019 numbers. Falic says, “More traffic passes our shop than any other location in Macau.” The focus these days by the Chinese government and by the luxury goods sector as a whole might be Hainan, but Falic says Macau offers gambling, high-end dining and shows, making it an equally desirable destination.
16 JULY 2021
Despite a pandemic, closed borders and a loss of many of the store’s usual clientele sources, DFA Macau managed to increase sales in 2020, and CEO Jerome Falic says 2021 is looking good by WENDY MORLEY
Strength in difficult times
In Macau, DFA managed to get through the entire pandemic without laying off even one of its 120 staff members who work in the office, shop and warehouse. In fact, against all odds, DFA ended up having a very good year in Macau in 2020, with sales slightly higher than those of 2019, despite the fact that a great portion of its normal client base was unable to travel there.
Before the pandemic, the store’s customers were multinational, made up mainly of a mix of people from Mainland China, India and elsewhere in Asia. The closed borders brought on by COVID meant the customers were made up entirely of Mainland Chinese, but Falic says despite that 2020 was a year of promotions being offered by brands, and this helped keep sales strong. While the promotions are no longer being offered to the same degree, Falic says sales for 2021 will continue on a positive trajectory, as Macau has eased its quarantine rules for those entering from China. Even before this restriction had been lifted, the store was doing well this year. Despite COVID rules requiring only limited numbers of people in the store at any given time plus the fact that
More than 30 million people per year pass through DFA Macau
Despite the growing Fragrance category, Beauty currently represents approximately 90% of sales at the store, with some liquor and confectionery as well. Though Japanese brands Decorte, POLA, Clé de Peau and of course Shiseido are all doing well at DFA Macau, for the most part the top brands are western: Lancôme, Dior, SK-II and Clarins. This is in part because of luxury brand association and in part because of sheer marketing spend, though there are also some strong Asian brands. “We have identified a few brands that we currently carry in Macau that we can definitely introduce in our shops in the Americas,” says Falic. “We are currently discussing these opportunities with those brands and will hopefully launch them within the next 12 months in the US.” In the 12 years that the Macau store has been open, there has been a clear trend toward younger shoppers. Falic says these shoppers are always shopping for staples and looking for the top brand, but also tend to seek out the latest hot brands.
Of late, China has become the epicenter of global travel retail. Chinese companies are seeking out western operators to partner with, and Falic confirms DFA is no exception, having been contacted to discuss partnerships. At this point, DFA has not yet chosen to go this route although the company does have aspirations to expand in region. “We are always looking for more locations in Asia and have some plans to open more,” says Falic. “We will be able to announce something later this year.” The company will be logistically ready for that expansion. “We currently have a warehouse plus additional storage spaces at the Venetian Resort. Our warehouse is large enough to be able to handle additional stores in the region. Same as our offices there. We have all departments for Asia based in Macau — buyers, finance, human resources and everything else needed to expand in the region,” says Falic. Macau is exceptionally service oriented — which can be more challenging with mask wearing by staff and other restrictions — the holiday season was a good one. Getting through this time successfully has been aided by the beauty brands, who were quick to create new ways of testing. It’s not an easy thing to choose a color based on a tiny dot; historically customers would use shared samples, but with that no longer possible, companies quickly introduced new ways customers can see what they are buying.
In addition to Dior, Lancôme and several others, Clarins and SK-II are two of the top brands in China, and by extension in Macau
Beauty above all else
For a company established in the Americas, the major difference seen with Macau is in category sales. Skin care and cosmetics, or “treatment and color,” are by far the biggest sellers in Macau, almost to the point of exclusion of other categories. Fragrance is growing, however, and DFA is in the process of dedicating more space to this usually popular category; it will end up with approximately 20% of the floor space. “We are currently expanding our current footprint again,” says Falic. “Around the end of the year we will be adding several fragrances to our offering. The category is growing and there is new demand for high-end brands. We are finalizing the space for these and are excited to introduce them in our expansion.”
CLEAR DIFFERENCES Travel retail research company m1nd-set completed in-depth studies of consumer behavior from 2016 to present, in all categories. Following is a comparison of pre-pandemic, pandemic and early recovery consumer behavior in the Confectionery category by WENDY MORLEY
DEMOGRAPHICS – CONFECTIONERY VISITORS
AGE Gen Z Pre-covid
Middle Aged Pre-covid
GENDER Males Precovid
PURPOSE OF TRIP Females
Leisure Q2 2021
57% 61% 59% 43% 39% 41%
Business Q2 2021
69% 76% 77%
31% 24% 23%
Green / red indicate significantly higher / lower vs the pre covid-19 2017-2020 3
The age and gender of the average customer changed considerably during the pandemic. This appears to be on the move back to normal
ith closed borders, close to zero international travel and even domestic travel down on average around 60% globally, it’s far from surprising that no category in travel retail was able to escape the wrath of the pandemic. Added to this previously unfathomable drop in traffic, many travelers were also concerned about the safety of shopping and therefore chose not to do so. Of those who did choose to shop, they did not choose to purchase in the confectionery category as often, as a percentage of footfall, as they did before the pandemic began. Confectionery had the added problem of hard expiration dates on products, something that was dealt with via a combination of promotions and moving product into the domestic market, though undoubtedly most companies experienced considerable loss. 18 JULY 2021
Trends vs temporary conditions
A study by m1nd-set travel research company looked at the differences in purchasing behavior in the years leading up to 2021 and also between Q1 2021 — when the world was still in full lockdown — and
Q2 of this year, when some borders were easing their restrictions and travel was beginning to resume. According to the study, there were sharp differences in consumer behavior as the pandemic took hold, many of which can be explained by the type of person likely to travel during this time. For example, the average age of travelers was lower than usual, likely because younger people were less concerned and older individuals were more concerned about contracting the illness. While differences such as this are easily explained, Confectionery saw some other trends that are more mystifying, such as the clear move away from buying from the category for gifting purposes.
The beginning of recovery
Some of these differences are now beginning to level off as travel has begun to return during Q2 2021 and the normal
CONFECTIONERY CONVERSION LOWEST SHARE OF DF BUYERS OUT OF TOTAL DF VISITORS 63%
54% 47% 36%
FOOTFALL: share of DF visitors out of total passengers CONVERSION: share of DF buyers out of total DF visitors
Conversion of customers to confectionery buyers was already decreasing. The pandemic caused these numbers to fall faster
The motivation for purchasing confectionery showed big changes from the pre-COVID era, with much less gifting and self-purchasing
traveling demographic is beginning to travel again. Others had been a trend before the pandemic began which, as with so many other realities, the pandemic sped up but had already been occurring. Confectionery conversion as a whole has been steadily decreasing in recent years. This trend continued during the pandemic but has dropped off even more sharply as travel has begun to return in Q2. In 2017 a full 63% of duty free shoppers purchased from the confectionery category. From 2018 to Q1 2020 that number dropped to 59%, 57% and finally 54%. In Q1 of 2021 it had dropped even further to 47%, but instead of a rebound in Q2 of this year, the percentage fell even further to 36%.
Some demographic differences in the COVID-era shopper that appear to be starting to return back to normal are the gender and age of passengers. In Q1 of 2021, passengers were overwhelmingly young and male. In pre-COVID times, middle-aged and senior passengers collectively made up 76% of travelers. In Q1 of this year that number had dropped to 52%, increasing to 58% in Q2, thanks to an increase in traveling seniors. Interestingly, the percentage of traveling Millennials dropped from 38% to 23% from Q1 to Q2, but Gen Z increased even more, from 9% to 19% of travelers. Before the pandemic, males made up 57% of travelers, females 43%. In Q1 this division was increased, with 61% of travelers being male and 39% female. In Q2 the disparity is moving back toward normal, at 59% male and 41% female.
A clear pandemic trend with less obvious reasons is a trend away from both gifting and self-purchasing in the Confectionery category. While in the years leading up to the pandemic gifting purchases had been on the rise at 52%, 53%, 56% and 56% in 2017, 2018, 2019 and Q1 2020 respectively, in Q1 2021 that dropped to 34%, falling even further to 30% in Q2. Meanwhile, confectionery that was purchased on request rose, from an average percentage in the high teens in the pre-COVID era to 25% in Q1 2021 and then further to 34% during Q2, becoming the top type of purchase. Impulse purchases also changed during the pandemic. While the percentage of planned vs impulse purchases in the category was fairly consistent from 2017 to Q1 of 2020 at around 70% planned vs 30% impulse, Q1 of 2021 showed a jump to 74% planned vs a drop to 26% impulse. Q2 2021 shows a return to normal at 69% vs 31%.
Other interesting changes to normal trends during the pandemic included a clear trend toward value/promotion, which became the most important driver. This could be at least in part because promotions were utilized so much during the pandemic in an attempt to drive sales from the meager number of travelers. Possibly in line with these promotions and also perhaps because of lower traffic numbers in the airports, confectionery shoppers were more likely to notice touchpoints than in the pre-pandemic era. This number had been decreasing since 2017, but increased significantly in 2021. While one might expect that traveler interaction with staff would lessen during a pandemic, the opposite was actually true. Interaction with sales staff increased significantly in Q1 of 2021. This could be in part because of a different way of purchasing, since sampling ceased to be an option. Additionally, this could again be a result of fewer passengers in general, making staff more easily accessible.
PLANNED VS IMPULSE CONFECTIONERY PURCHASES PLANNING TREND NORMALIZED IN Q2 AFTER SEEING THE HIGHEST SHARE OF CONFECTIONERY PLANNERS
69% PLANNING TREND NORMALIZED IN Q2
LOWEST SHARE OF CONFECTIONERY BUYERS PURCHASING COMPLETELY ON IMPULSE m1nd-set.com
As a percentage of purchases, impulse dropped and planned rose, though this has already returned to normal
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Loacker Tortina and Patisserie, assorted pleasures for those waiting to greet you. Pure goodness!
Lindt & Sprüngli Farming Program
Bean-to-bar: cocoa cultivation Designed to follow an integrated and holistic approach, the Lindt & Sprüngli Farming Program is based on four core pillars: traceability, training, community support and verification by LAURA SHIRK
o support its bean-to-bar approach, Lindt & Sprüngli developed a sustainability program that focuses on the selection and production of high-quality cocoa beans. Striving to achieve socially and ecologically responsible cultivation and promising to meet the highest level of traceability: identity preservation, the Lindt & Sprüngli Farming Program systemically improves the overall livelihood of cocoa farmers, their families and communities. A company spokesperson notes that the traceability of its cocoa bean supply chain is the foundation of the program and the key to creating a positive impact for the farmers in its supply chain. Lindt & Sprüngli enhances living conditions in developing countries by building local infrastructure, generating income diversification and prioritizing education. The highest level of traceability guarantees that the cocoa beans from the program are physically processed and transported separately from all other beans. “As a bean-to-bar manufacturer, we have built up extensive expertise in areas ranging from the selection of high-quality beans and technological know-how in the processing of our own
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cocoa mass to chocolate production at Lindt & Sprüngli factories. This is a differentiating feature that continues to distinguish us as a premium manufacturer,” says the spokesperson. With the support of other vital parties such as its suppliers, governments, non-governmental organizations, researchers, educators and farmers, Lindt & Sprüngli plays an important role in advancing participating households in its supply chain and helping to end poverty. Since the seasonal nature of cocoa cultivation and the standard farm size cause unstable cash flows among cocoa-farming households, farmers require additional and alternative sources of income to meet their expenses.
The need to professionalize agricultural practices
Lindt & Sprüngli launched the program in Ghana in 2008. Following the successful implementation of the program, it was extended across the globe in all other cocoa bean sourcing countries. Designed to follow an integrated and holistic approach, the Lindt & Sprüngli Farming Program is based on four core pillars:
Last year, Lindt & Sprüngli reached its interim goal of achieving a 100% traceable and externally verified cocoa bean supply; the company is committed to sourcing all of its cocoa ingredients through sustainability programs by 2025
Through theoretical and practical field training, the program empowers farmers to manage their local businesses in accordance with sound agricultural, social, ecological and economic practices
traceability, training, community support and verification and a philosophy that fosters locally embedded solutions. The program empowers farmers to manage their local businesses in accordance with sound agricultural, social, ecological and economic practices and increase productivity. Additionally, it shows farmers how agricultural land can be safeguarded in the long term by the conservation of biodiversity and natural ecosystems. “Through theoretical and practical training, farmers are able to professionalize their practices. Furthermore, a verification system, in the form of a structured annual internal monitoring and independent external assessment, assures the effectiveness of our efforts. This verification is based on a mutual learning process and transparent communication, which facilitate the continuous development of the Farming Program,” adds the spokesperson.
A pre-condition of relationship building
The program also counts on trainers and managers to educate cocoa farmers about agricultural practices, business models and environmental protection. Responsible for the hiring of its team, the spokesperson says Lindt & Sprüngli’s suppliers are the main
implementing partners in the field. Currently, local partners work with a field staff of approximately 440 educators. “The annual program assessment determines the capabilities of trainers and provides insights into potential knowledge gaps. As we maintain long-term relationships with suppliers and work with a stable base of farmers, trainers and partners are ensured job security and long-term employment. This is a pre-condition of relationship building with farmers,” states the spokesperson.
Bean, bar & beyond
Last year, Lindt & Sprüngli reached its interim goal of achieving a 100% traceable and externally verified cocoa bean supply. The company is committed to sourcing all of its cocoa ingredients (beans, butter, powder) through sustainability programs by 2025. “We sourced one third of our cocoa butter from segregated and verified sustainable sources in 2020. We are also working on finding sustainable strategies for the remaining cocoa products sourced in lower qualities such as powder. Overall, Lindt & Sprüngli is on track to achieve its sustainable procurement target for cocoa,” concludes the spokesperson.
Confectionery/Fine Foods report
At Discover Singapore, the demand is for unique items that offer a strong sense of place, with local, regional and seasonal flavours
P R O C E E D & A D VA N C E For this round-up, we spoke with retailers in three different regions to see how their confectionery and fine food sales have been throughout the pandemic, any trends they’ve been encountering and also what they foresee as restrictions begin to ease by WENDY MORLEY
ravel retailers around the world have been through a continuously evolving learning curve over the past 18 months. Creativity, promotions, and mostly a strong understanding of their customers have brought these three retailers to a place where they are in control during these precarious times while setting the stage for the reopening that’s to come.
ASIA: Henry Lim, Head of Marketing & Visual Merchandising, Lagardère Travel Retail
While research shows the sales of food items decreasing as a percentage of sales in travel retail, Lim says in Changi this has not been the case: “Souvenir foods remain a strong category in Travel Retail,
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and travelers continue to seek to bring home interesting foreign and delicious flavours to share with their loved ones. Our vast experience at Changi Airport affords us the market knowledge and ability to anticipate and adapt to the needs of the changing profile and interest of the travelers, especially as the border restrictions begin to ease.” Lim says the most significant trend is toward local products. “‘Local’ is the new black,” he says. “During this extended period of travel restrictions, we have all come to realize the importance of our freedom and ability to discover what new places and people have to offer. When travel resumes, travelers will be seeking to discover novelty and unique products during their journeys, including the time they spend at the airport.
“With over 12 years as the master concessionaire for Singapore Gift & Souvenir, our concept Discover Singapore has brought numerous flavours and highquality products to our customers. We find that local and seasonal flavours have always been a strong and refreshing force that drive the trend, such as the eponymous Durian flavour or ‘Kopi,’ our local coffee. Wider regional flavours and favourites also deliver a strong appeal, such as salted egg, Sichuan Pepper ‘Mala’ and fish skin snacks, allowing us to innovate to meet the customers' demand.” Whereas expiration and wastage has been a problem in the industry during lockdown times, Lagardère saw this as an opportunity to help. “We responded immediately as soon as the pandemic hit. To avoid food waste due to expiry, we
As sampling is not possible with current COVID-19 safety measures. Discover Singapore is stimulating the senses of its customer instead through visual and other sensory elements such as scent and audio
batches of high-quality products could better address the needs of the evolving to customers and enhance our performance.”
GULF-AFRICA: Rob Marriott, CEO and General Manager of Muscat Duty Free
Marriott says in Muscat the confectionery category had been gradually recovering, but this changed once the COVID situation on the Indian subcontinent worsened in May, causing all arrivals from mainly India, Bangladesh and Pakistan to be put on hold. “In Q1 the Confectionery category was recovering relatively faster than other categories such as Perfume and Cosmetics, Fashion and Sunglasses, but all this changed with the new travel ban,” he says. Recent data from m1nd-set showed confectionery sales in TR as a percentage had dropped relative to previous years, but in Muscat Duty Free this has not been the case. Marriott says while the sales volume certainly declined, as a percentage of total sales Confectionery remained the same. “The challenge at the moment is the drop in PAX numbers,” he says. “We still have attractive promotions such as 2+1 and %-off promotions to entice passen-
donated large quantities of our stock to the Food Bank and other local charities. The donations were very well received, as COVID-19 impacted the livelihoods of many. We also worked with our partners on corporate sales campaigns and appreciation drives,” says Lim. The company ceased plans for launches during this time, and sampling was also ceased, in line with the COVID-19 safety measures at the airport. Lim says: “We are looking at other ways to stimulate our customers, such as through visual and other sensory elements such as scent, audio etc. Our goal remains to provide our customers with a unique and memorable local ‘sense of place’ experience within Discover Singapore.” The pandemic brought with it many challenges. Lim says the biggest challenge is the volatile demand due to the changing passenger profile as border restrictions are lifted, combined with the expiry dates of the products they sell. “While promotions are an integral part of our operational marketing strategy, our focus is to innovate and remain agile to serve our customers. Delivering bespoke small
gers to buy confectionery products. When the travel restriction to Indian subcontinent is lifted, the confectionery sales will bounce back.” While some companies were forced to bin confectionery due to expiration dates or untimely packaging, Muscat Duty Free managed to avoid this. “We can with pride say that we did not throw away any confectionery product till date,” says Marriott. “In this time and age when millions of people are dying due to hunger, we took it as a mission not to throw away any consumable products. We had a committee comprising the Operations, Commercial and Finance team reviewing this on weekly basis, addressing both the immediate expiries and the SKU’s expiring at a later date but with high quantities.” The company then activated promotions, which it reviewed on a weekly basis, thereby successfully managing expiring items. The retailer will continue to have promotions during the coming months, which will be primarily supported by all the key Confectionery suppliers. For Muscat Duty Free, the immediate challenge is to wait for travel restrictions to be lifted. After that, the focus will turn to increasing the sales of Confectionery.
For Muscat Duty Free, Confectionery sales had been improving until the COVID situation on the Indian subcontinent worsened, causing all arrivals from that area to be put on hold
Confectionery/Fine Foods report
Marriott says: “The subcategory sales mix is more towards value for money — affordable confectionery SKU’s. One challenge will be to restore the sales of the Premium category. Another challenge is for the suppliers to get the production lines back to pre-COVID levels. Several suppliers now are able to produce and supply only their top SKU’s.” One potentially difficult step to climb in bringing the category up in sales is that sampling has always been an important part of selling new confectionery products, and this is currently not happening. “The safety of our colleagues and passengers is our top priority,” says Marriott. “In the current situation samplings cannot be done. Passengers themselves are not comfortable with sampling. From a hygiene perspective as well it is not ideal to do sampling.” He says this situation should encourage suppliers to create new ways to conduct sampling in future.
AMERICAS: Felix Lugo, Import Executive of Shopping China in Paraguay For Shopping China, the first seven months of lockdown were the most
difficult. When possible, the company sold confectionery stock in other stores that are under the same umbrella, if they received authorization from brand partners to do so. In some cases Shopping China did not receive this authorization, and those companies helped with credit. “It was a very difficult time, but it was manageable with the help or our partners/ providers,” says Lugo. In the Confectionery category, Shopping China’s customers have a clear preference for chocolate. “Chocolate has always represented 70% of our sales in this category, and that didn`t change,” says Lugo. “In tough times like these we have seen customers migrating to other cheaper options like sizes or brands, but they still show their preference to purchase chocolates.” As with many retailers, during the pandemic Shopping China ran a website that allowed customers to purchase online, in Paraguay and at its borders. But in this case they found even though customers were able to easily purchase online they preferred to come to the stores. For Shopping China, much is operating as normal. The company is constantly
working on promotions, with a heavy social media focus in order to bring these promotions to customers’ attention. While the company considered postponing launches and dedicated spaces, ultimately the management decided to keep things as planned, despite the uncertainties. And unlike in most regions of the world, sampling is allowed, with clear safety measures. Lugo expresses the company’s commitment to keeping staff and customers safe. “We are following all the protocols to make it a safe place for all our customers, and they seem to be adapted to these protocols. With these in place, samplings can continue as usual.” In addition to simply the decrease in customer numbers, the biggest challenge for Shopping China is keeping a large number of different items on hand. “We do not know when the market will be back to normal,” says Lugo. “Right now it is very difficult for us to have the variety of products that the customers are looking for, since the purchases are not in the normal rhythm, and besides many companies are struggling with raw material.”
Shopping China’s customers are looking for chocolate in their Confectionery purchases, with this subcategory making up 70% of category sales
One challenge the retailer has is having the large number of options on hand as it prefers; this is because of abnormal shopping patterns and the difficulty some manufacturers are having accessing raw material
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Referencing Loacker’s series of new recipes, the title of its brand re-launch campaign, More than good, represents two themes: more taste and more sustainability
A call to action
APPLYING PRODUCT PACKAGING AS A GATEWAY, LOACKER RE-LAUNCHED ITS BRAND WITH THE SUPPORT OF ITS MORE THAN GOOD CAMPAIGN
his year, as part of a broader, long-term project aiming to re-position Loacker and speak directly to it “mindful” clientele, the confectionery company relaunched its brand with the support of its More than good campaign. Referencing Loacker’s series of new recipes, the title of the re-launch campaign represents two themes: more taste and more sustainability. Although the initiative started in 2019 with the introduction of the company’s communication platform, Goodness is a Choice, and its campaign of the same name, the brand re-launch strengthens Loacker’s “More than good” promise and reveals its proverbial goodness. At the core of Loacker’s re-launch is its new communication strategy, which showcases the power of storytelling. According to Yvonne Profanter, Head of Communication, Loacker, the campaign concept has developed into a manifestocommercial, which opens with a view of Monte Sciliar, the majestic massif of the Dolomites in South Tyrol, Italy. Profanter goes on to say this mountain range has always inspired the identity of the brand, symbolizing the lasting bond between the company and the place where it all started. With an emphasis on digital media, the campaign rollout will take place in the second half of 2021 across all relevant touchpoints. “The underlying themes of Loacker’s storytelling are the values and choices that have enabled the brand to create new recipes of its much-loved products – products that are truly more than good. “To a great extent, this has been made
by LAURA SHIRK
possible by the company’s ability to verticalize the most strategic raw-material supply chains, which Loacker has implemented in order to ensure that its consumers can enjoy top-quality, sustainable ingredients – ingredients that enhance the natural taste of its products,” she states.
Balancing indulgence & sustainable living
As opposed to changing its direction, the pandemic simply enhanced the course of the re-launch. Beyond public concern of health and safety, Loacker realized COVID-19 generated a renewed sense of national unity and interconnectivity. Postoutbreak, there has been a strong increase in general interest about the importance of sustainability. “We know that consumers, especially younger generations demand that companies take more responsibility for the major challenges that humanity is facing – and this is exactly the direction we are moving toward with our projects on raw materials and packaging. However, indulgence still plays a role. Consumers don’t want to have to choose between a great tasting product and a clean conscience, they want both, and we think they have the right to,” explains Profanter.
Digital media consumption & communication
During the development of its campaign assets, Loacker has observed the impact of increased digital media consumption – applying digital channels means accounting for different types of media intake and delivering tailor-made formats. Furthermore, when it comes to digital sales,
Profanter states the number of consumers purchasing confectionery online has significantly increased during the first year of the pandemic and this newly acquired habit is here to stay. Profanter says the most tangible impact of COVID-19 on the re-launch was the need to adapt the standard communication methods of its customers and distribution partners. The pandemic caused Loacker to re-organize its three-day international live launch event and devise improved ways to effectively convey key messages.
Although its new and improved products have only started phasing onto shelves across global markets, Juan Miguel Cabrera, Business Director of Duty Free & Travel Retail, Loacker, says the company is looking forward to seeing the consumer reaction. Featuring a QR code, the brand’s new package design marks the first time Loacker has applied product packaging as a gateway. “With consumers requesting more information about our products, ingredients and QR project, the placement of our recipes and methods of communication on packaging is essential in order to engage both existing and potential consumers. “All of our new packaging will be on display at a later date – most likely at Cannes since More than good is still in early stages among our mature markets. The company is working hard to have everything set to re-launch at the end of Q3,” concludes Cabrera.
Mondelez WTR & CircleSquare Partnership
MONDELEZ WTR discusses scorecards & sustainability
In partnership with CircleSquare, Mondelez WTR has developed and shared its Sustainable DNA Rating scorecard to encourage more sustainable practices and reduce environmental impact by LAURA SHIRK
The application of the scorecard to Mondelez WTR’s Toblerone re-design helped to set a new standard for progressive, sustainable design in travel retail
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ecognizing the demand for more sustainable practices across the duty free and travel retail channel, Mondelez World Travel Retail (WTR) approached longtime partner, CircleSquare, to initiate a dialogue and build a sustainability “playbook.” As the industry had no existing method of measurement, Richard Houseago, Head of Customer Marketing at Mondelez WTR, describes the developing of its Sustainable DNA Rating scorecard as a collaborative effort and detailed exercise that allowed the team to quickly identify opportunities to become more eco-friendly. Houseago says before thinking about how Mondelez WTR could “do better,” the company had to pose the question: where
perfection; we have simply strived to do better and this feels like a more comfortable place to be. Acknowledging that we are not experts in the field, we have been confident, yet humble. This scorecard is going to evolve as we continue to learn more,” he comments.
Toblerone: a bold new look & feel
The application of the tool to Mondelez WTR’s Toblerone re-design helped to successfully achieve a bold new look and set a new standard for progressive, sustainable design in travel retail. When it comes to “early phase thinking,” Houseago points out that it’s one thing to take an existing design and retrofit it by using more sustainable materials and something profoundly different to select sustainable materials and incorporate them into product design. During the new redesign, the company prioritized reducing the use of plastic, increasing the quantity of raw and biodegradable materials and limiting power consumption in order to “capture the spirit of the channel’s number one chocolate brand.”
To determine an average rating out of five, the scorecard considers four key criteria: recyclability, reusability, manufacture & availability and end of life
are we now? Having collaborated with CircleSquare for more than a decade with a partnership based on trust and openness, he notes that the sustainable design scorecard could not have been established without the support of the creative agency. Looking to inspire the spread of more sustainable practices within the travel retail channel, Mondelez WTR has made the scorecard available to download free of charge via CircleSquare’s website. Following its implementation, the pair has received an overwhelmingly positive response. “The Sustainable DNA Rating scorecard has been a big piece of work – and one that we are very proud of. Even if the scorecard inspires just one brand, retailer or airport to re-assess its supply chain and
make one unit in a way that is better for the environment then it’s worthwhile,” says Houseago.
POSM lifecycle & key criteria
Encouraging the use of more authentic materials and considerate construction methods during the packaging process, the scorecard aims to create a more sustainable point-of-sale materials (POSM) lifecycle and reduce environmental impact. To determine an average rating out of five, the card considers four key criteria: recyclability, reusability, manufacture & availability and end of life. Moving forward, this rating can be used as a comparative measure. “On the topic of sustainability, Mondelez WTR has never aspired to achieve
As part of a much broader Mondelez International business, the Mondelez WTR representative offers insight into the company’s corporate-wide and industryspecific initiatives. In addition to discussing Mondelez International’s cocoa sourcing program, Cocoa Life, and packaging global commitment to use 100% recyclable or recyclable-ready packaging by 2025, Houseago talks about current travel retail initiatives to summarize its sustainability roadmap of the channel. Beyond its Sustainable DNA Rating scorecard, Mondelez WTR has implemented its track and trace portal to help identify all of its POSM units across the globe and support its partners to make better choices on a daily basis. This portal has also been developed in partnership with CircleSquare. Houseago lists offering fewer and better gifts with purchase, applying new in-store technology such as shelf talkers and wobblers and experimenting with solar panels as other initiatives on the go. To be discussed down the road, Mondelez WTR’s ethical promotions proposal, which will lead customers to make more ethical decisions throughout the consumer journey. www.dutyfreemag.com
Taking its time As HARIBO advances throughout Asia, the company is making sure to have its shapes, flavors and ingredient compliance 100% certain before fully engaging in the exciting Chinese market by WENDY MORLEY
Fontana believes items with a crazy look, such as HARIBO Twin Snakes and Giant Dummies, will have particular appeal in Asia
Shapes and flavors for China Elisa Fontana, Head of Marketing Travel Retail, HARIBO
ell-known confectionery brand HARIBO is available domestically and in travel retail around the world, including parts of Asia, but is just beginning to enter the Chinese market. Elisa Fontana, Head of Marketing Travel Retail, says the company believes it can leverage credentials such as its use of highest-quality ingredients, range of snacking and gifting items and bright fun packaging to develop its footprint in Asia more widely and to break into “exciting” new markets such as China travel retail. Currently, HARIBO is working intensively to find the right ingredients, shapes and flavours to meet the needs and regulations of the Chinese duty free market, she says. “At HARIBO we are obsessed with quality. We do not enter a market until we are 100% sure of its compliance and our likely success, and this is the reason we are not present in the market yet. We aim to have an offer available very soon.”
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In Asia, HARIBO has found great success with sharing bags of its most iconic treats such as HARIBO Goldbears and Happy Cola Bottles. The resealable versions for travellers are being very well received as snack items or as small gifts, says Fontana. “We also make cute gifts for children like the Travel Suitcase filled with mini-bags of jellies — kid-appeal and portion-control in one SKU.” “The latest flavours in the resealable pouch format are sure to be popular in Asia for their great taste and crazy look, including the HARIBO Giant Dummies, which are fruit jelly pacifier shapes, and the HARIBO Twin Snakes, the sweet and sour duo-flavour jellies.”
HARIBO is currently rolling out its travelexclusive Destination Collection. While only four European destinations are available now, the company is assessing the viability of extending the range to others, including key points in Asia. As travel resumes, HARIBO expects the split between gifting and self-consumption to be similar to pre-pandemic levels, which is roughly half and half. “HARIBO has a very loyal following in its established domestic and travel retail markets, so people are delighted to find new mixes, new flavours, travel-exclusive gift sets and sharing bags from a brand they know and love,” says Fontana.
Hainan and beyond
As a family-friendly city, Hainan seems the perfect place for HARIBO to spread its base in China. “The appeal of HARIBO products is multi-generational, crosscultural and non-gender specific, which is perfect for a family-friendly environment like Hainan!” enthuses Fontana. “The HARIBO brand ambassador we use in marketing displays and promotional activities is a bright yellow bear who stands out in-store and is adored by children (and adults) everywhere. Our brand really could not be better suited to a duty free paradise like Hainan.” Fontana believes there is immense potential for the brand in China. “It is a massive market, and its huge population is becoming more outward looking every year, with a penchant for international brands. We also know that German quality, which is renowned worldwide, has an impact among Chinese consumers. In addition, sugar confectionery has an advantage over the chocolate brands in that it is stable to transport and store, and has a fairly long shelf life, which makes it easier to sell into the disparate markets on the other side of the world. China Duty Free is expanding its reach all the time; with superb retail facilities and an increasingly diverse selection of brands across all categories. Its latest venture, Haikou International Duty Free City in Hainan province, is on schedule to open in June 2022. We would very much like to be there!”
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Growing the category
When it comes to maximizing sales, Otis McAllister says it’s important to find balance between the experience of global brands and the innovation of niche products to support the confectionery category as a whole
by LAURA SHIRK
ith a plan in position for the continued stabilization of travel, Otis McAllister has relied on close contact with its suppliers and consumers to ensure a successful recovery. Although the company has been forced to adapt to the new reality, Marc Panara, VP of Sales & Operations, Otis McAllister, says the one thing the pandemic has not been able to take away is what lies at the core of the company’s DNA: category growth. When it comes to maximizing retail sales and nurturing partnerships, it is important to find balance between the experience of leading global brands and the innovation of niche products to support category growth. “We know that if we can grow the confectionery category as a whole our respective brands will grow accordingly,” he states. When asked how Otis McAllister enhanced the value of its duty free and travel retail supply chain, Panara notes that its first response from a supply standpoint was to hone in on the main assortment of each manufacturer and follow studies based on consumer insight to align with its audience. While spending the last year overcoming logistical challenges, the distributor adapted its promotional calendars to suit the requests of retailers and the behaviors of consumers. Referring to the evolution of different “need states” of the consumer such as self-consumption, sharing and gifting, Justin Nee, VP of Sales & Marketing, Otis McAllister, explains the distributor started to closely study retail trends and travel pat32 JULY 2021
terns in order to offer value to both its retail partners and vendor partners and flexibility in terms of consolidating brands and products.
Entering the TR & DF channel
Responsible for helping select confectionery brands enter the travel retail market, the pandemic has modified Otis McAllister’s approach to entering the channel and increasing visibility. The company had several new brands and different products lined up to showcase at The Summit of the Americas 2020; however, all of them have been placed on hold for the time being. According to the pair, Otis McAllister’s brand portfolio is always accessible to tweak and niche subcategories such as sugar-free and liquorfilled chocolate are on the rise. Although the company is still interested in making the introduction, many participating brands would like to gain a better understanding of the current travel retail landscape before committing to the move. “Most of our retail partners in North America elected to continue with their pre-pandemic brands, but tighten up their assortments to feature the bestselling and fastest-selling items. Given the volatility of the marketplace, our partners want to observe new shopping patterns from the consumer before expanding existing brands or launching new initiatives. “We take pride in acting as the bridge between our suppliers’ portfolio and the end consumer and ensuring that the right product assortment is available to the traveler. We are still moving forward with our plans to bring new brands to the market, but their introduction will be slightly more delayed than we initially anticipated,” says Panara.
Diversification & specialization
Prioritizing diversity among its brand portfolio from both a company-wide and divisional standpoint, Otis McAllister has
While spending the last year overcoming logistical challenges, the distributor adapted its promotional calendars to suit the requests of retailers and the behaviors of consumers
Looking ahead, Otis McAllister expects the confectionery category to maintain its position as leader of the company’s overall business post-recovery
witnessed the increasing popularity of the health-conscious consumer and the biscuit subcategory. The company is responding to the growing “better for you” trend by offering products according to lifestyle and looking to introduce new options to the channel. In terms of the subcategory, Otis McAllister is working with its current suppliers and seeking specialized suppliers to add related items to its product range. “Leading up to Q1 of 2020, we were on our way to achieving another record year – and then the pandemic occurred. We realize now, more than ever, how important it is to have a diverse organization. Although our travel retail division experienced a challenging 12 months, our rice and grains division and canned seafood division thrived. Along with the previously mentioned divisions, Otis McAllister features an international and military offering,” states Nee.
Dufry & distribution rights
Elaborating on taking advantage of opportunities that might not have been as important pre-COVID-19 such as the acceleration of sustainability and farm-to-table, Otis McAllister says it’s focusing on the sourcing of its ingredients and packaging. Additionally, the company has found opportunities on the supply side. Most notably, Otis McAllister secured the distribution rights to Dufry’s business in the USA. As of May 1, the company has been supplying all of the travel retailer’s confectionery brands to its locations across the country. “With the breadth of brands that we represent, we offer our customers the flexibility of being able to benefit locally from the critical mass of our warehouse rather than using full containers from overseas, which is a challenge these days with limited container availability and prices on the rise,” states Panara. Looking ahead, Panara expects the confectionery category to maintain its position as leader of the company’s overall business post-recovery. He says it’s a numbers game and at this time, Otis McAllister represents twelve confectionery suppliers, which is significantly more than either of its other divisions.
Marc Panara, VP of Sales & Operations, Otis McAllister & Justin Nee, VP of Sales & Marketing, Otis McAllister, expand on enhancing the value of its DF & TR supply chain www.dutyfreemag.com
Combining the elegance of its designs and the finesse of its recipes in the composition of personalized gift boxes, the gourmet and delicatessen company highlights flavors inspired by French culinary heritage
OFFERING GOURMET HAMPERS, PERSONALIZED GIFT BOXES AND CONFECTIONERY ARRANGEMENTS FOR ALL SPECIAL OCCASIONS AND PRICE POINTS, FAUCHON SAYS THE PANDEMIC REPRESENTS AN OPPORTUNITY TO ACCELERATE OMNI-CHANNEL SALES by LAURA SHIRK
ffering more than a century of culinary art expertise, FAUCHON provides a creative, sensory and personalized experience in all of its product categories: delicatessen, cellar, patisserie, tea, confectionery and chocolate. As defined by its website, the gourmet and delicatessen company has become the benchmark for luxury French gastronomy in the world. Combining the elegance of its designs and the finesse of its recipes in the composition of gift boxes, FAUCHON highlights gourmet flavors inspired by French culinary heritage. As one of FAUCHON’s core values, its “Art of Giving” offering features gourmet hampers, personalized gift boxes and confectionery arrangements for all special occasions, price points and taste buds. When asked how the company adapts this offering to its presence in duty free and travel retail, Alexandre Antusze-
34 JULY 2021
wicz, Chief Development Officer, FAUCHON, states all of its corners at airports include a wrapping station with a wide range of decorative wrapping papers and ribbons and its iconic luxury shopping bag. Since time is of the essence for many travelers, the brand has developed quick gifting options with automatic ribbon that the consumer can directly slide around the product. With the return of travel, FAUCHON does not believe that the post-pandemic conversion rate of on-site sales within its categories will be affected by COVID-19. However, the company has developed a strict protocol to ensure the highest level of protection for both its clients and employees. “We believe that the pandemic represents an opportunity to accelerate omni-channel sales – especially click and collect with our direct operations,” says Antuszewicz.
The crisis has led FAUCHON to re-think its strategy, prioritize diversification and favor developments involving the investment of local partners
with developments in the Middle East and Asia. We recently opened a Beautiful FAUCHON corner at Bahrain Airport with ARI and we are actively exploring options to launch our nano FAUCHON self-service display in China. “We are also willing to accelerate in new channels such as railway stations and airline catering, both of which offer good alternatives to promote the brand and ensure a high level of activity. This is why we are happy to open a new 50-sqm store at Gare Montparnasse train station in Paris in Q4,” he explains.
Hospitality, education & retail With all of its recipes designed and greenlighted by its renowned team of chefs, the brand’s product range is 100% made in France exclusively with local producers
A sign of appreciation
Similar to other brands, FAUCHON has observed a “strong ramp up” of its online sales since the start of the pandemic. With minimal social interactions and gatherings taking place throughout the last 18+ months, consumers have opted to purchase gifts online and send confectionery arrangements with personalized messages as a sign of appreciation or form of celebration. Antuszewicz adds that the company has also experienced a significant increase in business among its corporate clients looking to gift employees during this challenging time. “More specifically in travel retail, sales have been extremely down due to low passenger traffic and high stock levels in our key European markets. Therefore, we are aiming to further diversify our presence. This will initially take place geographically,
With all of its recipes designed and greenlighted by its renowned team of chefs, FAUCHON’s product range is 100% made in France exclusively with local producers. Touching on the luxury component of the brand, Antuszewicz lists macaroons, chocolates, French confectioneries and teas as its bestselling items. “What makes our product unique and authentically luxurious is a combination of know-how, quality, legacy and timeless Parisian flavor,” he says. The crisis has led FAUCHON to re-think its strategy around three key pillars: hospitality, education and retail. Following the launch of FAUCHON L’hôtel Paris in 2018, the company opened a second 5-star hotel in Kyoto, Japan, last March. Along with several other hospitality related developments in the pipeline, FAUCHON will open its first cooking school in Rouen next year. This initiative will welcome over 800 students each year to learn more about the fields of gastronomy. “With a clear focus on our key categories, the company’s retail concepts and business models are currently being reworked to provide greater agility and efficiency. Generally speaking, we are favoring developments involving the investment of local partners, which will bring a strong commitment to projects in development, as well as a genuine operational know-how that is essential to achieve success in export markets,” concludes Antuszewicz.
A holistic approach to
sustainability FROM SOURCING INGREDIENTS TO PROMOTING RESPONSIBLE CONSUMPTION, COMPANIES ACROSS THE CATEGORY ARE PRIORITIZING MORE SUSTAINABLE PRACTICES THROUGHOUT ALL STAGES OF THE SUPPLY CHAIN
by LAURA SHIRK
ccording to extensive research, the average consumer is willing to pay more for eco-friendly products and sustainable packaging. The fact that as a collective we are willing to pay to protect the planet has led brands, retailers and suppliers across the channel to re-assess their approach to embracing sustainability and conducting business on a holistic level. This is especially true of the confectionery category. With the introduction of green initiatives and sustainability roadmaps, terms such as “farm-to-table,” “bean-to-bar” and “traceability” have become commonplace. From sourcing ingre-
dients to promoting responsible consumption, companies of all sizes and margins are prioritizing more sustainable practices throughout all stages of the supply chain. Looking to cover the topic in more detail Duty Free & Travel Retailing Magazine reached out to a number of industry professionals to learn more about how companies across the category are striving to reduce their environmental impact. Below, we hear from representatives of Cloetta International, Fazer Confectionery, Ferrero Travel Market, Mars Wrigley ITR, Ricola AG and Ritter Sport.
BEREND-JAN VAN EGMOND, Senior Global Travel Retail Manager, Cloetta International
MICHAL WOJCIK, Director CU International, Fazer Confectionery
Cloetta’s new sustainability agenda, A Sweeter Future, reflects a heightened ambition and the company’s purpose: We believe in the power of true joy. Demonstrating increased engagement, Cloetta joins the internationally renowned Science Based Targets initiative and sets clearer goals for its long-term work to reduce the company’s total carbon footprint. This new sustainability agenda reflects Cloetta’s purpose and showcases three key pillars: for you, for people, and for the planet. The initiatives within this sustainability agenda cover topics all across the value chain where Cloetta has the ability to make an impact. 36 JULY 2021
Sustainability is a part of the company’s DNA, since Fazer comes from Finland (the land of a thousand lakes), where a healthy community and social equity is appreciated. Our sustainability goals for the next decade include taking care of the purity of nature. This means producing 50% less emissions, generating 50% less food waste and promising that 100% of our raw materials – especially cocoa – is sustainability sourced. Also, our aim is to establish a more plant-based production. We believe that reducing consumption of meat and dairy products is the single greatest way to reduce environmental impact of the planet.
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SERGIO SALVAGNO, General Manager, Ferrero Travel Market
Ferrero’s Sustainability Strategy promises to protect the environment, source ingredients sustainably, promote responsible consumption and empower people. We have committed to responsibly source 100% certified cocoa. Our suppliers follow strict environmental, social and economic criteria. Although certification and traceability are the cornerstones of our strategy, we also aim to make a positive impact on the ground. Ferrero plans to achieve 100% traceability in the sourcing of sustainable hazelnuts, right down to the individual farm or “farm cluster” level. Ferrero is also committed to making its packaging 100% reusable, recyclable or compostable by 2025. As an example, in the travel retail channel, the new packaging of the bestselling Ferrero Rocher 375-g is 100% recyclable, with 40% weight reduction and 60% less CO2 emissions.
RAGHAV REKHI, Global Commercial Director, Mars Wrigley ITR
Mars Wrigley ITR says there is no such thing as a sustainable product in unsustainable packaging. Our main goal is to develop eco-friendly packaging that is reusable, recyclable or compostable while decreasing virgin plastic use by 25% by 2025. Therefore, we are re-thinking our approach to packaging in the following ways: reducing unnecessary packaging, re-designing necessary packaging to achieve circularity and investing to close the loop. This philosophy applies to all of our business models including global travel retail.
ANDREAS RECKART, Head of Travel Retail, Ricola AG
JAN PASOLD, Managing Director of Global Travel Retail, Ritter Sport
As a family-owned company, we think in generations and align our work in such a way as to leave an environment behind that is worth living in. We use the freedom that brings to focus the long term. We care about every aspect of chocolate production – from bean-to-bar. “Doing the right thing to create really good chocolate” is the purpose of Ritter Sport. Doing the right thing means living up to our pledge: to do everything as well as we possibly can. To strive for success and to work in harmony with people and nature. 38 JULY 2021
Ricola has been committed to thinking and acting sustainably for decades, based on the foundation that “Sustainability is our way of life.” This mantra is at the heart of internal processes and reinforces internal and external communication regarding sustainability. While herb specialities are our focus, we are constantly evaluating opportunities to remove unnecessary packaging material from our products or use packaging material that is easier to recycle. Obviously, this is done under the premise that the quality of our products will not be affected. A recent project involved replacing the aluminum foil from our range of sugar-free 75-g tins with an added outside seal, which serves the same purpose without any impact on product quality.
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