Interview: Heinemann reaches for the skies as buy-on-board soars

INTERNATIONAL. As airlines strive to improve their commercial returns onboard, many have recognised the fast-growing opportunity that is the buy-on-board (BoB) segment for food and drinks.

German family-owned travel retailer Gebr Heinemann has identified the growth trends in BoB and is determined to maximise them via its onboard supply business. Sales Director Inflight & Catering John Baumgartner (left) says: “Higher quality, variety and more brands – airlines are now competing with the airport, they want to show they have a good offer and entice travellers to buy onboard.”

The BoB model, originally introduced on low-cost, short-haul carriers, has become a staple for many legacy airlines. Baumgartner says: “Low-cost carriers are the fastest-growing airline segment and they are all BoB airlines. As that sector grows, the BoB segment automatically grows, which is a huge development within the inflight retail area for consumables,” he says. In future, BoB looks likely to become part of the long-haul model too.

Baumgartner, who joined Gebr Heinemann in 2016, is leading the company’s efforts to grow its buy-on-board business. The company has two main businesses areas; distribution and retail. Six years ago, Gebr Heinemann reorganised its distribution business into sales channels, as opposed to the previous geographical split, Baumgartner explains.

Distribution is now divided into: cruise and ferries; airports; border shops; Central Europe & Asia; Africa & Benelux and airlines. “In all parts of Heinemann we are reaching out to new areas that are connected directly or indirectly to our business,” Baumgartner says.

“Catering in the inflight channel is becoming bigger for Heinemann and my team. We now have a very focused team working on BoB. This includes snacking, miniatures and wine for pouring; everything you can consume onboard, although we stay away from perishable food.

“BoB is a growing business for airlines in general and we also want to be a player in that business channel,” he says.

At home in Hamburg: Gebr Heinemann is taking aim at the buy-on-board market as it continues to diversify

The expansion makes good sense for Heinemann. The company has already built a powerful distribution chain and warehousing capabilities. The Inflight & Catering division works with over 50 airlines in Europe either directly or indirectly via concessionaires. Around 80% of the inflight boutique business is perfumes & cosmetics and accessories. It also offers some tobacco, confectionery and liquor, including miniatures.

“This hasn’t been a core focus for my team previously. But now that we have the logistics chain in place and delivery from our warehouses – weekly and for some twice a week – its very natural for us to consider what else is being sold or consumed onboard,” he notes.

This can include anything from wines or pouring wines, olives, tapas plates and confectionery bars; basically anything that is served or sold to passengers onboard. “We already have many brands in-house; why not provide these products to airlines?” he says.

The company is investing in growing this business line by creating more visibility of its capabilities in the channel. Gebr Heinemann expanded its presence at the World Travel Catering & Onboard Services Expo in April this year.

Says Baumgartner: “This is an area which could be much bigger for Heinemann Inflight and Catering. We have the possibility of being a one-stop shop for the inflight channel where we can provide everything from the boutique range to consumables onboard. We have great competence and great products.”

For example, Heinemann, via Scorpio Worldwide’s majority stake in Gastro Culinary Innovation (GCI), can bring innovative brands to the market such as British Asian-inspired fast-food chain itsu.

GCI, which develops and sources artisan convenience snacking products for the BoB market, was acquired by Heinemann-Scorpio International Holdings in 2017. It also provides sales, marketing and distribution services for a range of non-competing high street brands.

Through Scorpio and its stake in Gastro Culinary Innovation, Heinemann says it can take innovative food brands to the airline channel

There are synergies to be realised via this partnership, according to Baumgartner. GCI is able to reach many new airlines via Heinemann and Scorpio and is supported by their infrastructure. Heinemann via GCI will have access to various suppliers and producers.

“It’s a no brainer. They have a wealth of experience in product development, access to producers and suppliers – we have the infrastructure and technologies and warehousing, expertise in how to handle transport, airlines and catering logistics. That business proposal can be very competitive in this business channel,” he notes.

Baumgartner points out, however, that the travel retail business needs to acknowledge that the inflight and catering channels require a unique competence to ensure its full potential profitability. “Over the past 5-6 years, we have been building that and we are dedicated to this channel. Our team are experts in airlines and boutique and very quickly becoming experts in the BoB segment.”

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