TRAVEL RETAIL – VODKA: Try before you fly

Airports provide the ideal setting for premium vodkas to increase brand exposure and to reach their target audience, writes Clinton Cawood

The vodka aisles of a duty free store in an international airport: litre bottles of luxury brands perused by affluent, idle (bored) travellers, captive and open to suggestion, lured by flashy, expensive displays, wooed by free tastings, sample cocktails and bartending displays, and not an own-label brand in sight. Compared to conventional retail environments, surely this is a commercial dream for peddlers of white spirits – a marketing Valhalla for premium vodkas of all nationalities and filtering techniques?

For many brands it is, despite the sometimes harsh economic realities associated with the channel. Gary Chau, global marketing director for Bacardi’s global travel retail division, asked to comment on the challenges and opportunities that this channel provides, acknowledges that the former exist, but enthuses that “the opportunities are virtually limitless”.

But those speaking for many smaller or newer brands would probably comment that this is only true when marketing budgets are virtually limitless as well.

While Stolichnaya is neither small nor new, it has not had a long history with this channel, according to Jonathan Ashworth, the brand’s regional director for developing markets and duty free. “Up until January 2005 there was no coordinated sales and marketing strategy globally – it was all through third party agents,” he says. “And when you couple that with the margins you have in duty free, there’s not a lot of money to invest there.”

This does not, however, diminish the sales and marketing paradise that duty free can provide. For Ketel One’s European export manager, Victor ten Wolde, “There are no real boundaries to duty free/travel retail,” adding that this channel is “important to any premium brand”. He paints a picture where, in this channel, “consumers expect good quality products, while producers expect an interesting audience”. The result, ten Wolde explains, “is a win-win situation for everyone: a nice shopping experience for the consumer, a place where the producer can talk to affluent consumers in a premium environment, and a healthy business for the retailer”.

For brands, whether the benefits are skewed towards brand exposure or actual volume sales varies. Snow Queen’s Nick Spencer confirms that “the exposure of the brand is of higher value”. Chau agrees that, for Bacardi’s vodka brands (Grey Goose and 42 Below), “the channel provides an unparalleled vehicle for generating significant exposure among a very upscale demographic”.

Jonathan Roberts, brand category director for Diageo travel and Middle East, places a significant amount of emphasis on the duty free channel for Smirnoff. “We use this environment not only to sell this brand,” Roberts explains, “but also to extend its reach to consumers”, adding, “We view travel retail as the shop window to the world.”

Underberg makes extensive use of the duty free channel to drive sales of its Grasovka brand. As managing director Rainer Bentele explains: “Both volume and exposure in duty free for Grasovka are very satisfying.” For Charles-Edouard Delelis-Fanien, senior brand manager for Belvedere vodka, the benefits of this channel “start with international exposure. Brand image can really be enhanced. However, volume sales are important. Consumers are looking for gifts and better prices through this channel”.

The price is right
This last point is critical to premium vodka, and, perhaps, one of the major reasons for its emphasis on this channel. To convince a consumer to invest a significant amount of money into a bottle of spirits is not the easiest thing, but is significantly easier when there is a price incentive, or when the product is intended as a gift. As Roberts explains, “Spirits brands make great gifts. They have high perceived value and are internationally recognised.” According to Roberts, “half of all purchases in travel retail are gifts.”

Developing on this theory, he explains: “You can share spirits, and for many cultures around the world a shareable gift is a better gift.” Whereas duty free consumers are frequently just described as affluent, a useful but not very specific descriptor, Roberts takes this further, saying, “For businessmen the airport is one of the few places they have time to shop, and spirits are a male-friendly category and an ideal gift currency between men.”

Taking advantage of the gift opportunity has practical implications in terms of developing specific packaging and formats. Grey Goose first launched its annual everyday luxury gift box last year, including an information booklet. At the other end of the scale, it also produces limited edition gift sets with companies like Baccarat. According to Chau, “these sell upwards of US$1,000”.

This kind of partnership with other products has proven successful for other vodka brands. According to Chris Lucas, CEO for Russian Standard in Western Europe, promotion of this Russian vodka with salmon caviar has tripled sales in duty free.

For Grasovka, product innovation in travel retail goes beyond gifting. Bentele explains: “We always try to offer tailor-made solutions for this specific travel community. We have duty free exclusives and/or very interesting special sizes like Grasovka’s travel bottle which is 100cl.”

While exclusive packaging and formats provide a point of difference in this channel for brand owners, a real vote of confidence for the duty free market is its regular use as a platform for exclusive product launches.

Absolut, a major player in this arena, used the channel to launch Absolut 100, a masculine, higher ABV addition to the brand’s portfolio. V&S global travel retail director, Anders Olsson, explaining the decision to launch the product exclusively in this channel, described it as the “progressive – and truly global – duty free and travel retail market”.

Another major player to use this channel for this purpose is Diageo, which relaunched its Smirnoff Black Label in the travel retail market with great success. As Roberts reports, “The success of the exclusive travel retail launch led to our rolling the brand out to the worldwide domestic market.”

While consumers in airports (or on a cruise or ferry for that matter), are more open to purchasing a bottle of premium spirits than they usually are, there are ways to encourage them even further. A number of brands offer events and tastings to further drive brand awareness and sales. Delelis-Fanien explains: “We offer exclusive promotions like cocktail tasting sessions with bartenders, where consumers can interact with the bartender.”

Time well spent
Bacardi has taken this further, offering the “Grey Goose lifestyle experience” at Paris Charles de Gaulle airport, a self-contained venue at the airport during this summer that featured visual displays and sampling activity, as well as mixology demonstrations – activity undoubtedly welcomed by travellers with a bit of time to kill. Chau reports triple-digit growth during this promotional period.

These activities, as well as other aspects of having a travel retail presence are not cheap, of course. As Ashworth says, “The entry ticket is enormous. If you’re starting from scratch it’s an uphill struggle.” Simply put, “To launch a new and unknown brand [in this channel], you’re doomed to failure, unless you’re lucky or have deep pockets.” On the other hand, as Ashworth knows, “For big brands it’s essential, as your consumers are travelling through these airports.”

These entry costs extend to point of sale and added value offerings, as well as displays and sampling activity, but also often involve the development of the one-litre bottle format so common in travel retail stores.

The seemingly unlimited potential and attractiveness of this market brings its own challenge. As in other channels, there are no shortage of vodka brands vying for the attention of consumers. “There are many more competitive brands to contend with,” says Spencer. This is not the only challenge he recognises. The other side of the captive-audience coin is that “people are generally not intending to purchase a bottle of super-premium vodka. They are usually just killing time before a flight,” he says. “You have to work harder to entice the customer.” The upside, of course, as Roberts points out, is that this environment “provides a location where we are not competing with own-brand versions. It is exclusively brand orientated, which means it is an ideal place to build brand equity”.

Security concerns
By far the largest limitation to sales of vodka, and, indeed, many other categories in this channel, is the restrictions put in place since August last year relating to the carriage of liquids. A number of companies, including Diageo and Bacardi, are working with the European Travel Retail Commission on the issue. Bentele, of Underberg, still believes that as a result of “all the restrictions and security issues, footfall and penetration are not high enough by far”.

As Chau points out, the cause of the problem is that “protocols are still not set and those that are vary based on airport, so passengers are still confused”. Diageo’s Roberts acknowledges that this “is an ongoing issue for anyone involved in travel retail”.

These challenges aside, this is still an important and lucrative market, one that is well suited to the premium end of the vodka market, both in terms of brand exposure and in terms of reaching an appropriate target audience. And brand owners are not the only beneficiaries, of course. As Lucas points out: “The leading duty free operators have realised that the proven consumer trend is white spirits consumption, and that there is a need to follow it.”

In that case, expect to see more vodka displays, mixology demonstrations, and expensive limited edition launches in the airports.

© db October 2007