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TRAVEL RETAIL: VODKA: Premium pilgrimage
“standfirst”>Travellers love to mark their journey with something special, that perhaps isn’t available elsewhere, and vodka, the fastest growing spirits category in duty free, has some impressive offerings in the fertile airport environment. By Alexis Hercules
It’s the journey, not the destination. A cliché that may result in a withering look, or worse, from a frazzled parent who has heard “are we there yet?” one too many times. Yet there is something special about a journey, be it a family holiday, a weekend break or even a business trip. The transient nature of transit – so brief the desire to savour and experience it again and again becomes almost inescapable. As does the desire to mark the occasion with a special purchase, either for yourself, someone you are visiting, or someone back home.
In airports we pass one another while walking along great, shiny corridors. Bathed in a perpetual neon light of “non-time”, where people sleep on floors, confused tourists try to decipher signs, and businessmen shave in small rooms, having risen at four in the morning to catch their flight. In short, excitement and the joy of movement prevail, and all this comes together to create an environment quite unlike any other.
Passengers have a special feeling, and from a retailer’s point of view, this feeling can be transferred into the sale of high-end goods. A higher than normal percentage of these customers will be ABC1s, loaded with more disposable income than the average high-street shopper, and expecting something exceptional and unique to purchase. Even those that may not necessarily have that much to spend, having poured a fair amount into their flight and accommodation, still feel the urge to buy something. Impulse and gifting come to the fore here like nowhere else, and premium drinks brands are obviously eager to take a large slice of this particular pie. It is here that we find vodka, a vibrant and relatively young sector that is highly suited to premiumisation, and one that is growing fast.
Sales
Vodka sales have grown dramatically since 2003, according to Generation, a group that has analysed and documented the global duty free and travel retail market for over two decades. Between 1999 and 2003, sales were relatively constant, but after dipping to a low of US$185 million in 2001, there has been only growth. This culminated in sales of $353m in 2007, which was a massive jump from $271m two years before, and easily the biggest change in this period of observation.
The total duty free and travel retail sales for wine and spirits came to $5,840.8m in 2007, and vodka was responsible for 6% of this. However, according to those in the know, this figure is set to rise and rise.
“Vodka is the number two spirits category in duty free and travel retail, and the fastest growing of all,” says Anders Olsson, director of global travel retail for The Absolut Company. He also claims that Absolut is the brand that is generating this “outstanding growth”, and since 2004 it is “actually the single fastest growing spirits brand in the global duty free and travel retail market”.
This is backed up to a degree by Generation, who list the top vodka brands for 2007, in terms of value sales in US dollars, as: Absolut, Smirnoff, Finlandia, Danzka, Koskenkorva, Stolichnaya, Grey Goose, Skyy, Belvedere and Eristoff.
With similar names, but including a new entry for 2008 (up to the end of August), World Duty Free lists the best-selling vodka brands as (in no particular order): Absolut Blue, Grey Goose Vodka, Smirnoff Blue, Smirnoff Red and Pinky Vodka.
Tom Hickton, the Smirnoff brand manager for Diageo’s Global Travel & Middle East (GTME), division, concurs with what Olsson says, by stating that vodka is indeed “the fastest-growing category at the moment”.
| VODKA SALES 2007 |
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Global duty-free vodka brand sales in US$ 1 Absolut Source: Generation DataBank 2007 |
Premiumisation
One of the major factors driving this growth is the proliferation of premium vodkas. The super-premium and ultra-premium categories are growing at 13% and 21% respectively in travel retail, according to the Duty Free Intelligence Centre (DFIC) 2007, and this is an important area for Diageo. “We have a strong focus on premiumisation,” says Hickton, “and after the remarkable success we have achieved in Scotch, we are developing the strategy across our portfolio, especially through Smirnoff Black, Ciroc, Ketel One and Tanqueray Sterling.” Hickton believes that Absolut is Diageo’s biggest competitor in the premium vodka sector, but says “we are also seeing strong growth from super- and ultra-premium brands such as Stolichnaya, Grey Goose and Belvedere”.
It would seem Diageo is right to be wary of Grey Goose, as Gary Chau, global marketing director for Bacardi Travel Retail confirms, “Grey Goose is the world’s number one selling super-premium vodka, with a 52% market share, driving category growth at +27% versus the market’s +21%” (IWSR 2007 value data). “We have observed that many consumers are trading up from standard vodka brands to premium and super-premium vodkas,” continues Chau, “and we plan to build brand presence globally, with innovative consumer experience programmes such as sampling and exclusive luxury gift packs.”
The new name on the vodka block, highlighted by its presence in WDF’s top five sellers, is Pinky. “Over the last few years, there has been a strong trend towards premium and super-premium vodka, but at a price which is attractive to the travelling consumer,” says Francesco Scaglione, travel retail director for Whyte & Mackay, owners of Vladivar and Pinky vodka. “With Vladivar, we are concentrating on premiumisation and an accessible price point in travel retail,” he continues. “We have just recently repackaged the product, improving its premium credentials and making it more attractive to the mainstream.” However, it is Pinky that the company is really putting its weight behind as a “more exclusive offering in travel retail”. It is marketed as “the world’s most beautiful vodka, and Scaglione believes that “it is for a discerning consumer who appreciates its unique production method. It’s a vodka exclusively for women, and is only found in top outlets in key cities like London, New York or San Francisco.” Pinky is made in Sweden by a team of “champion wine tasters”, using a mix of violets, rose petals and strawberries which give the vodka its eye-catching colour.
Third in Generation’s 2007 vodka sales list, Finlandia, is very aware of the role travel retail plays, especially at the premium end. “Travel retail is a great channel to showcase Finlandia Vodka in a very premium way,” says Maureen Brekka, Finlandia’s global managing director. “As cosmetic companies do, premium spirits view this channel as a place to highlight their aspirational brand attributes.”
Although Diageo’s Hickton named Absolut as its biggest competitor, Olsson prefers to concentrate on the unique aspect of the shopping on offer in travel retail. “Super premium is indeed a growing segment in the vodka category,” he says, “but, primarily, duty free or travel retail is a market where exclusives and out of the ordinary shopping experiences are instrumental in attracting consumers and generating sales.”
| BESTSELLERS 2008 |
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The best-selling vodkas in World Duty Free stores, as of the end of August 2008 (in no particular order) • Absolut Blue • Grey Goose Vodka |
Unique
Travel retail is an extreme commercial environment with brutal competition between the world’s leading luxury brands. The audience is captive and it is up to brands to grab consumers’ attention over and above their competitors. This unique window of opportunity is constant in terms of the volume of shoppers, but fleeting in terms of the individual. Display and packaging play massive roles here, much more than they would in another setting. Terminal 5 at Heathrow has set a new benchmark in terms of luxury shopping, and it is quite likely that passengers will want to buy into this with the purchase of a premium or limited edition bottle.
“In travel retail, the key success factor has to be to offer products at a saving,” says Whyte & Mackay’s Scaglione. “But using its prestigious retail space to offer products that can’t be found elsewhere is just as important. People always find it great when they can get something limited or exclusive that few other people have or even know about. It gives them a feeling of discernment and sophistication.”
Finlandia’s Brekka agrees: “The travel retail category helps create buzz for products because travellers see offerings they can’t yet purchase in their markets. Packaging and displays are very important because they allow premium brands of substance to feature their credentials.”
Absolut is very active in the limited edition sphere, and it is known for launching exclusives and gift packs through travel retail. This summer saw the release of Absolut Masquerade, which followed last year’s award-winning Disco, and the previous success of Bling Bling.
There was also the Absolut 100 exclusive, which has subsequently been launched in domestic markets worldwide, as well as Absolut Pears and Absolut Mango – launched via exclusive travel retail/duty free campaigns.
“Travel retail is a market with well-travelled, discerning consumers who are also extremely early adapters,” says Olsson. “These consumers are not content with the run of the mill, but are always on the lookout for the new, the exclusive, the innovative and the spectacular. Something to bring home and show their friends.”
Absolut uses travel retail as a “test ground” and “launch pad” for future domestic launches, because a high percentage of its core target group are frequent travellers. “Travel retail consumers have a number of specific qualities,” continues Olsson. “They like to feel cosmopolitan, which makes them more open to novelties, exclusives and innovation, and ready to pay more for added values. We call this quality consumer trade up.”
Bacardi’s Chau is of a similar opinion when it comes to analysing the way in which travel retail customers look for and make their purchases. “The shopping behaviour of TR consumers is very different compared to other shopping environments,” he says. “Travellers look for exclusives, rewards and gifts, anything that is different from what is normally offered in domestic markets. Because of this, TR is the ideal channel to launch exclusives and trial new experiences and product ideas, as consumers have a greater motivation to purchase this type of exclusivity.”
Displays and packaging
In such a competitive environment, the way in which the product is put on show and packaged is of equal importance to the product itself. Some would even take this one step further and say that it is more important. Your brand may be present, but with a host of luxury items screaming for attention, getting seen is a must. Based on the amount of work and thought Absolut put into this area (for example, Masquerade is made from 3,328 red spangles with a zipper on the back), it is unsurprising when Olsson says: “The importance of packaging and displays can hardly be exaggerated. I’m almost tempted to say that it’s everything.” He believes that the demands on innovation and execution are very high just to be noticed, and even higher to stand out, attract consumers and generate sales. “The encounter with the consumer is the moment of truth,” he continues, “and, as the old saying goes, you never get a second chance to make a first impression.”
Chau calls packaging “the greatest form of advertising”, and says that consumers “will form a perception about your brand based on how the product looks”. He believes packaging plays an important role in attracting consumers in the first place. As such, shelf packaging needs to “stand out and create brand difference in order for it to be easily located and capture consumers’ attention”.
However, Diageo’s Hickton feels that while packaging and display are “vital elements”, the overall shopping experience for a consumer in travel retail needs to be substantially different from other forms of shopping. “The travel retail experience needs to stand apart from the experience the customer has had in other channels,” he says.
“Our focus on premiumisation across our brand portfolio can only work if the whole retail experience is a premium one. This means not only through packaging and display, but also across every seemingly minor detail too.”
To achieve this, Hickton reveals that Diageo works in close cooperation with its partners, taking a holistic approach that “reaches every detail of the customer experience,” ensuring that the quality of the whole experience is “enhanced and maintained”.
The impact of a bold, inclusive display should never be underestimated. Diageo took this concept to a premium end this September, with a seasonal store concept called The Collection in Paris’ Charles de Gaulle (CdG) airport, Terminal 2F. It was a partnership with retailer Aelia, offering premium brands from the supplier’s portfolio including Johnnie Walker Blue Label and King George V whiskies, Zacapa Centenario rum and Ketel One vodka.
In March, Grey Goose took advantage of the T5 launch by placing sampling stations inside the main World Duty Free store. The stations offered shoppers their choice of Grey Goose cocktails, and brand images were showcased on the event wall inside the store, “visible to 70% of all shoppers”, according to Chau. A Grey Goose boutique also took over CdG airport’s departure area in Terminal 2F2, “the most premium location in the airport”. Here, travellers could sample Peartini and L’Orange Cosmopolitan cocktails. “This boutique increased sales 126% in May, and 200% in June,” claims Chau.
Finlandia has also operated prominent, high visibility display areas, with a display space in Helsinki airport that “exudes premiumness and showcases key brand elements”, according to Brekka. “Its design brings the Finlandia story to life.”
In short, travel retail is a great opportunity and an ideal showcase for major brands. As Chau says, they can be presented in stores as a “flagship experience, with a 360 degree activation that entices and draws in the consumer”. In travel retail, billboard advertising, in-store merchandising, promotions, and exclusive offers can be implemented all in one place.
Vodka as a category is definitely growing, and its premium end could be safe from a sales dip, if the oft-quoted theory that the very top tier is immune from an economic downturn proves to be true.
Yet that special feeling brought on by the bright lights of an airport, and the sense of freedom imbued by the journey itself, will still combine to create a truly unique purchasing environment.
If a product can only be bought in this environment, it instantly becomes desirable. The lack of ease with which it can be obtained leads inextricably to a desire to obtain it.
With Heathrow’s T5 raising the bar, world airports will all have to follow suit, and a premium, exclusive shopping experience will continue to be as vital as your passport to any journey.
db © October 2008