This article has been available to Global Drinks Intel subscribers since April. Click here for details on how to join them.
Earlier this year, the Asia Pacific Travel Retail Association held a two-day conference in Delhi to focus on the growing Indian travel retail market and the increasing retail influence of the outbound Indian travelling shopper overseas. The timing of the event was well-judged as India, with its expanding middle class, booming economy and modernising airport infrastructure, could soon challenge China as the most important sales source in global travel retail.
Some industry observers might claim this prediction is a stretch. Yet the numbers build a compelling case, especially for spirits in GTR. India has now overtaken China to become the world’s most populous nation with a median age below 30 (China’s is closer to 40). Moreover, between 2021 and 2032, the country is predicted to add more than 280m middle-class consumers, many of them eager to travel abroad.
By any standards, the GTR channel in India has recovered quickly from the Covid-19 pandemic. Last year, Indian international traffic numbers surpassed 2019’s by more than 2m, with nearly 69m Indians venturing overseas, according to data from travel retail researcher m1nd-set and the International Air Transport Association. This year, the pair estimate, that total will exceed 75m.
Contrast this with China – beset by multiple political and economic issues, the country has posted a stuttering post-Covid performance. In 2023, Chinese international passenger traffic was only 39% of its level in pre-pandemic 2019.
After decades of unprecedented growth in the Chinese economy, fault lines have started to appear. A recent Reuters poll of economic forecasts suggests the country’s rate of economic growth may slow to +4.6% this year and to +4.5% in 2025.
As China falters, the GTR channel needs to be prepared to recognise India’s enormous potential. By the end of the decade, India will be the fourth-largest spender on worldwide travel. Many Asian countries – such as Macao, Mauritius, Sri Lanka, Malaysia and Vietnam – are responding by offering visa-free travel or visa-on-arrival facilities to Indian passport holders.
GTR operators in these markets can profit by targeting this relatively youthful group of travel shoppers if they can master a decent understanding of Indian shopper behaviour. This is made easier by the fact that in the domestic market, consumers are already familiar with Indian-made (IMFL) versions of international spirits such as whisky, rum and brandy.
The main challenge for alcohol brand owners and their retail partners becomes one of persuading travellers to trade up to more premium international brands. Helpfully, this transition is already underway in India, where IWSR Drinks Market Analysis forecasts that between 2022 and 2027, premium-plus blended scotch, for example, will grow at a CAGR of 13%.
Compare this happy state of affairs with the situation in China where, despite younger middle-class consumers’ growing interest in Western brands, baijiu dominates the overall spirits market domestically. Indeed, outside of the well-established scotch and cognac categories, spirits brands wishing to target Chinese consumers have had to invest considerable sums in educational initiatives.
The Chinese and Indian GTR channels are, at least temporarily, pulling in different directions, and this trend doesn’t seem to have yet been grasped by the wider travel retail industry.
The growing Indian middle class is displaying the same levels of wanderlust the Chinese did in the mid-2000s, ranking fifth this year in terms of international departures, ahead of China in eighth place. The leading destinations for Indians this year will be the UAE, Singapore, the UK and Thailand.
Meanwhile, many Chinese now prefer to holiday within their home country, with 4.9bn domestic trips recorded last year. This trend has been fuelled by both temporary issues such as high ticket prices and visa problems, but also the altered geopolitical situation post-Covid. That said, the domestic tourism boom has helped fuel record duty-free sales on the Chinese island of Hainan, which leapt more than 25% in 2023 to total over US$6bn.
The first step for a spirits brand eager to target Chinese travellers today, then, is surely to gain a listing with one of Hainan’s 12 duty-free retailers. As a GTR newcomer, why pore over a list of overseas airports to which the Chinese once flew in great numbers, but may never do so again?
I’m not arguing that Chinese outbound international travel will not recover further – all the indicators for the rest of 2024 already suggest this is happening – but it’s difficult not to conclude that the golden years of Chinese tourism witnessed between 2010 and 2019 are over.
The rapidly deglobalising world of 2024 is drastically different. Is the West, or even parts of Asia, offering as welcoming and as friendly places for Chinese tourists to travel to as it did in 2019?
As China’s GTR channel increasingly looks inwards, India’s is looking outward and moving upmarket, diversifying from a business that historically focused on airport arrivals duty free and returning expat nationals.
It’s a seismic shift that the whole travel retail industry would do well to heed.
