How smaller beverage alcohol brands can break the multinational stranglehold on global travel retail - Comment

Earlier this year, I was lucky enough to travel to Turkey for the opening of The Macallan’s new shop-in-shop at Istanbul Airport. Positioned right in the middle of Gebr Heinemann and Unifree Duty Free’s cavernous open-plan outlet, the brightly-lit, 43sqm retail space was undeniably impressive. With its channel-exclusive expressions, luxury gifting station, sensorial aroma jars and digital displays, this felt like a powerful example of the biggest spirits brand owners’ growing stranglehold on global travel retail.

Thanks to its rarity, carefully cultivated luxury image and sizable investment potential, The Macallan’s presence in GTR only looks set to expand further in the years ahead, as is the likely case for many of its big rivals. Already the third-largest single malt by volume in GTR in 2022, according to IWSR Drinks Market Analysis, the brand’s owner, Edrington, views the channel as ideal for brand-building activity for The Macallan. Indeed, the iconic Speyside malt already boasts boutiques at Taipei Taoyuan, Dubai and Heathrow airports.

Interestingly, at the Istanbul unit, a third of the space has been reserved for Edrington’s Highland Park single malt brand. Revered for the quality of its liquid, this award-winning Island whisky’s Viking-inspired packaging has – so far – failed to capture the imagination of high-spending Asian travellers. The brand’s brighter, more colourful positioning at the Istanbul store may make all the difference. The focus is on provenance – Orkney’s big skies, the island’s abundant purple heather and Hobbister Moor, from where the distillery sources its peat.

There’s little doubt, however, that The Macallan is the main draw at Istanbul. Along with other household names, such as Johnnie Walker, Hennessy, Martell and The Dalmore, it’s one of a small group of multinational-owned Scotch whiskies and cognacs whose mono-brand stores and shop-in-shops are increasingly eating away at the shelf space allocated in airport stores to spirits.

A more recent embodiment of this trend is for multinationals to open multi-brand outlets in airports that enable them to leverage the full power of their portfolios. Late last year, for example, Moët Hennessy Travel Retail opened a ‘Les Caves de Champagne’ concept store at Taiwan Taoyuan International Airport in partnership with EverRich Duty Free, showcasing brands including Armand de Brignac, Dom Pérignon, Veuve Clicquot and Moët & Chandon.

Similarly, last month, Pernod Ricard GTR opened a wine and spirits shop-in-shop at Auckland Airport in collaboration with operator Lagardère AWPL. Initially focusing on Jameson, the boutique has interchangeable furniture to allow it to display multiple brands. Plans are in motion for the store to switch to other brands in Pernod Ricard’s portfolio, such as Malfy Gin and Chivas Whisky, over the next year.

For high-rent-paying GTR operators, for whom efficiency and profitability are vital to their survival, the attractions of these juggernaut brands and their giant parent companies are obvious. Travellers are offered consistent supplies of brands they want to buy, along with a steady stream of exclusive iterations. At the same time, retailers can rely on guaranteed sales, extensive marketing and promotional support, and reliable logistics and distribution.

For smaller alcohol brand owners, the struggle to gain – and, more importantly, retain – listings in the high-margin, cramped GTR environment has never been more challenging. Duty-free retailers feel a pressure to keep up with evolving market trends and periodically refresh their in-store ranges. Invariably, however, the hard economics of this particular sales channel weigh against buyers taking risks on untried-and-untested products.

What can small-to-medium-sized brands do to secure a toehold in travel retail? For a start, the quality of their liquid needs to be peerless. The packaging, meanwhile, must be aesthetically pleasing, especially for gift seekers, and supply chains have to be robust, efficient and speedy. Above all, brand owners need to be able to live with the high-margin requirements of GTR and be prepared to fund addtional costs such as marketing support, discounts and sponsoring tastings.

Specialist GTR drinks distributors, such as Duty Free Global, the Monarq Group and Global Drinks, can make a big difference. Brand owners’ bottom lines might be further squeezed by their appointment, but navigating the complex, diverse world of GTR is not a job for the inexperienced. Distributors can help with mastering different labelling requirements, meeting customs regulations, ensuring adequate stock availability and efficient logistics to meet fluctuations in demand. Most importantly, they have long-term working relationships with all the key buyers.

In the current climate, smaller brands with genuine sustainability credentials, such as B Corp status, are also very well-placed to win listings in GTR. Duty-free retailers are under increasing pressure from airport landlords and travellers to offer more sustainable products, and the same trend is making itself felt onboard airlines, cruise lines and ferries.

UK distributor Sustainaholics has recently had notable success in this area, winning a key listing onboard EasyJet airline in March for challenger sustainable craft brands, such as Two Drifters – a B Corp-certified, carbon-negative rum made in the south-west of the UK – and B Corp spirits producer Ellers Farm Distillery, now co-owned by comedian Ricky Gervais, whose flagship brand is Dutch Barn Vodka. The brand’s miniatures collection, for example, uses bottles made from 100% recycled aluminium.

While it remains true that the odds remain heavily stacked against small- to medium-sized brands in GTR, companies with the right offering that have done their due diligence can make a breakthrough. My fear is that too many younger brand owners erroneously dismiss GTR as a high-cost legacy channel with nothing to offer.

if it wants to stay fresh and relevant, the wider travel retail industry has to work hard to combat this perception.