Otis McAllister was expecting 2020 to be another record year for its travel retail division before the COVID-19 pandemic stopped that momentum in its tracks, Otis McAllister Vice President Sales and Operations Marc Panara tells TMI. The company has steadily grown to be the pre-eminent regional confectionery distributor in North America.
“Like everyone, the pandemic caught us by surprise and derailed our business almost overnight. We were coming off back-to-back years (2018 and 2019) of record-breaking performance for our division and ended Q1 of 2020 35% ahead of 2019 figures, which includes the business shutting down effectively in mid-March.”
With booming sales, Otis McAllister could never have anticipated the impact the pandemic would have on its business, says Panara.
“Never take anything for granted. In mid-February of 2020, we were experienc- ing record setting growth through the first month and a half of the year and we were about to bring on the spirits business as of March 1st. We said, ‘There isn’t anything that can slow us down.’ Well, we ended
up eating those words in a big way, but no one could have predicted the impact that COVID-19 would have on our industry let alone around the world.”
Even as COVID-19 hit its business hard, Otis McAllister maintained close contact and communication with both its customers and suppliers. The idea was to shape a recovery plan from an assortment and promotional perspective coming out of COVID, says Justin Nee, Vice President of Sales & Marketing, at Otis McAllister.
“Although it has been a challenging twelve months, we are seeing opportunities present themselves that may have not otherwise been open to us at this point pre-COVID. This includes the potential supply of our brands to new customers and territories, as well as the representation of new brands that we do not currently represent,” says Nee.
“If anything our partnerships with our suppliers have gotten better,” added Panara, explaining how the company did all it could to maintain its business obligations.
“One of the things we are most proud of is that many customers and distributors around the world had cash flow problems when COVID really hit. And we were one of the few companies that was never late on any of our payments, and paid all of our bills in full. I think because of that there have been a lot of opportunities that have opened for us,” he said.
Panara notes that they approached the challenges from a variety of directions to prepare for recovery with their customers.
“From a customer perspective we always thought that we are all in this together. We did what we could from a company perspective and a brand perspective to support our retailers and more importantly work with them on a game plan of recovery and building a solid plan. A road map we can all follow in terms of cutting down the assortment and focusing on best sellers, making sure we have the right promotional calendars for each store.”
Both Panara and Nee emphasize that Otis McAllister remains optimistic about the future of the travel retail channel.
“From both a companywide and division standpoint we are committed to Travel Retail. We have been very fortunate that we have the backing of a strong parent company which believes in our vision for the future of the Travel Retail division. As we have been, we will adapt our business to cater to the current conditions and continue to be nimble to make changes accordingly. We will remain an extension of our brand partners in the stores and work closely with our customers to accommodate their ever- changing needs. We are looking forward to the continuous rollout of the vaccine, people being able to travel more freely again and getting back into the market where we thrive,” says Panara.
Logistics and Trucking Costs
With airport shops closed and product sitting on shelf un-sold, the confectionery specialists had to deal with the logistical issue of products with sell-by dates. As customers were still figuring out their ideal stock on hand needs and more cognizant of product dating, the company had to find a way to maintain a balance between order size and freight rates while accommodating new fulfillment needs.
“It is an extreme challenge for us to navigate currently,” says Panara. “The sheer number of top international brands that we represent has lifted some of the burden for both our customers and Otis to build up the critical mass when placing and shipping an order.”
The price of shipping products to operators has also gone up during the past year, adding another layer of cost to the total, says Nee. There was also a short- age of truckers available to deliver the temperature-controlled confectionery, pushing trucking rates higher.
“We have seen increases to some of our most frequent delivered locations more than double,” says Nee.
New spirits division
Otis McAllister expanded into the spirits business exactly a year ago with the asset purchase of Chase International, Inc. The company still sees spirits as an impor- tant part of its future.
“We are thrilled to have entered the spirits business back in March of 2020 although the timing was certainly not ideal. We represent several fantastic suppliers who all focus on or cater to different customer needs with the array of offerings in their respective portfolios,” says Panara. Even with a solid portion of its spirits business devoted to cruise ships, which have been at a standstill, he is optimistic with the potential of the category.
“The goal of the spirits division is for Otis McAllister to eventually be looked upon as the go to spirits supplier for U.S. Duty Free in which we are providing a window to the world of our brands to international travelers from around the globe. We are still learning the business and of course with COVID it has affected the volumes and assortments for the time being, but
we will continue to work together with our partners and ensure we have the right offering to the right nationalities traveling through the airports. We do expect and feel that we can grow the business to be a much more significant portion of our overall business than it is today.”