Duty free and travel retail - bittersweet for confectioners

Tomorrow (19 October), the world's major confectioners flock to Cannes in the south of France for one of the highlights of the duty-free and travel-retail calendar the Tax Free World Association (TFWA) World Exhibition. The economic downturn has had a severe impact on the channel with worldwide travel numbers under pressure but, as Dean Best reports, there are reasons for confectioners to arrive on the French riviera less gloomy than others.

Duty free and travel retail, in recent years a sweet spot for the confectionery sector, has, over the last 12 months, soured as the global recession has taken hold.

From Nestle to Mars and from Kraft Foods to Cadbury, the travel-retail channel has quite literally provided a shop window for the confectionery sector's major players to unveil new products and bolster the image of their global brands in the eyes of the world's travellers.

More upmarket confectioners, including the likes of Godiva, Guylian and Lindt, have also used the channel to showcase their "premium" wares in a bid to benefit from what those in the business call "gifting".

According to recent figures from industry analyst Generation, duty-free and travel-retail sales of confectionery and fine food climbed by more than 16% in 2008 to reach US$3.4bn - surpassing tobacco for the first time.

However, since last autumn, duty free and travel retail, a channel that has endured its fair share of crises in the Noughties (think Sars, swine flu and security legislation) has suffered perhaps its most difficult year of the decade.

The economic downturn has led to industry-wide losses in the aviation industry, with jobs axed and routes slashed. Worldwide air travel is down and, crucially, business travel has taken a hit - all of which has had a severe impact on travel retail.

Data from Generation shows that global duty-free and travel-retail sales slumped by more than 14% in the first quarter of 2009. Against the backdrop of a bleak economy, sales were hit by widespread de-stocking throughout the sector as retailers ran down their stocks to save cash.

Tomorrow (19 October), the duty-free and travel-retail sector's most important annual trade show - the Tax Free World Association (TFWA) World Exhibition - takes place in Cannes, in the south of France.

It is the 25th anniversary of the exhibition but, against such a gloomy economic landscape, few will be heading to the French riviera in the mood to mark the show's quarter-of-a-century.

Chocolate and candy makers will be among the more buoyant arrivals. As in the wider in the food industry, the confectionery category has proved one of the more resilient elements of the duty-free and travel-retail sector.

However, unsurprisingly, the Generation numbers show that confectionery too has been hit by the downturn. Sales in the first quarter of 2009 slid by 9.3% but industry watchers believe that the fall in confectionery sales has not been as steep as elsewhere in the sector due to the relative affordability of chocolate and candy.

Nevertheless, these are testing times for confectioners in duty free and travel retail. Even the growth seen in 2008 was buoyed by price hikes demanded by suppliers to cover the spike in commodity costs. While the value of confectionery sales in the channel jumped 16.5% in 2008, volumes inched up by a mere 1.2%.

This week, just-food will be at the TFWA exhibition in Cannes to test the pulse of those confectioners operating in duty free and travel retail. The show has attracted some of confectionery's biggest players, and we'll look to bring you the latest news and views from the show.