Inflight Magazine of Brussels Airlines

Business trends

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Boyd Farrow rounds up what’s happening in the business world across Europe

Fast tracking

Dressing the issues

After the desperation and hype of the season’s various Fashion Weeks, Mintel’s Global Market Navigator offers far more comfort and warmth for the industry. Despite the economic downturn, in the US, the clothing market has continued to grow, up almost 14% in 2008, and Mintel predicts steady increases this year and beyond. The UK, France and Italy have also proved very stable markets, a state of affairs expected to continue.

However, Mintel reports that stereotypes of style-obsessive Italians, high-spending French and faddish Americans are not substantiated: it is actually the tracksuit-loving Brits who shop the most. In 2008, the UK clothing spend per head was €730. In France and Italy, people spent just €355 and €462, respectively, while US clothing spend per head was €498.

Indeed, Steve Charlton, managing director of Mintel GMN, notes that the UK market is one-third the size of the US’s, but the population of Britain is just one-fifth of America’s.

Unsurprisingly, perhaps, across all of the countries, womenswear remains a key driver of the fashion industry.

In the US, UK and Italy, women’s clothing accounts for nearly 60% of annual sales. In France, however, womenswear represents just 24.7% of the market. And presumably 24% of that is spent on lingerie!

Upgrade your trip

Apple’s big screen test

The prospect of soon being able to sprint for your plane without juggling armfuls of newspapers and mags – not to mention all those eat-raw-meat-for-breakfast management books that make the queues in your airport retailer look like Fight Club auditions – appears a lot more likely. The usually reliable Gizmodo website cites people related to The New York Times, who claim Apple approached them to talk about repurposing the newspaper onto a “new device” – widely believed to be a larger iPod Touch/iPhone with a 10-inch screen.

Gismodo also cites a senior executive in textbook publishing who claims that publishers McGraw-Hill and Oberlin College Press are collaborating with Apple to move textbooks to the iTunes Store. The possible distribution model would involve a digital rights-managed “one-time-use” book, which could spell out to lots of money for publishers while reducing pricing of e-books for consumers.

Lastly, Gizmodo claims that several executives from magazines met at Apple’s Cupertino campus to demonstrate their ideas on the future of publishing, where they presented mock-ups of magazines in interactive form. Apple is clearly aiming to seize the e-publishing market and bag newspapers, magazines and books.

Radar

Beefing up operations

German food companies have found a new way to make money in straitened economic times – by catering to what Spiegel calls “faith-oriented consumption”. Although four million Muslims live in Germany, the country has been very sluggish in developing the halal food market.

Halal already accounts for 17% of the global food market, and is the sector’s fastest growing segment.

In France, Casino supermarkets supply halal products and in the UK, halal food is easily found in Tesco and Sainsbury’s. Up to now, though, German supermarkets have offered a very limited range of halal food, partly through the fear of provoking animal protection groups; partly because Germany’s devout Muslims have not agreed on uniform halal standards. But this looks set to change, as several German food companies spy opportunities. Nestlé already earns more from halal products in Berlin than it does from organic food.

Among German companies beefing up its halal range is sausage-maker Meemken, which has just successfully passed its audit for 60 halal products.

Next month, almost 1,000 halal food producers from all over Europe will attend a trade fair in Cologne.

Drawing board

Crazy paving

One of the many trends that Berlin is ahead of is urban farming, the Michelle Obama-blessed practice of creating gardens in city centres so as to minimise food transport and keep citizens healthy and physically occupied. But bizarrely the German capital now appears to be turning its back on the land, which currently boasts around 74,500 small gardens. Berlin’s senate, the administrative body that runs the city-state, has decided that there are simply too many small urban garden plots. Indeed it wants more than 20% of the total space dedicated to small gardens to be sold off and primed for construction by 2020. Even with a huge influx of tourism for this month’s 20th anniversary of the fall of the Wall, Berlin’s debt still stands at around €60bn and the Senate is drooling over its green patchwork of “attractive inner-city locations for residential and commercial use”. But this is shaping up into a green battle, under Peter Ehrenberg, the leader of the Landesverband der Gartenfreunde, a body claiming to represent 500,000 urban gardeners. The “friends of the garden” claim that the plots have a cooling effect on the city’s climate, and their trees filter harmful particles out of the air. They also provide refuge in the middle of the city for many species of wildlife and they provide inner-city children with a chance to experience nature. Presumably this nature also includes nude sunbathers.

Radar

Fanciful footwork

As it is clear to the most casual of observers that football is now a billionaires’ indulgence rather than a real business, few will be surprised by the conclusions of two recent European events, the first Conference in Sports Economics and the annual Football Arena Conference. The greatest minds at both shindigs decided that despite revenues for the 2007-08 season nudging €15bn, hardly any European club will ever turn a profit. Indeed, famed football economist Egon Franck claimed: “In the top-flight leagues … it’s an inbuilt, permanent crisis”, further noting that the UK’s Premier League clubs owed a combined €3.3bn even before recession hit. Spanish clubs, meanwhile, owe around €4bn, a fact which did not seem to perturb Francisco Roca, who runs La Liga. Roca shrugged that Spanish clubs were always going bankrupt, but added that they never vanished, a state of affairs common in many of England’s lower leagues. Clubs are untouchable though simply because creditors and the government dare not put the kibosh on such hallowed brands. Consequently they can merrily incur debts and as few clubs have future profits, those debts will be written off. Indeed, both forums surmised that only two financing models now remain. The first is to have such a global brand that you can generate money to pay top players, such as Manchester United – whose manager Sir Alex Ferguson recently complained about the financial madness governing football – Barcelona, Real Madrid and Inter Milan. The second and increasingly popular model is to find a sheikh or oligarch to buy your club.

Growing gains

One prize fits all

Spanish clothing retailers continue to dominate the high street…. and cyberspace. Europe’s largest clothing retailer, Inditex, followed its forecast-beating first-half profits by announcing that next autumn it will launch an online version of its Zara stores, selling its entire range in the UK, Spain, France, Germany, Italy and Portugal. Ironically, perhaps, Zara’s online rival will be UK fashion e-tailer Asos, which partly credits the popularity of the Spanish brand Mango for its 47% surge in sales over the last six months.

Inditex may also launch some of its other brands online, including Massimo Dutti and Bershka. Meanwhile, a new Spanish contender is emerging on the high street. Barcelona-based Desigual – a cheap-and-cheerful brand big on patchwork designs – is expanding throughout Spain and internationally, buoyed by 60% annual growth over the past seven years and turnover in 2009 so far exceeding €250m.

Desigual now has 140 standalone shops and its goods are available at 4,500 multi-brand sales points. It opened 52 shops last year and will have opened 30 more by the end of 2009, including in Paris, Kiev and Madrid. However, according to the company’s CEO, Manel Adell, outside Spain, Desigual’s biggest markets are the Netherlands and Germany – which seems to suggest that the brand’s ideal buyers are very tall and not terribly interested in fashion at all!

Why are we here?

In a German bookshop

Using last month’s Frankfurt Book Fair as a launchpad, the American online giant Amazon is flooding Europe with its Kindle, which is used to download all kinds of e-books using a free wireless connection. But in the land of Johannes Gutenberg, who invented the printing press, the market is much harder to crack. First there is the price of the gadgets themselves. In the US, they cost around €187; in Germany they are €250. Then there are the e-books themselves. Although, the Kindle’s German launch chimes with the publication of not just Dan Brown’s blockbuster The Lost Symbol but Limit, by Frank Schätzing (Brown’s German rival) potential buyers are actively discouraged to read them in digital formats. In Germany prices are fixed for all printed works in order to protect both “objects of cultural value” and small bookstores. So while most people can buy The Lost Symbol say, online for €7, Germans will have to pay €26 and only in bookstores. The Kindle’s main competitor, the Sony Reader, is available in Germany at around €250 but it cannot directly download e-books. In fact, the price of an e-book is only allowed to fall once the paperback has hit the market, which usually takes around two years.

Not really …..

Smoking

As countries throughout the EU ban smoking in public, those rebellious Swedes are fighting to get a European-wide ban lifted on snus, a moist tobacco that is sucked rather than chewed or smoked. The teabag-like pouches, also called moist snuff, are used by nearly one million Swedes, who enjoy an exemption to the EU’s 1992 snus ban. And while cigarette sales have tumbled by 50% in Sweden over the past 30 years, snus sales have risen from some 2,500 tonnes a year in the 1970s to almost 7,500 tonnes in 2008. Swedish Match, the number one snus manufacturer in the Nordic country, reported sales of €660m in Sweden in 2008. In Norway, outside of the EU, some 400,000 people use snus on a regular basis, while 100,000 Finnish diehards travel to Sweden to stock up.

With public smoking bans now hurting their profits, tobacco giants are looking to tap into this potentially lucrative market. The snus ban could be set for review in 2010 and Swedish Match spies “a window of opportunity” to make their case for legalisation elsewhere. In February, Philip Morris International set up a joint venture with Swedish Match, and last year British American Tobacco bought Sweden’s second-biggest snus maker, Fiedler & Lundgren. Snus has started to be gradually rolled out in the US, South Africa and Canada.

Swedish Trade Minister Ewa Björling, a fan of snus, argues that other forms of “oral” tobacco are allowed to be sold within the EU and points out that her country has one of the lowest rates of smoking.

Fast tracking

Key developments

Although all the cities in the HotStats European Chain Hotels survey suffered a drop in revenues during August compared to the same month a year ago, the rate of decline for most cities was actually slower than for the first eight months of the year. Which is sort of good news for the beleaguered hospitality business. But, as always, these surveys throw up oddities. For example, the Vienna tourist board reported that in August there was a decline in visitor numbers from the UK, Spain, Russia and France, but visitor numbers from Germany, Italy and the US increased.

Ultimately, Vienna’s summer was saved by the Jehovah’s Witness Congress, which was held at the

Ernst Happel Stadium and attracted 40,000 delegates. Hallelujahs were thinner on the ground in

Munich, despite Germany’s warm summer. Revenues were down 30.3%, but this was mainly due to the unusually high demand in August 2008, when the city hosted the European Society of Cardiology Congress.

In 2009, the congress hotfooted it to Barcelona, causing what HotStats politely calls “a relative decline in performance levels” – and possibly the odd cardiac arrest among the more excitable Munich innkeepers.

Hamburg was the relatively bright spot in the German hotel market, with revenue per room declining by just 2.3% in the eight months to August, compared to a decline of 21.3% in Munich and 13.6% in Berlin. However, in Hamburg profit per available room declined by 22.6%, compared to 20.1% in Berlin.

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