The travel retail market was amongst the most sectors most heavily hit by the COVID-19 pandemic over the past two years due to various closed borders and travel bans being implemented worldwide, but in recent months the industry in APAC has reported healthy recovery across the board as regional and international borders started opening, including for foods and beverages.
“International Air Transport Association (IATA) figures for February this year have shown good grounds for optimism [with] global traffic having recovered to more than half its pre- pandemic level at minus 45.5% versus February 2019,” Tax Free World Association (TFWA) President Erik Juul-Mortensen said at the recent TFWA Asia Pacific Live event in Singapore.
“The list of countries across the region opening up to vaccinated travellers in 2022 includes Australia, India, Indonesia, Malaysia, New Zealand, Singapore, South Korea and Vietnam, and others may well join them in the coming months. [Travel retail] and duty free sales is also rebounding at a rate that is very encouraging for an industry that up till recently, faced an existential threat from the impact of COVID-19.”
Within the travel retail market, alcohol and chocolate brands have always been amongst the most prominent sectors, particularly when it comes to duty free sales at airports – but in order to not just continue this success but also grow beyond current achievements, there is a need for even the most prominent of brands to keep up with current trends driving the wider F&B industry.
“The 2020s is essentially a strategic inflection point for all of today’s corporations, a period that will make or break firms regardless of how big or successful they have been before this,” Innovators Institute Founding President Charlie Ang said at the event.
“This is what we call the Fusion Era, where we are in the midst of a shift from previous megatrends driving global development such as urbanisation and globalisation to new megatrends such as the Fourth Industrial Revolution, climate emergencies, geopolitical disorder and rapidly ageing societies which are essentially converging and fusing to produce a perfect storm, a whole new era of development.
“So in order for businesses to make sure they make it instead of breaking, [in a sector such as travel retail] it is very important to develop based on trends driving consumer purchases [even in the wider market].
“In [food and beverage for example], many consumers are now drawn by guilt-free purchases which means that they want products with lower fat or sugar content, with an increased focus on health and wellness - This is an example of how manufacturers can create new value for consumers, and at the same time, and the same applies when making products for travel retail.
“At the same time, guilt-free also means enabling consumers to buy and enjoy products without feeling guilt over harming the environment, so the focus would be on creating products that are more energy and carbon effective, with a lower carbon footprint.
In this sense, Ang highlighted that ever since the COVID-19 pandemic hit, consumers have been increasingly prioritising regionalised production, which means the manufacturing of products with ingredients and production sites that are as close to the site of retail as possible.
“Beyond localisation, hyperlocalisation has become a big point of focus in order to keep the supply chain as short and sustainable as possible,” said Ang.
“In addition to the sustainable aspect, COVID-19 has also driven up consumer awareness about the importance of short supply chains in terms of access to food items [and food security] as a whole.
“So food brands that are able to make products for the same price which consumers can eat without guilt [either from a nutritional sense] or produced via a supply chain that is as hyperlocalised as possible are the ones that are most likely to be able to succeed through the 2020s, both in travel retail and beyond.”
Technology as main driver
In addition, Ang believes that technology will be the biggest driver of all in this decade, as this has now become a ‘foundational’ part of business growth as opposed to an ‘emerging’ one that was ‘nice to have’ like it was 10 years ago.
“It should be noted that we are basically at the tail end of the third industrial revolution and the start of the fourth, so are somewhere in between, and we are going to see more and more fusion of technology into every aspect of life and business, via 4.0 technological stacks that can cover cognitive (AI and machine learning to mimic human thinking), trust (blockchain and crypto) as well as immersive (virtual reality, holography) functions,” he said.
“The fusion of technology into almost all sorts of operations means that the lines are very clearly blurring between the physical, digital and biological spheres when it comes to just about all industries in the world – every one of these are set to be disrupted by technology, including food and beverage production and innovation for every type of market.
“This paradigm shift basically means that food companies will need to proactively make that digital change so as to reduce their chances of being fatally disrupted – or risk ending up as the next Blockbusters of today.”