19 January 2018 Courier Weekly

The ups and downs of Wizz and Norwegian airlines

PLUS: Sugar tax – Coffee cups – Urban farms — PR stunts

Choppy times for Wizz Air and Norwegian.

The two airlines have been the talk of the European skies the last few years. Both offer super-cheap flights and have been making a lot of headway, but there are growing concerns whether they will survive long-term.

Norwegian in particular has been growing very fast — perhaps too fast. It had just three planes running four domestic routes in 1993. It rose to 68 planes and 330 routes by 2012. Since then, it’s been expanding wildly. Last year its 145 aircraft covered 512 routes.

A non-stop London-to-New York route for the headline price of £130 one-way has become what Norwegian is best known for.

But it’s the rising unit cost and losses which are precipitating a falling share price (£).

Hungarian startup Wizz Air, launched in 2003, has been making similar waves.

Its strategy has been fascinating. It has targeted ‘underserved destinations with growing economies’, notably in eastern Europe.

Wizz Air’s website is the sixth most visited of any airline in the world, the company runs an app in 13 languages and it has used social media prolifically to make noise.

(It also snapped up 146 new planes last month.)

Running an airline, especially a low-cost one, isn’t for the faint-hearted. Several challenger airlines have come and gone over the years. Remarkably, 254 airlines have collapsed around the world over the last decade, most recently British airline Monarch.

Running a low-cost airline in particular requires tons of outlay and involves operating on minuscule margins with little scope for things going wrong. Such companies are exceptionally exposed to external events like terrorism, currency and oil price fluctuations.

Drink firms: export or tweak formulas.

From 6 April, cans of sugary fizzy drinks will get more expensive.

The ‘sugar tax’, first announced in 2016, will mean an 18p per litre hit for a drink with five grams of sugar or more per 100ml, going up to 24p per litre at eight grams or more.

Startups will only need to worry about the impact of these rules once they are shifting more than one million litres of their products.

London’s Square Root Soda reckons it will sell 250,000 litres of fizzy drink this year. Its founder Robyn Simms tells Courier her company will focus on export markets when it approaches the one million litre mark, to avoid paying the UK levy. She expects others to do the same.

Simms and other small producers have ruled out reformulating recipes. Karma Cola’s founder Simon Coley previously told Marketing Week it’s not yet possible to substitute the taste of real sugar. Energy drink startup Tenzing, meanwhile, has made a minor change to cut its products’ sugar content.

Low- or no-sugar startups like Ugly Drinks and Dash Water (launched in 2016 and 2017) can’t wait for the levy, obviously.

‘Latte levy’ threatens coffee shop owners.

Coffee shops are also absorbing a new bit of government ruling.

MPs have been calling for a 25p tax on take-out coffee as a means to encourage people to re-use cups.

Coffee shops aren’t happy. Ross Brown, founder of Browns of Brockley, called it ‘proper knee-jerk bollocks in reaction to a TV show [BBC’s Blue Planet]’.

This blog post talks about the implications for coffee shops, especially ones with A1 retail leases which stipulate 50% of sales should be sold as take-away.

Starbucks – the UK’s second largest coffee chain with 956 outlets in the UK – has started charging its take-out customers 5p per disposable cup, mirroring 2015’s plastic bag charge.

One company that could do well from this is Vegware, a specialist in packaging made from fully compostable materials. The Scottish company will need to make a case that it should be exempt from the levy.

Green shoots in urban farms. 

Investment and energy is going into artificial farms in cities. Growing organic fruit and vegetables close to where people live has for some time been envisaged as a revolutionary means to provide food which is cheaper, fresher, more consistent and arrives at people’s doors faster.

The technology is getting cleverer; and farms are growing upwards, not just sideways.

US startup, Plenty, wants to grow vegetables in 300 indoor farms in China. Its founder claims its farms, which grow greens on vertical structures under LED lights, can achieve 150 to 350 times the output of a field farm.

Health app gets in on the stunts.

There’s been a rash of startup marketing stunts in recent months.

The health app Thriva installed a giant blob of fat on the Southbank this week, to remind tourists and workers to check in on their health.

Flat-pack furniture retailer Ikea also hit headlines, with a paper ad that doubles as a pregnancy test.

In May last year, Deliveroo created an ‘upcycled’ bike made from kitchen utensils, to highlight the fact that most UK kitchens now contain 34 unused tools (presumably, the rise of take-away meals has been partly behind this trend).

Airbnb, meanwhile, partnered with Pantone to create a greenery-themed home that could be booked on its platform.

This piece from The Drum outlines the ingredients of a well-executed stunt and highlights some of the best examples from 2017.