4 April 2018 Courier Apr/May 2018

Doing business at 40,000 feet

Airlines are complex and often cumbersome organisations. That doesn't mean they're not interested in working with small businesses, though. Here, several food brands discuss their route to getting up in the air.

PART ONE: Making money in the sky

Using your noodle 

For Bournemouth-based Mr Lee’s Noodles, selling to airlines has allowed it to build up enough sales to justify opening an Australian production facility.

Tesco carries about 70,000 different items across its stores. On board an Easyjet airplane, customers choose from around 65 food and drink items only.

Considering this, Damien Lee, founder of Mr Lee’s Noodles, figured that getting a spot in the exclusive realm of air space would help his brand stand out and build sales. 

‘[Airlines] are always hungry for new, cool brands,’ Lee points out. ‘But they tend to be difficult to get into.’ 

The economics of flight

Airlines are picky about who they work with; getting the right brands on board can be a big revenue driver. Globally, ‘ancillary’ purchases, including food, drinks, car hire and other items beyond the ticket price, brought in nearly £50bn for airlines in 2016.

Meanwhile, catering companies are also trying to cash in, promising to present exciting food brands to airlines. With so many players, margins can often be slim, especially if an item is being given away as part of the complimentary on-board food offering.

The biggest consideration, Lee says, is to figure out an acceptable trade-off between volumes and margins: when airlines charge customers extra for their food, small businesses tend to take a bigger cut of each sale, while being part of a complimentary menu can mean selling many more products overall. In Lee’s case, Australian budget airline Jetstar started selling the noodle pots on-board last summer.

Taste testing

Meanwhile, significant changes often need to be made to a product for it to be practical for crew to stock and serve, and still taste good at 40,000ft.

The air pressure, lack of humidity and background noise in a cabin all impact taste on board. As a result, food that’s flavoursome on the ground can become bland in the skies.

To get the product airline-ready, Lee and his team began testing seasoning combinations, bringing different versions of the noodle pots on board whenever they flew, asking for hot water on the flight to make and taste their packed lunches. In total, Lee estimates that up to 15 combinations were tested before settling on the right one.

‘We spent a good three or four months on and off getting the flavour profile right,’ Lee says. A new 14oz noodle pot was also developed specifically to fit on airline storage trays.

Getting on board

While Lee and his team were busy reformulating the product to woo airline buyers, there was another pressing concern:  securing the first contract.

Lee was scheduling meetings with airline professionals at trade events and speaking to aviation journalists about Mr Lee’s. He was also reaching out to catering companies like Alpha Flight Services to see if they’d list the noodle pots.

Eventually it paid off: after six months he struck a deal through Alpha with Jetstar.

Weighing it up

It’s a lot of effort to go through to secure a new sales channel. And while many startups would warn against expecting to make money on in-flight sales (see Airborne marketing, below), Lee is convinced his brand has found a way to make it work.

‘We’re in the business to make money, and it is possible to get a [healthy] margin. It’s just [about] how good you are at negotiating,’ he says. ‘Certain airlines want their pound of flesh, that’s for sure.’

The quantity agreed with Jetstar, which has said it will sell the product for one year, prompted Lee to open a facility in Australia in December 2017.

Now the brand has an ‘aviation-friendly’ seal of approval, it’s able to get on board with other airlines more quickly. Compared to the six months he spent preparing the product and negotiating with Jetstar, Lee was able to get his next airline client on board in just three months. From April, Mr Lee’s noodle pots be available in European skies, with Germany-based TUI.

PART TWO: BRAND AWARENESS

Airborne marketing

The world isn’t exactly short of posh pudding brands. Pots and Co decided the best way to stand out to buyers was by getting on a plane.

While Mr Lee’s Noodles has focused on airlines as a revenue-builder, Pots and Co sees them as a potential marketing opportunity.

The company had already been in business for eight years before striking its first airline deal; its single-serving desserts in ceramic pots are ranged in the likes of Waitrose, Selfridges and Harrods.

In 2016, it struck a deal with British Airways, which wanted to include the puddings on its menu. The packaging was reformulated, the flavours intensified, and the pots were sent up in the air.

Promotional play

Pots and Co’s agreement with the airline means, from a revenue perspective, it at least breaks even but margins are slimmer than at supermarkets. 

For founder Julian Dyer, the main appeal is the captive audience on airplanes. Being on board with BA also allows the brand to tap into the airline’s prestigious reputation.

Dyer says he’s made deals with US companies after buyers sampled his puddings in the air. ‘One of the biggest retailers in the world had my product on the plane,’ he says. Since getting on board with BA, Pots and Co has secured contracts with major US retailers Costco and HEB.

PART THREE: STRIKING THE DEAL

The exhibitionist

At trade shows, Moma was able to get its porridge pots in front of industry insiders.

A critical stumbling block for startups wanting to sell into airlines is often a simple one: finding the right people to speak to.

In-house airline buyers tend to be shielded by a combination of catering companies, brokers and other agents, which all want to provide ‘one-stop shops’ for airline executives to get all the food items they might want to offer on board in one go.

Tom Mercer, founder of Moma, realised that in order to get his product listed with an airline, he’d need to get inside this circle. 

Social events

Each year, about 4,000 aviation professionals descend on Hamburg, Germany, looking for new food to serve on board. The World Travel Catering Expo (WTCE) is the biggest trade event of its kind, and predictably, attendance for brands isn’t cheap. 

Moma opted for a 4m-by-2m stand at a cost of £5,000 for its first show in 2013. ‘[On top of that] you’ve got to get over there, hire fridges, pay for your accommodation [and so on],’ Mercer points out. ‘It’s a big process.’

He estimates it’s possible to spend up to £30,000 exhibiting at the event, while the cheapest stalls can come in at around £2,000.

Mercer credits the brand’s attendance at the shows with getting ins with Finnair, Easyjet and several Middle Eastern carriers. 

Following on from its first listing with Virgin back in 2009, Moma’s porridge pots are currently available across four airlines. They now make up around 10% of the brand’s sales.

FOMO?

At this point, Mercer says, Moma has ‘maxed out’ its capacity for working with airlines. Its current range isn’t the most practical for a complimentary listing (airline crew would likely object to having to fill hundreds of porridge pots up with piping hot water on a flight). As a result, Moma has skipped the last two WTCE events, unable to justify the cost of exhibiting: ‘It’s no good going there and raising awareness if your product isn’t a good fit.’

Moma is working on expanding its range; once it’s hit on something that’s easy for air crew to serve en masse, the brand will be back at Hamburg.