SPECIAL REPORT: Travel retail business

TFWA president Erik Juul-Mortensen opened this year’s TFWA conference in Cannes by presenting a number of new statistics about the performance of the industry. The data, from Generation Research, showed that while in 2015 the industry experienced the first year-on-year decline in global sales in six years, final results for 2016 show that there has been a modest recovery. Year-on-year sales at 63.5 billion US$ were plus 2.4 %, which is a significant improvement on the negative growth of 2015.

With regard to category performance, once again it was fragrances and cosmetics that performed the best with year-on-year growth of 9.2 %, whereas watches and jewellery sales declined by 8.4%. “The pressure on the luxury sector continues,” said Juul-Mortensen.

In terms of sales by channel, the strongest performer was ‘other shops’ which grew by 7.3%. Sales here are mainly at downtown and border locations and, increasingly, on board cruise ships. The key driver of growth had been the sales of perfume and cosmetics in Asia Pacific downtown locations.

Looking at performance of the regions, Asia Pacific was once again what Juul-Mortensen described as “the engine room for the industry” with a year-on-year growth of 8.2%.

The first quarter of 2017 is showing some encouraging momentum building on the modest recovery of 2016, he said, and versus quarter one of 2016, global sales in quarter one of 2017 were up 4.2%. The two key drivers continue to be fragrance and cosmetics with sales up 11.6%, and the Asia Pacific region where sales were up by 7.8%.

In terms of sales channels, airports are up 2.2% and other shops grew by 7.8%, again with the perfume and cosmetics category driving this growth.

Juul-Mortensen went on to state that the duty free and travel retail industry desperately needs data that is as accurate and reliable as it can possibly be, and said that trade associations cannot expect to win the attention of government bodies around the world “if we cannot accurately say what we as an industry are worth. The need for meaningful, accurate data is something we at TFWA take extremely seriously and we have been frustrated by the fact that this need is not always universally acknowledged.” He did, however, recognise the fact that in a concession-driven industry such as duty free and travel retail, data is extremely sensitive, but a way around this must be found for the good of the industry. 

The progress of the industry is, of course, dependent on what is happening in the wider world, and the world has never been more unpredictable than this year. “Elections in the US, France, the UK and South Korea among others have produced results that were unthinkable just a short time ago. A climate of uncertainty reigns – and if there is one thing that economists and business leaders dislike, it is uncertainty.”

7 October 2017 - Felicity Murray The Drinks Report, Editor in Chief