Agility, flexibility and interdependency – MEADFA webinar assesses supply chain challenges

MIDDLE EAST/AFRICA. The Middle East & Africa Duty Free Association (MEADFA) today hosted a valuable webinar led by discussion of a key theme for retailers and brand owners in the travel sector – supply chain. It was attended by around 220 delegates from more than 30 countries.

Speakers included MEADFA President Sherif Toulan, m1nd-set Head of Business Development Anna Marchesini, Organico Solutions (part of The SEVA Group) Managing Director Roger Jackson (also MEADFA Board Member and Chair of the association’s Liquor Group) and ARI-Middle East CEO Richard Gray (also MEADFA Chair of Advocacy Committee). The session was chaired by Hume Brophy Managing Partner John Hume.

The speaker line-up at the MEADFA webinar today; click to enlarge

Roger Jackson addressed some of the key challenges around supply chain today and offered his views on how travel retail should embrace this within the business looking ahead. He spoke about the importance of agility and flexibility of resource, and thinking and moving fast within the supply chain model.

He said pointedly, “While COVID-19 is a root cause for many of the problems we face in supply chain, it has now been with us for 24 months so we have to stop using [the pandemic] as an excuse. We have seen a backlash from consumers and business when they have received poor service or slow delivery. That is a challenge.”

Analysing where the industry stands today, he said: “We know that many organisations are fire-fighting. They are dealing with redundancies, retirements, people moving back to their home countries, and an erosion of expertise in this area. People have left roles and not come back. So supply chain has come under pressure here, as well as from scarcity and cost of goods. That then links to margin pressure within the business, which in turn places the pressure back on supply chain to deliver.

“What we are also seeing is that the rhythm of the business has been interrupted, making forecasting very difficult. Travel retail is not yet back into that rhythm of depletions that we were used to, with out of stocks and other challenges. That means we don’t yet have the data that we would normally rely on, and don’t yet know what the ‘new normal’ looks like. The picture is really clouded. We need to understand where our new baseline is and to understand the new sales patterns.”

Roger Jackson outlines four areas of focus for the future of supply chain in travel retail during the webinar

So how does the future of supply chain look in travel retail? First, said Jackson, rather than look at five to ten-year goals for supply chain, as historically, it is important to look at the next 24 months.

“We know there will be disruptions, as there have been before, but these are only going to continue. Supply chain organisations have to manage these without allowing them to disrupt levels of service.”

On the future for supply chain, Jackson addressed four key areas. The first is commercial growth through supply chain. “Half of all CEOs rank growth among their top three priorities, which is no surprise, but 30% say that this will come through supply chain. So the pressure on supply chain will remain high. The only way we can address that is by becoming truly customer-centric and insights-driven and having a customer experience mindset.

“We were definitely on that journey 24 months ago, with COVID the disruptor since. You cannot get away from the current pressures but we have to park those and say, how do we get customer experience back to the forefront of what we are trying to deliver?”

Second, delivering on ESG commitments in an “authentic” way is another element of the future, he added. “54% of all businesses have shared that they will only work with partners that take sustainability seriously. But who is really living this? That’s where authenticity comes in. We really need supply chain organisations to fulfil their part in this, with KPIs around sustainability.”

Real-time execution of supply chain is also vital. “Here data has such an important part to play. We really need to look at data capabilities, automated warehousing, walkout technology. Look at what Amazon is doing with their rollout of stores, where essentially, there is no checkout now. This is the direction we are going in. The same applies to warehousing efficiencies.

“And then finally, probably an area that gets forgotten about is around flexible work experiences. Some 44% of all people in supply chain are suggesting that they will leave that sector. Over the last 24 months fatigue has really hit those employees hard, and many are considering career changes. So the erosion of supply chain expertise I mentioned earlier could become a second wave, and have a big impact on travel retail, which is quite a specific category to work in. We don’t want that exodus from the industry because of that fatigue.

“What we have got to do is use technology and data to ensure a great work environment for supply chain.”

In Q&A later, Jackson addressed how the industry might have better reacted to the challenges of the past 24 months in terms of supply chain. “Interdependency is a key issue,” he said. “If we take alcohol, most brands have liquid, but look at the areas around it, to the suppliers of raw materials from cork to glass to cardboard. Those are the missing elements for many brands today. Those suppliers were given less of a priority but the reality is, if you don’t have cork you cannot sell your whisky.

“If those relationships had been firmer pre-COVID and during COVID, we would be in a different place. A lot of these companies shut down production, laid off skilled people, and we face that now. Brand owners will not forget this; the lesson is that we are interdependent. The same applies to freight companies that had to walk away from the business. It will be a continuing challenge.”

A mixed picture for the industry

Reflecting on the wider challenges facing the business, ARI’s Richard Gray said: “We are seeing a mixed picture. Trying to work out what it means is not easy. We see some very high-end products being sold for self-treat, but we are also seeing different kinds of consumers coming through. That includes more families, and people who are also concerned about their income with inflation, the cost of flying, the cost of running a home.

“We need to ensure that our value proposition is spot-on. If we are to be different from the high street, I believe our people should top the agenda. They are our most important asset.”

Richard Gray assessed the latest MEADFA advocacy initiatives in conversation with John Hume (right)

Commenting on MEADFA’s advocacy work, Gray added that a key mission is to ensure that regulators understand the impact of legislation on travel retail.

“If we take tobacco in particular, and the challenges with track & trace [which helps determine where a tobacco product was produced and following it through to its point of sale -Ed], education of government bodies is a task for MEADFA today. We believe in track & trace to avoid smuggling or counterfeiting, but it’s not appropriate for travel retail when stock is so well controlled, and the level of stock going missing in our industry is incredibly low.

“But as an industry we need to be united, and to talk to governments about what their aims are, being clear about the damage it can do to our business. Without our industry, the price of a flight rises so our contribution is vital. This isn’t about competition but about protecting our industry.”

Speaking earlier, m1nd-set’s Anna Marchesini outlined some travel and spending trends observed by the analyst in the MEADFA region in 2021.

Anna Marchesini of M1nd-set summarised key takeaways from the data for webinar guests in these slides

She highlighted the consistent growth in international traffic in the region through 2021, led by key markets such as UAE, Qatar, Saudi Arabia, Egypt and Morocco.

In-store, footfall was broadly steady, she added, but with decreased purchase and conversion rates versus 2019. Addressing these challenges should involve reinforcing communications about value for money – a key shopping driver post-pandemic – Marchesini noted.

Pre-planning of shopping increased during the crisis, suggesting an opportunity to enhance pre-trip engagement; impulse purchasing in categories such as confectionery, tobacco and souvenirs dipped, she added.

Speaking after the event, MEADFA President Sherif Toulan said: “I am delighted with the turnout we had for this first webinar for 2022. The success of the various MEADFA events has shown that our industry is keen to regain its strong performance and profitability. It clearly demonstrates the interest and importance the travel retail sector has in the context of the recovery from the global Covid-19 pandemic.

“As we build back from the pandemic, we have seen consistent growth of international passengers in the region throughout 2021, to slowly approach Q1 2020 levels. This has been seen in key countries such as UAE, Qatar, Saudi Arabia, Egypt and Morocco. Indeed, so far this year we have seen a sharp increase of duty free-exclusive purchases among international travellers across the Middle East & Africa, up +59%. Today’s webinar served to reinforce the enthusiasm in our industry as we continue to recovery throughout 2022.”

Toulan also extended the thoughts of all at MEADFA to those affected by the crisis in Ukraine, saying he hoped for a peaceful resolution soon.

Richard Gray added: “Today we saw some truly insightful perspectives shared from and to the entire travel retail value chain, and we all now have a greater understanding of the challenges we face. Only together can we rise to meet these challenges. But after seeing the strong support and commitment earlier today, I am confident our industry can and will adapt to these challenges and build back better because of it.”

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