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Pre-Singapore update on liquor in duty free

Sizing up duty free, seeking an independent perspective and getting ready for Singapore – reflections from Erik Juul-Mortensen, TFWA president

Erik Juul-Mortensen Tax Free World Association

Although unconventional geographically, duty free and travel retail is an important source of business for many liquor companies. In this quarter’s update, I’ll use a few key numbers to show why. Although the bigger players loom large here, there’s also plenty of room for proactive independents, as the travel retail head of one tells us. And May brings the 20th TFWA Asia Pacific Exhibition & Conference in Singapore, which we preview from a drinks angle.

Getting a feel for a liquor market that, by definition, crosses borders can be difficult, especially for those unfamiliar with duty free and travel retail. In pure volume terms, if this were a country, it would count as the world’s 16th largest spirits market based on data collected by IWSR.

A total of 21.6 million nine litre cases makes it sizeable, larger than Spain for example but smaller than Mexico. Category-wise, whisky takes the lead with over 9 million cases. Much of that is sold as higher-value offerings, such as aged blends or single malts. In fact travellers’ tendency to trade up means that the proportion of single malt Scotch sold in duty free and travel retail is more than double that on domestic markets, with over a million cases bought by passengers in 2013.

The story’s similar for vodka, the no.2 spirit sold to travellers. IWSR reckon that premium and super premium vodkas account for 6% of the global domestic market, but in duty free they represent 20% of the total volume. Factor in the consumer awareness that good distribution at major airports can achieve, and it’s easy to see why brand companies eager to attract premium-oriented consumers are increasingly active in duty free and travel retail.

One player with a strong track record in the channel is Spirit France. The independent Normandy-based company has a distinctive portfolio of upmarket calvados and armagnac brands, positioning itself as a leading supplier of premium French niche products.

“Duty free and travel retail represents around 15% of our business. We see it as a strategic channel offering our brands a valuable shop window” comments the company’s duty free and travel retail head Jean-Luc Lebault.

While his core business is in Europe, he views Asia as a development market ripe for expansion. The Boulard calvados brand is category leader on the domestic Japanese market, and leveraging that in duty free is one objective, but Lebault’s channel ambitions extend to the region as a whole. With an armagnac (Janneau) in its portfolio and having recently taken on the distribution of two rums from Martinique (J.M. and Clément), Spirit France is looking at opportunities to grow its distribution and will have a stand (J1) at TFWA Asia Pacific Exhibition & Conference (see below). Lebault recently attended the TFWA China’s Century Conference in Shanghai to learn more about the market there. As he points out, “Boulard was one of the first brands to exhibit at the Cannes exhibition over 30 years ago”, so the company has long viewed duty free and travel retail as important for business development.

Spirit France’s interest in Asia is understandable. The region’s wine and spirit sales to travellers totalled nearly $3.3bn in 2014 according to Generation Research, second only to Europe and growing nearly twice as fast at +6.9% last year.

May sees the return of Asia’s leading trade event, TFWA Asia Pacific Exhibition & Conference. This year’s show (10-14 May in Singapore) will be the 20th such gathering. The 2015 Conference speakers include two men who’ve played important roles in the growth of travel and the demand for luxury goods. Liew Mun Leong, chairman of Changi Airport Group, has helped turn Singapore’s airport into one of the world’s best, while Andrew Wu, LVMH group president for Greater China, has first-hand experience of Asia’s thirst for upmarket brands.

Liquor will be well represented at the Exhibition with some 60 stands, over 20% of the total. Companies taking space range from the major global groups to independents and smaller specialists. Among those making their first appearance or returning after a break are Moët Hennessy, Beam Suntory, Heineken, SABMiller and Bodegas Osborne.

21 April 2015