TRAVEL RETAIL / TFWA PREVIEW: Moving the Boundaries

Beer has burst into the hallowed halls of travel retail, previously the domain of luxury spirits and wine. A little innovation goes a long way, says Ben Grant

The Tax Free World Exhibition in Cannes this month provides the perfect forum for a slew of new products, packages and campaigns as both industry heavyweights and the ambitious smaller players set out their travel-retail stalls for the next year. Over 400 companies will be exhibiting at the show, with virtually all the major spirits suppliers among them. An increasing focus on the premium end of the market, spiced up with a generous dash of innovation, suggests that the US$4.75 billion travel retail liquor business is in rude health.

A revised portfolio and a highly respected new travel retail director ensure that Whyte & Mackay will definitely be one to watch in the coming year. The company is forging ahead with a comprehensive update of its key brands under the new stewardship of James Prescott, who joined the Glasgow-based company earlier this month from principle UK retailer World Duty Free, where he was head of liquor. After 17 years of travel-retail drinks buying, he perhaps wins a prize for understatement when he declares, “I know what buyers are looking for.” And he’ll be working hard to make sure that’s just what W&M is offering.

“Historically W&M has struggled to put out a broad range,” he explains. Correcting this deficiency will be central to W&M’s new strategy; the eponymous brand now stands together as a coherent family, ensuring infinitely stronger shelf presence. The other cornerstone of the new strategy is an increased focus on “rare and prestige” products. A range of references, particularly from the Dalmore stable, are being released: not only are they expected to generate substantial margins for all parties, but they also attract attention and add credibility to the standard range. And as Prescott well knows, that’s exactly what travel retailers want.

The parallels between W&M and William Grant & Sons are considerable. Earlier in the year the company proudly announced the arrival of a new global travel retail director, Ylva Persson, one of the creative architects of Bacardi’s recent travel-retail renaissance. And WG, too, is firmly focused on building both brand equity and its bottom line by releasing selected batches from an enormous inventory of aged spirit.

Persson believes that it is crucial to communicate the depth of the brand in order to retain market leadership. “Glenfiddich has some of the most precious stock in the industry,” she explains. “Going forward, we will demonstrate our premium ranges; even the 50-year-old forms part of the range, rather than being a one off.” She believes that the size of the organisation allows it to be more agile and responsive. Considering the role she played in getting a giant like Bacardi to implement the leftfield – but enormously impactful – Bombay Sapphire Be Inspired campaign, it seems a safe bet that originality and innovative thinking will be the order of the day.

Making a difference
In spite of her departure, Persson’s former colleagues at Bacardi continue to inject creativity into one of the strongest portfolios in the business. And the company’s recognition of the importance of the channel is underscored by the creation of Bacardi Global TR, a new standalone business unit. According to marketing director Gary Chau, the company adheres to the mantra “differentiation through innovation”, and travel retail provides a perfect forum for implementing radical strategies.

Typical of the company’s focus on innovation was the partnership between Martini and Ferrari to create a high-profile presence at Milan Malpensa alongside the Italian Grand Prix last month. In Cannes the company will expand the eponymous range with the release of Bacardi Melon, and the next year will also see a renewed focus on Dewar’s and a continuation of the Grey Goose success story.

Rémy-Cointreau has traditionally enjoyed excellent presence in travel retail, recognising the enormous potential that the channel has for building brand equity. Global TR director Peter Sant explains that the company invests heavily in wide-reaching on-airport campaigns to take advantage of the tremendous exposure generated through the channel. Recent targeted promotions, such as Rémy’s The Heart of Cognac and Cointreau Spectacular, have helped to drive brand awareness around the world. “Sales more than doubled at the selected outlets,” Sant explains and, following the promotional period, “the increase has been sustained.” In terms of product development, RC has produced exclusive new packaging for Rémy Martin XO Excellence, “to answer the consumers’ demand for increased premium-ness”, and has devised a range of presentation boxes and duo-packs to support all key brands.

RC’s Cognac rival, Camus, has also been very creative in its travel-retail strategy, using the channel astutely to drive not just sales, but also brand equity. Cannes will see the launch of VS Elegance, completing the revamp of the core range. “The strong coherence and air de famille in our range, combined with the new display units, result in stunning merchandising impact,” enthuses president Cyril Camus.

However, Camus’s TR presence is by no means limited to Cognac. The entire industry has been obsessing for years about the potential of China, but Camus is one of the only players to have implemented a coherent strategy to tap into the market. The Spirit of China initiative was launched a year ago, teaming up with a number of the top liquor brands in China – including Moutai, Gu Yue Long Shan and Chunghwa XO – to help them forge a presence in the channel. There has, inevitably, been need for some fine-tuning, but the brands are rapidly gaining listings and finding favour with travelling Chinese and non-Chinese alike. “Our outlook on TR is what has driven the reinvention of our company in the last three years, and can be summed up in four words –  more luxury, more Chinese,” says Camus. As Chinese traveller numbers continue to rise dramatically, the company will undoubtedly reap the rewards of its early – and favourable – entry into the market.

A year after concluding the Allied acquisition, Pernod Ricard heads to Cannes having integrated a plethora of new brands into its now bulging portfolio. Christian Porta, Chivas Brothers’ CEO and director of Pernod Ricard’s TR business emphasises that the new additions give the company a substantial presence in every sub-category. Top-end references have been PR’s biggest hits in TR, as Porta explains, “There’s a thirst for luxury goods, which bodes well for our sector.”

Right spirit

The premium vodka category continues to grow apace, and two recent newcomers demonstrate how effective travel retail is as a launch platform. V&S used airports for the initial roll-out of Absolut Ruby over the last year. Strategic development manager, Magnus Bidestam, reports that the reception has been excellent. SPI Spirits is also maximising the potential of the channel to drive awareness of the Kremlyovskaya brand. Duty free director, Stavros Stavrou, explains, “Making the product available at key destinations is crucial to driving the brand forward.” Kremly has already found favour in the Russian market, a promising portent for a vodka, and SPI is working with selective retail partners, predominanly in Europe and Asia, to steadily grow the brand.

The liquor selection on display at Le Palais des Festivals will be widened this year with two major newcomers to the exhibition, Campari and Rones de Guatemala. Campari already has a strong presence in airports with its eponymous brand as well as Glen Grant whisky. The focus in Cannes, however, will be on the white spirits, with Skyy90 and Martin Miller’s getting special attention. “We have recently restructured the TR operation,” says duty-free area manager, Virginie Marquet, and official participation at the TFWA show should help to further drive the business forward.

Last, but by no means least, Rones de Guatemala has a grand plan to totally shake up the rum category and it sees travel retail as a key platform for achieving this objective. “Travel retail consumers are looking for something special,” says TR manager, Walter Aguilar. “They’re looking for a credible, aspirational brand. Nobody wants to pick up an $8 bottle of rum in travel retail.” RdG’s portfolio, dominated by high-ticket, aged rums and led by Centenario 23-year-old, meets this demand perfectly. Aguilar cites the success of the superpremium vodka segment, confidently declaring, “We’re going to do the same for rum.”

It’s an ambitious task, but the product is excellent, the company is brimming with self-belief and travel retailers will certainly be intrigued to see whether they can do it. “We’re not trying to cannibalise existing sales, this will be totally incremental business. And the margins are obviously much better,” says Aguilar. The brands are aimed not at rum drinkers, but at XO or premium Scotch shoppers. He explains, “We don’t want to be listed with the rums; these brands belong with the Cognac, where our customers are.” Cannes will see the launch of an exclusive new gift pack, including the specially commissioned Riedel rum glass, as well as a limited-edition 30th anniversary blend. RdG may be a relative newcomer to the sector, but it seems that the company has a clear understanding of travel retail’s insatiable thirst for the superpremium.

Heineken refreshes the parts …

Travel retail has always been a valuable channel in terms of both volume and brand building for spirits, and it’s an increasingly important arena for the wine trade. But beer, with its significant bulk and low margins, has traditionally struggled to find its feet in such a luxurious environment. Heineken, however, has rewritten the rulebook; investing heavily and creatively, and effectively making the category its own.

In Cannes last year the Dutch brewer scored a most unexpected victory. At the Frontier Awards, widely regarded as the Oscars of travel retail, Heineken Paco was named star product of the year. Up against the giants of the fragrance, confectionery and luxury goods industries, the judges plumped for a beer. With a TR price of €7 per 330ml (the equivalent of Chivas 12-year-old or Johnnie Walker Black), a beer brand had finally broken the boundaries for this historically weak category, positioning itself as a truly premium proposition in the off-trade.

“We see the TR channel as a source of growth in terms of volume, value and exposure,” says duty free and TR manager Erik van de Ven. “Beer is absolutely a viable category in TR.” Sergey Pletnev, global account manager, airport shops, continues, “Innovation is becoming the single most important aspect, not only in product development, but also in new ways to interact with consumers and create brand experiences on the shop floor.”

It’s incredibly difficult to make a success of a high-volume, low-value product in an environment where space is critical. But, this victory will have made the competition sit up and take stock of what can be achieved with an appropriate travel-retail offer. Perhaps Heineken’s success will prove to be an inspiration; now that the boundaries have been broken, let’s hope for a period of experimentation as the big brewers discover what can be achieved through the channel.

© db October 2006

The TFWA World Exhibition takes place at the Palais des Festivals, Cannes, from October 22-27. It kicks off with a cocktail party on Sunday evening, and the show floor is open from 09:00-18:00 Mon-Fri. For further details see www.tfwa.com