A Piece of the Pie

Sugar and chocolate are undoubtedly the universal ‘pick-me-up’, throw in some beautifully packaged boxes with ribbons and bows or raisins and nuts and you’ve got an unbeatable combination of goodness that is hard to resist.

While, one would like to believe that the mood-elevating properties of good-quality chocolate may very well be the underlining reason why the confectionery segment continues to do better than other categories — competing for floor space in duty free outlets around the world — there are admittedly other factors at play.

Before we go down the road to explore the multitude of ingredients that go in to making this successful mix — be it the Middle East as an emerging market to the fact that confectionery continues to remain a strongly impulse-driven category and hence making it necessary for brands to constantly innovate; or that there are a surprisingly small number of major players dominating a category that Daniel Cappell, Senior Vice-President Commercial, Abu Dhabi Airports Company (ADAC), calls a "core category within the Abu Dhabi Duty Free (ADDF) mix that continues to both grow and increase its share of our total business," — let’s take a look at what this business is. According to some of the major players in the market, such as Ferrero, "Confectionary has been growing consistently year-on-year for the past decade and there are no signs that this positive momentum is going to change any time soon," says a very positive Giannicola Losacco, General Manager Travel Market, Ferrero.

It’s easy to get carried away while talking about a segment where there is obviously no dissent or debate on how well the category is performing as a whole — but what do the above mentioned trends mean for brands and more importantly how are brands and operators capitalising on these new developments to provide passengers and shoppers with the best in-store retail solutions.

Perhaps the best thing confectionary has going for it is the potential of every passenger being a shopper — where as every passenger isn’t into alcohol or cigarette consumption — but almost everyone wouldn’t mind snacking on chocolates and candies or then, if nothing else, satiating a retail therapy urge by buying something for gifting purposes. It is this wide appeal and impulse nature of confectionery that not only makes it a lucrative segment but a very competitive one as well. This is where brands and brand-recall play a critical role. The better known the brand, the faster the recognition and product understanding and quicker the purchase decision.

It is interesting to note that, "Just eight players account for 70 per cent of the confectionery market share by value. Of those eight, according to industry analyst Generation Research, Ferrero was the fastest grower in 2011. The way we grew is very similar to the way we grew in the domestic markets: very unique and beloved products, a maniacal attention to the quality and freshness and fresh new ways to engage with travellers," says Losacco.

A fallout of this whole impulse driver is the gifting trend that continues to dominate the segment and is considered by many as the single most important factor in driving the category forward. After all, which other purchase can transcend gender, culture, age and ethnic boundaries? Which is why, Cappell is of the opinion that: "There are many reasons for buying confectionery, the primary being as a gift, for sharing or for self consumption, or indeed on impulse. And we provide a range at ADDF that meets all these purchasing needs and the business is spread across all reasons for purchase."

The same seems to be the case with Dubai as Losacco explains there are approximately 25 million passengers passing through the airport and "Not even 2 per cent are from the UAE, the rest are international passengers in transit, making the first reason for purchase as usually being gifting. Although it depends also on the nationality of the shoppers as purchase behaviour changes dramatically within different ethnic groups." But Karl Marnane, Travel Retail Director, Butlers Chocolates, has a different take on it, "Gifting continues to be a strong driver — especially on occasions such as Christmas, Ramadan and other festivals but there is a definite global trend where most companies have started to introduce lower price points, hence targeting self consumption. And the majority of launches in the coming times will be for self consumption. This is primarily because people are really watching what they spend."

We’ve been hearing for sometime now about the power of the Asian giant and with good reason as this market has been tremendously beneficial to most brands who invested in it. But the discernable shift has begun where other markets such as Latin America and the Middle East are fast developing into profit centres. When it comes to this region the factors for conducive growth are all in place from a strong economic impetuous; greater disposable income, global business hubs and aspiration to travel coupled with a strong gifting culture — a recipe for success.

To understand the long-term potential of the market, one has only to look at how Butlers performed, where in the past three years the brand that was exporting to 12 countries has expanded to 38 countries, with the focus in the past two years being in this region. "We’ve historically been only in Dubai but now we are listed in Abu Dhabi, Muscat, Cairo, Beirut, Jordan and Doha to name a few places. And the Middle East was the fastest growing market last year — by July this year, we are expecting the region to have overtaken mainland Europe as our
third busiest markets with the UK
and Ireland retaining the first two spots," says Marnane.

Another popular brand to have a strong presence in the region and which is capitalising on it is Ritter Sport. "Having a solid distribution network in the Middle East region, Ritter Sport meets the demands of both the local people, as well as international travellers at the region’s large airports, such as Dubai," says Katharina Tyrolt, Country Manager, International Division, Ritter Sport.

Apart from growth in passenger traffic and emerging markets, another key factor in the growth of this market is that unlike Europe and America this region hasn’t been as affected by the economic downturn, explains Marnane, "The Arab Spring delayed our entry into the Egyptian market and did impact business in Jordan and Bahrain. But Bahrain has come back strongly in the last 12 months and business in the Middle East has doubled."

A similar thought is echoed by Losacco who believes that the Middle East will do better in the near future compared to the past. "For economic and political reasons some of the areas have been negatively affected in terms of sales, but I think that in the future the major hubs will play an extremely important role in terms of passengers traffic and, ultimately, sales."

The other driver pushing the segment to the next level is regionalisation strategy and localisation. The idea being that continuous new product launches, exclusive offers, strong branded POPs and an enhanced duty free shopping experience are all part of the business strategies — but it obviously pays off as Cappell says, "Confectionery has one of the highest average spend per head (ASPH) within the overall duty free offer; we continuously seek to increase this with innovative value-driven promotional campaigns."

In a bid to capture this much-touted ‘impulse’ drive when it comes to confectionery, there is a strong need
to better understand shopper behaviour and triggers of purchase. And it is
these findings that translate into effective merchandising and
category management.

"In the region, Ritter Sport offers a wide assortment and many different flavours for every taste, all filled with the best ingredients. There is the 100g bar for personal enjoyment; a 250g bar to share and the Ritter Sport mini bars (16.7g) for sharing or self consumption. For international travellers, we have
a brand new travel retail exclusive range that was launched in April this year and is designed for gifting. There
is a compact 4 x 100g Ritter Sport Gift Box of either Whole Hazelnuts flavour, Praline or Alpine Milk Chocolate. With regards to the Middle East, people very much enjoy our 100g Butter Biscuit and Raisins & Nuts — a squared shortbread biscuit especially made for Ritter Sport and sun-ripened dried Californian raisins are used for these two flavours," explains Tyrolt.

The constant need for product development and localisation is reflected in Butlers’ offerings for this region. "Now our packaging uses a lot of visual imagery of chocolates, this is done in Asia as well as for this region. Also in terms of exclusive boxes, we have had great success with the Christmas box we did in Beirut Duty Free; the special gift box on the occasion of Chinese New Year in Dubai as well as the gift boxes for Ramadan we have done in Dubai and Abu Dhabi. For our 80th anniversary, we have a special gold 200g box. And after Ramadan we are launching the 300g twist-wrapped non-alcoholic truffles," says Marnane.

Regionalisation and localisation

Action Middle East

Big on impulse and gifting