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After three long years, the biggest spenders in global travel retail are back. In spirits, however, brand owners operating at the higher end of the price ladder have a balancing act to navigate.
The sudden return of high-spending Chinese travellers in the last year has provided a welcome boost to sales of luxury spirits in global travel retail. A sales channel that is already firing on all cylinders in the Americas, Europe and the Middle East is now moving up through the gears in Asia Pacific as the region finally recovers from three years of Covid-19-related disruption and financial loss.
In 2022, airlines in Asia Pacific welcomed a 363.3% jump in international traffic, according to the International Air Transport Association [IATA]. But it was the swift dismantling of China’s zero-Covid policy in December last year, followed by the reopening of the country’s international borders a month later, that has quickened the pace of higher-end spirits launches into the GTR channel this year.
For the past three years, Chinese luxury spend in GTR has been confined to the domestic duty-free island of Hainan, the country’s most southerly province. Prior to the pandemic, however, the Chinese were prized for bestowing their largesse much more widely. In 2019, according to the Swiss travel retail research firm m1nd-set, the Chinese were the top-spending nationality for duty-free purchases of over US$200, ahead of the South Koreans and Emiratis.
Chinese appetite for luxury remains strong
How quickly the Chinese will reclaim their crown as top duty-free spenders is an interesting question. The country’s troubled economy and high rate of unemployment perhaps don’t augur well, but the senior creative foresight analyst at international consultancy The Future Laboratory, Savannah Scott, argues the demand for luxury goods among the Chinese remains strong. “A report released in March by The Hurun Research Institute, based on its ‘Chinese Luxury Consumer Survey 2023’, found that over the next three years, 56% of the country’s high-net-worth individuals plan to increase spending on personal luxuries – a three-percentage-point rise over 2022,” Scott reveals. “This means that post-pandemic, luxury consumers in China will be on the lookout for unique in-store shopping experiences that brands should focus on enhancing to capture their attention and wallets.”
Luxury in China has become polarised, according to a new report by global management consultant Bain & Co. “Chinese ‘Very Important Clients’ (VICs) are growing in number and have become major contributors to luxury sales over the past year,” says Scott. “Less likely to be hit by recession, VICs represent the fastest-growing segment of consumers in China. Mainly because of nationwide lockdowns, Chinese VICs contributed to 50% of online luxury sales.
“To weather a period of slower market growth, luxury businesses will have to find the right balance between serving VICs and cultivating loyalty among entry-level luxury consumers who, despite curbed consumption, represent an important customer base in non-recessionary times,” Scott adds.
As wealthy Chinese travellers dust off their passports, the early signs for duty-free retailers are encouraging. “The demand for luxury spirits is stronger than ever, particularly in Macau and Vietnam,” reveals Christophe Marque, president of merchandising at DFS Group, which operates airport and downtown outlets across Asia Pacific and North America. He says allocations on aged single malts remain an issue, but the retailer’s long history and strong partnerships have allowed it to avoid serious supply challenges.
“With more than 60 years in the industry, we’ve established strong, longstanding relationships with our brand partners who know they can trust our ability to deliver in the spirits category, whether that’s through world-renowned events such as our annual ‘Masters of Wines & Spirits’ or exclusive activations and pop-ups in other prominent store locations, such as T Galleria by DFS, Macau, Shoppes at Four Seasons and DFS, Los Angeles International Airport,” says Marque.
DFS unveils cross-category exclusive with Hennessy
DFS has been demonstrating the strength of demand for higher-end spirits in GTR by staging two high-profile drinks-related events in recent months. The first was in March at the annual ‘Masters of Wines & Spirits’ event in Macau, which showcased over 100 rare and exclusive whiskies, Cognacs, rums, tequilas and wines from 50 companies. Among the brand owners participating were Edrington, Karuzaiwa and Whyte & Mackay.
The second was the exclusive launch of the ‘Hennessy XO x Kim Jones’ collection – a three-piece collection designed by Kim Jones, artistic director at fashion house Dior, which comprises a pair of Cognac-coloured nubuck leather basketball sneakers, a 3D-printed sculpted decanter that comes with titanium casing, and a bottle of Hennessy XO Cognac encased in aluminium. Limited to 200 of each, the collection has gone on sale exclusively at DFS’s GTR locations worldwide.
“It’s not often that we’re able to witness a grand master step … across categories,” says Marque. “To be the exclusive offline travel retailer for the Hennessy XO x Kim Jones sneaker demonstrates the trust Hennessy has placed in us – from understanding our audience’s desires to providing an experience that honours the countless hours that have gone into this tremendous partnership of two icons.”
Record-breaking whisky releases
Elsewhere, the number of luxury spirits launches into GTR has increased greatly this year, several of which are record-breaking in terms of their age and rarity. In February, Proximo Spirits completed Bushmills’ ‘Causeway Collection’, a series of cask-finished Irish single malt whiskies, with the release of Bushmills 33-year-old Port Cask exclusively with Dufry-owned World Duty Free at its London Heathrow stores. Priced at US$1,500, the 53.3% ABV whiskey was limited to 690 bottles.
A month later, Edrington introduced Highland Park 54 Year Old, the oldest single malt whisky ever produced at the Orkney distillery. Initially launched for one month at London Heathrow, the iteration has since been made available worldwide. Highland Park created only 225 bottles, representing each year of its history. The expression carries a price tag of $46,900.
The advance of white spirits
While luxury spirits are clearly back with a bang in GTR, the pandemic changed consumer tastes and trends significantly. Home cocktail-making caught on in a big way in many markets and premiumisation within the various white spirits segments intensified. These trends are now beginning to make themselves felt in GTR. Earlier this year, UK-based Silent Pool Distillers launched Silent Pool Black Juniper Gin, a 43% ABV ultra-premium iteration containing rare black juniper from the Himalayas. In addition to various upscale domestic listings, London Heathrow and Dubai airports were the two key GTR locations for the new release, which carries a category-redefining SRP of $357.
Not quite scaling such heights price-wise but still pushing consumer expectations, Cambridge Distillery – also based in the UK – gained a debut listing in the channel in March for a range of its luxury gins at two new design-led Curi.o.City souvenir shops at London Gatwick Airport. Among the gins listed was the distillery’s tenth-anniversary tasting pack filled with 12 gins with a recommended price tag of about $146.
Gin is not the only white spirits segment reaching new heights in terms of price. In the Americas, Bacardi’s GTR division opened an ‘Experiencia Patrón’ activation at Mexico’s tourist-dominated Cancún Airport in March, where the tequila brand’s latest luxury collaboration with French crystal decanter producer Lalique took pride of place. With an SRP of $7,500, Patrón en Lalique Serie 3 is an extra añejo containing 14 different tequilas each aged for up to eight years in French and American oak casks. The liquid is contained in a decanter created by Lalique’s artistic & creative director, Marc Larminaux and is inspired by the agave plant.
Bacardi’s Americas GTR regional director, Geoff Biggs, is bullish about the prospects for premium-plus spirits in the Americas travel retail channel. “Across the region, there is growth,” he says. “In Mexico, it’s driven by the ease of access for US travellers and we expect business to return to 2019 levels this year. In Argentina, Brazil, Chile and Colombia, flights are packed, consumers are excited to be travelling again and we’re growing market share across our portfolio, especially driven by the relevance of our brands in the passion for home mixology and from on-premise trends in domestic markets.
“Although inflation continues to be an issue for many of these markets, volatility in exchange rates is nothing new and consumer confidence, especially among high-net-worth individuals, remains high as there is clear pent-up demand for premium spirits,” he adds.
Biggs’ confidence that well-heeled travellers will continue to spend big on spirits in GTR is widely held across the sales channel. At a time when e-commerce is becoming a key channel for many higher-end releases, GTR is fast recapturing its pre-pandemic position as one of the pre-eminent bricks-and-mortar launchpads for luxury spirits.
This article has been available to Global Drinks Intel subscribers since May. For details on how to join them, please click here.
