Airline catering businesses are finding new “down to earth” markets
While the aviation industry is still struggling to overcome the most challenging period in its history due to the global pandemic, a number of airline catering businesses are finding new ways to develop.
As a fan of bubble tea, Quynh Trang, aged 27, was curious when a friend introduced her to a new and uniquely named drink in Hanoi: “Bubble tea in the clouds”. Upon visiting a convenience store in Hoan Kiem district, Ms. Trang discovered that this bubble tea was made by Noi Bai Catering Services Joint Stock Company (NCS). This company used to focus exclusively on providing in-flight meals.
After more than a year of fighting the Covid-19 pandemic, the airline industry has suffered the largest hit. Catering companies like NCS have also faced tremendous difficulties, resulting in a sharp decline in output, revenues, and profits.
Launching new products like bubble tea, aimed at completely different markets than their traditional ones, is one way for the company to maintain its operations and production and survive in post-Covid-19 times, as explained by Ms. Vuong Phuc Minh, Deputy General Director of Noi Bai Catering Services Joint Stock Company (NCS).
Finding customers on solid ground
At the very start of 2021, NCS’s leaders predicted that 2021 would remain tough for the aviation industry due to the pandemic’s complicated developments. The domestic market has just started recovering, and it will take a long time for international routes to resume operations. The shrinking market has brought intense competition to the airline catering sector.
Apart from adjusting their production plans to match flight schedules during the pandemic period, NCS devised new plans to attract new customers, including providing international-standard light meals for students of the Vinschool system in Hanoi and Hai Phong. In particular, NCS focused on researching and developing new product lines like bubble tea, stir-fried giò (boiled minced pork), and “Lotus Sky” mooncakes to serve “on-ground customers”.
“This transformation has received praise from customers. Particularly, the Lotus Sky Tea bubble tea launched at the end of March has gone viral and won many customers,” said NCS’s leader.
In the southern market, Vietnam Airlines Caterers Limited Company (VACS) is heading in a similar direction, developing new products for the domestic market with the slogan “Both Cloud and Ground”.
“Our idea to develop new products came from our confidence in meeting the strict food safety and hygiene needs of our partners, including schools, hospitals, hotels used as isolation facilities, factories, and offices. VACS believes we are able to provide world-standard meals at Vietnamese prices,” said Ms. Pham Nguyen Viet Thi, who works in the Marketing Department of VACS.
According to representatives of NCS and VACS, these new directions have helped these companies to “survive through turbulent times and open up great opportunities to exploit the large potential on-ground customer market” to offset a dramatic decline in both revenues and profits. Although profits from these new ventures remain small, they are gradually increasing as a percentage of NCS’s total revenues, starting from 1% in 2019 to 5% in 2020. In 2021, NCS hopes to earn 20% of its profits from on-ground ventures.
Developing products for the on-ground market began as a temporary measure to survive the pandemic. However, after a period of implementation, the leaders of NCS and VACS both affirmed that this is “not just a walk in the park but a long-term direction”.
“Approaching and competing in the domestic market has never been an easy mission, but once our customer and distribution channels have been established, we are determined to maintain this development. This will be another task along with our main target of providing meals for domestic and international airlines,” said Ms. Viet Thi of VACS.
Ms. Minh of NCS also emphasized that developing new products and implementing modern retail channels is “one of the long-term directions” that the company has seriously researched and invested in due to the great potential of the on-ground market. “We are looking for domestic and international partners with experience as well as food production technology and distribution to bring the best products to consumers in Vietnam and around the world,” said Ms. Minh.
In fact, airline catering companies like NCS and VACS have multiple advantages in this new sector. They have great experience and established production processes; appropriate supply chains for clean, safe, and transparent food ingredients; and a modern system of factories and equipment capable of providing stable services to many large-scale customers.
As a catering service-provider for domestic and international airlines, NCS and VACS must always strictly control and ensure international standards for food safety and quality. This is a great advantage since there are growing numbers of day schools in Vietnam and rising food safety problems in these schools, including some classified as “international”.
Experience in scientific research and branding are other advantages of airline catering companies. Each meal is created based on research, nutritional values, and health standards. Products designed for “aviation” are known as “consistent, high-quality goods”, which should help them to compete in the domestic market.
Trying to solve difficult puzzles
Any new direction can bring myriad challenges, especially in a market as diverse and competitive as food supply. Approaching the on-ground market, companies are applying an additional B2C (Business to Customer) model along with the traditional B2B (Business to Business) model. NCS’s leaders acknowledge that this new customer group is completely different in terms of needs and behavior compared to traditional airlines customers. This requires a completely different and innovative approach.
Moreover, NCS does not have much experience in developing distribution systems. The company is located on the outskirts of Hanoi with a dedicated transportation system. However, this system is only used for providing in-flight meals.
It is hard to build a continuous distribution chain and strict preservation process to ensure the product quality of items delivered to consumers. Both catering firms must carefully choose and manage their distribution channels.
VACS’s representative said the company’s biggest challenge was finding new customers in the domestic market. Despite being an established brand in the airline catering sector, VACS is a “newbie” in the domestic food market. The company’s brand recognition remains weak and must compete with longstanding businesses in this field. In addition, their distribution channel is still under development and requires time to grow.
Currently, NCS’s products are available in PostMart convenience stores and many stand-alone and household shops. This partly solves the challenge of building distribution channels to consumers. VACS is also strengthening business connections with enterprises both in and out of the industry to increase its customer base and take advantage of each other’s distribution channels.