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TRAVEL RETAIL: TRENDS: The sky’s the limit

Despite the multitude of challenges facing travel retail, clever innovations and improvements keep the sector flying high. By Simon Warburton

It’s that time of year again for the industry to decamp to the south of France and set up shop in the – admittedly very glamorous – converted car park that is the setting for the Tax Free World Association (TFWA) World Exhibition 2008.

And as the raft of consolidation sweeping the brewing industry gathers ever more bewildering pace, is there room for travel retail in the beer sector? Is the thought of lugging heavy cases of your favourite tipple really going to appeal when the stuff is so easy to buy when you actually arrive at the destination?

“The travel retail market for beer is significant in many markets and adds an interesting dimension to the market dynamics,” says Erik Juul-Mortensen, president of the TFWA and president of Maxxium Global Travel Retail. “I would see the availability of beer in travel retail very much as a convenience purchase and as a gifting product for close family and friends. Also in the beer market we have experienced interesting product development with new beers and exciting new packaging related specially to the travelling consumer.

“As such we feel that beer companies who are serious about the travel retail market have a natural place in the industry – and indeed in Cannes.”


> Top five most popular complimentary drinks served on board
(Bottles consumed per month in brackets)

1. Heineken 33cl – first, business, economy (60,168)

2. Budweiser 355ml – first, business, economy (56,285)

3. Famous Grouse whisky 5cl – economy (29,610)

4. Stolichnaya vodka 5cl – first, business, economy (29,494)

5. Beefeater gin 5cl – economy (22,923)


> Top five duty free/travel retail brands

1. Bells Whisky (1ltr)

2. Smirnoff Red Vodka (1ltr)

3. Gordon’s Gin (1 ltr)

4. Bombay Sapphire (1 ltr)

5. Jack Daniels (1 ltr)
> Top five alcoholic drinks  served to passengers onboard

1. Quarter bottle red wine (four rotations of choice during a year from supplier Castello Monte Vibiano Vecchio)

2. Carlsberg lager

3. Quarter bottle white wine (four rotations of choice during the year from supplier Castello Monte Vibiano Vecchio)

4. Gordon’s gin miniature

5. Smirnoff miniature

World events
Is there any business in the world that has been so affected by events as aviation? The seismic shocks that have successively rocked the sector from the global fall-out of 9/11, Sars, avian-flu threats and now the sky-high cost of oil that saw kerosene nudge $150 per barrel recently, have all battered the industry, but it continues to show remarkable resilience.

The new rules designed to thwart terrorist attacks using liquid, aerosols, pastes and gels have also affected drinks purchases quite significantly, both on aircraft and cruise lines. This could be particularly relevant to those on connecting flights, but can also apply to single journey passengers, who may well be deterred by what they perceive as complicated regulations. The fact that it is perfectly possible to buy drinks brands once through departures, for example, is presenting a major challenge to the industry, that has to communicate just what is permissible much more clearly.

Yet despite the litany of challenges that are stacked against air travel, global passenger numbers continue to increase, although at a slower rate than previously and clearly drinks companies are taking advantage of that opportunity, particularly for premium brands. Continued consolidation on both the operator and supplier level is nonetheless a feature and this looks likely to continue during the next year.


There’s no getting away from it, airports – and by extension travel retailers – are facing unprecedented challenges as they reel from successive price spikes in oil and security concerns, but Erik Juul-Mortensen remains confident that the drinks sector can ride the storm. “The drinks environment in duty free and travel retail is still very buoyant,” he said. “The market for drinks is increasing year on year and still represents an interesting market for drinks companies, who produce and market premium brands. Maxxium of course is going through interesting times and it will be instructive to see how it responds at Cannes.

“Shopping in travel retail is also a pleasant use of the dwell time while passengers wait for their flights – a lot of people just love to shop.”

Juul-Mortensen also highlights the point that drinks packaging remains a crucial plank of the travel retail mix and that the sector could learn from other channels. “Packaging and presentation of wines and particularly spirits have taken a quantum leap in the last decade,” he says.

Clearly, an airport offers a unique environment, where consumers are captive for a determined or even indeterminate period of time.

One of the challenges, therefore, is how to involve the consumer in, for example, the “theatre” of tasting bars and having brand ambassadors on hand to dispense information.

Bailey’s scored a major success  in this respect with its stand at London Gatwick’s South Terminal immediately as passengers arrived into the departure lounge.

Value proposition
But it still comes down to the core question; why would the traveller – on business or leisure – buy drinks in travel retail? What is its value? “The value of travel retail will depend on the perspective,” says Juul-Mortensen. “If the consumer is looking for standard mass products at knock-down prices then they would be best advised to wait for sale time on their local high street or in their supermarket where often there is still an element of product piled high and sold cheap.

“Duty free and travel retail do still offer interesting savings compared with the downtown domestic shops. However, the real value is in the product assortment with the availability of a wide and deep assortment. The average high street does not offer the range and diversity of products from international brands and at the prices offered.”

Clearly, the other main advantage of travel retail is that drinks retailers will often use the channel as a launch pad for new lines during an introductory phase, while the traveller may well pick up a duty free exclusive that is not available in the mainstream; thus lending kudos and value as a present. A malt whisky buff, for instance, might well find a new extension from an established brand that has not yet come through in general retail outlets. And, of course, travel retail shopping is often based on impulse – passengers who are cash rich and time poor are ideal purchasers.


One airport to watch is Dubai, whose stellar success with Dubai Duty Free has become a virtual template for the industry. And being in the Middle East does not seem to have dampened enthusiasm for drinks lines at Dubai Airport, which will receive a further boost shortly with the phased opening of its new Terminal 3 from 14 October.

And with one eye clearly on the debacle surrounding Heathrow’s Terminal 5 opening earlier this year, Dubai Airports CEO Paul Griffiths, said: “Raising customer service standards at Dubai International is at the heart of our strategy. We want to make absolutely sure that all the systems and processes at Terminal 3 are working smoothly and that customers experience nothing short of world-class facilities.” And just to underline what a regional powerhouse Dubai is, the emirate is currently constructing a six-runway behemoth in the desert that will open in around 2012.

Drinks companies such as Bacardi and Heineken will also offer exclusives with glitzy  packaging. “Packaging and presentation of wines and particularly spirits have taken a quantum leap in the last decade,” said Juul-Mortensen. “Some promotions and merchandising tools would look equally at home on a perfume counter and others are aesthetic features of the departures lounge.

“However, I would say that the biggest change is not in presentation as such but in the involvement of the consumer. The theatre often offered with tasting bars, consumption experiences and brand knowledge to encourage trade up and increased sales are becoming increasingly a feature of the modern airport retail area. Consumers are wary of new lines and often settle for the name they recognise. But if they have the chance to taste the product, either straight or in an exciting cocktail and learn about the product, it inspires them and very often produces a sale and/or a trade-up.”

And Juul-Mortensen does not pull any punches concerning the economic difficulties sweeping the world either. He freely admits that 2007 was “not an easy year” for duty free and travel retail, although the entire channel showed a global increase of 17% to a staggering US$34bn. This is a particularly challenging time, but drinks travel retail is one of the most innovative segments around; and it will be a fascinating one to watch.


One category that has been particularly successful in travel retail has been the rum sector. Perhaps more synonymous with travel than any other drinks brand, its popularity has grown during successive Cannes shows. Erik Juul-Mortensen says: “The rum category in travel retail has shown a very healthy growth over the last couple of years, and this applies to both white and dark rum and across the various channels.”

And of course, key to the sector is the leviathan Bacardi, whose global travel retail marketing director Gary Chau outlined some of his company’s drinks philosophy. “We do have a variety of speciality gift packs to increasingly address our shopper needs for gifts, exclusive indulgences and brand experiences, which we do through sampling and education in an entertaining way – such as the Original Bacardi Mojito Sampling Program or the Dewar’s Engraving Program.

“Within Travel Retail, Bacardi focuses on two very simple activities given the nature of consumers always being in a rush to catch their flights: special gift packs and the Original Bacardi Mojito Lifestyle Experience sampling stations, which began in 2007 and expanded to 11 airports in Europe and the Middle East this past summer.”

Since its 2007 inception, travellers visiting the Experience can have bar staff teach guests how to mix a Mojito and if they buy a 1-litre bottle of Bacardi Superior, they will receive a muddler (along with an instructional leaflet). Bacardi Original Mojitos are currently being muddled in 21 airports: 15 in Europe, five in the Middle East, and one in Australia.

And for one of the world’s premier drinks companies, Diageo, its Zacapa Centanario Rum is its ultra-premium offering in travel retail, with significant presence in Paris Charles de Gaulle Terminal 2F, with the Zacapa Centanario 23 and XO extensions.

“During the past few years travel retail has seen a steady rise in demand for aged, super-premium products in the rum category and the Diageo stand [at Cannes] will feature Zacapa Centenario Rum as part of the Reserve Portfolio of our very finest brands,” a Diageo spokesman said. “The Zacapa brand widens our range within the second largest and fastest growing spirits category in the world and further diversifies our reserve brand collection, which includes super-premium brands such as Johnnie Walker Blue Label and Buchanan’s Red Seal.”

Havana Club, of course, is heavily active in travel retail and has two major brands in the premium segment – the Cuban Barrel Proof and Maximo Extra Añejo that retails at e1,500 (£1,184).

“Rum is performing consistently in travel retail, [while] Duty Free Europe is a high growth region in the rum category,” says a Havana Club spokesman. “Overall, European travel retail is performing very well with a huge increase in 2007 of 25% compared with a worldwide growth of the brand of 15%.

“Trends in Europe see the increase in dark/gold rum at 24% in 2007 and Havana Club is the specialist of the category. Havana Club Maximo Extra Añejo, the first ultra premium rum on the market, already on sale at e1,500 in several European markets, is currently being proposed to duty-free customers – it looks positive though quantities are limited.”



db © October 2008

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