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Optimism is building around the opportunities for premium aged spirits in GTR, although China is still not back in the game and Hainan’s future is unclear.
Whisper it, but amid all the uncertainties surrounding inflation, interest rates, the cost of living crisis and ongoing geopolitical concerns, there’s a growing sense of optimism surrounding the global travel retail channel for premium spirits.
It would be an exaggeration to say that the good times have altogether returned – especially with regard to the hugely influential and high-spending base of international travellers coming from Greater China – but business in other regions is now nearing pre-pandemic levels, with aged spirits to the fore.
According to the global commercial director of Camus Cognac, Anne Blois, the rebound started in EMEA at the end of 2022, followed by Asia-Pacific in the second quarter of last year. Since then, she says, “we are at 90% of where we were pre-Covid and expect growth versus 2019 by Q1 2024”. Trade was buoyed by what Blois calls “the revenge travelling phenomenon” in Europe, and will be boosted further by the anecdotal reports of Chinese travellers returning to the region last summer – not to mention increased duty-free spend by Russian travellers in Istanbul, Dubai and Phuket.
Asia is more mixed. “If we take China out of the equation, travelling is back and duty free growing, especially in Thailand and Singapore,” says Blois. “In Hong Kong, it’s just starting to grow again after four years of disturbances (protests in 2019, followed by the pandemic). In Seoul, the Chinese travellers are not yet back, limiting the growth in duty free there.”
However, at GTR distributor Waldemar Behn, export director Philippe Biais is slightly more cautious. “Global travel retail is back to a decent level, but saying that, we are still missing Asian passengers,” he says.
“Europe and the Americas are almost business as usual – but the Chinese are not really travelling yet.”
Now the pandemic is over, what will happen to Hainan?
One of the big questions facing GTR in the Far East is the future role of Hainan, the duty-free enclave established at the height of the pandemic to capture wealthy Chinese consumers unable to indulge their passion for global travel. A huge success in its time and a welcome (if partial) antidote to the woes afflicting the channel through 2020–22 - but what will happen to it now?
It seems certain that Hainan will evolve in line with broader market trends, and the gradual return of international travel for Chinese passengers. At Camus, Blois says spending at Hainan is now slowing after three highly dynamic years, simply because tourist numbers are declining as Chinese travellers venture further afield.
Nonetheless, she adds: “Hainan will remain a shopping destination for the Chinese, as nothing yet can seriously compete with the luxurious nature and size of the shopping mall operated by CDFG and Shenzhen DF (the main operators there), offering a huge portfolio of brands and products that you cannot find anywhere else.”
If Hainan’s luxury focus shifts somewhat in the future, that’s unlikely to change the ongoing process of premiumisation that permeates the entire travel retail channel. “Within spirits, we noticed even greater momentum for well-known premium-plus spirits brands such as Jack Daniel’s, Woodford Reserve, The GlenDronach, Ron Diplomático,” says Brown-Forman's GTR MD, David Rodiek. “The traveller is increasingly looking for more premium expressions. We expect air travel seat capacity to increase, especially across Asia and particularly China, which will further fuel the ongoing premiumisation trend.”
The rise in importance of ESG for GTR shoppers
While ESG is now a very high priority for brand owners, Rodiek sees this manifesting among travel retail shoppers as well.
“Post-pandemic travellers show a greater interest in sustainable and responsible travel, seeking brands that prioritise eco-friendly practices and support local economies,” he says. “At the same time, they're still interested in travel retail for convenience, exploration and novelty. Brands that offer unique and exclusive products attract their attention like before.”
Sustainability is at the core of the new ‘Future Friendly’ initiative pioneered by retail operator Gebr Heinemann, which aims to highlight environmentally-conscious products such as Nc’nean, the organic Highland single malt produced at a distillery on Scotland’s remote Morvern peninsula. Organic, bottled in recycled glass and named a '2022 Best for the World' B Corp because of its positive impact on environmental stewardship, Nc’nean is now available at Gebr Heinemann airport stores in Amsterdam, Vienna, Berlin, Hamburg, Copenhagen, Düsseldorf, Frankfurt and Sydney, Travel Free border shops and through distribution partners such as Baku and Munich.
“Heinemann are a genuinely great business who care about working with brands that are better for the planet and its people," says Nc’nean Distillery's head of marketing, Sasha Smyth-Osbourne. "It didn’t matter to them whether we were big or small, the important thing was what we could offer from a product perspective. They have done a good job of jumping on the consumer trend of seeking out brands that are better for the environment, but they also do it for the greater good - for a wider impact outside their own profits.”
While Smyth-Osbourne is encouraged by the Gebr Heinemann initiative, she feels GTR still has a long way to go in this area. “The initiative says a lot about the changing world of retail," she says, "that sustainability has become almost the biggest trend within food and drink, and that consumers are actively picking products that are shown to be better ethically and sustainably.
“But it doesn’t mean that there isn’t a long way to go across wider travel and duty-free stores. There are still retailers putting profits ahead of people and the planet, meaning their offering more often than not ignores any climate and ethical issues that come alongside it.”
Boutique products and smaller brands play a growing role
Beyond such ethical concerns, it would be easy for the GTR channel to focus exclusively on what has worked historically - big-brand Cognac and whisky/whiskey, chiefly - but the Heinemann/Nc’nean partnership shows that there's a growing role for more boutique products and smaller operations.
Another brand looking to build a significant GTR presence is Bumbu, the rum owned by Sovereign Brands, in which Pernod Ricard has a significant stake. Bumbu’s Original and XO expressions both launched into GTR last year, boosted by the brand’s position as the leading premium rum in the US, Canada, the UK, Latvia and other markets, says Europe, Asia & Africa marketing & communications director Sophie Lawrence.
She adds: “This has given us an excellent opportunity to cut through into GTR, where premium rum is hugely underrepresented.” Bumbu already has listings with Dufry, Heinemann and Lagardère, covering key locations across Europe, Turkey, Mauritius and Johannesburg, as well as featuring in the 'magazzino', the three-storey luxury duty-free emporium in the Vatican City exclusively for Vatican staff.
Lawrence says the company has “significant ambitions” for Bumbu in travel retail, with Bumbu Original served to travellers in a Bumbu Daiquiri at the Virgin Lounge in London Heathrow Airport.
‘Duty free has still to refine itself’
Clearly, there are still opportunities for spirits brands in GTR, but some feel that the channel missed an opportunity for significant reform when resetting after the worst impacts of the Covid-19 pandemic.
“Duty free has still to redefine itself, which is not done yet,” says Waldemar Behn’s Biais. “All the actors are falling back into the old pattern. The golden years of GTR are behind us.”
Biais would like to see radical reform of the channel's business model, encompassing a number of steps, such as landlords accepting less revenue from concession fees; retailers being clearer in their communication on pricing, and more innovative in reaching the end consumer; suppliers returning to the roots of their brands rather than indulging in “superficial” marketing, as well as proposing real savings versus domestic channels; and consumers accepting that they need to pay more for airline tickets.
However, he isn'o't optimistic that such reforms will take place, particularly as operators are distracted by the return of international travellers from Greater China. “When the Chinese travel fully, that will be like the tree hiding the forest for a certain period,” says Biais.
“We still consider GTR as a fantastic marketing window in terms of brand visibility - but not at any price.”
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