TRAVEL RETAIL – LIQUEURS: Sweet treats

Liqueur brands have realised that travel retail represents more than simply a shop window and are exploiting the opportunity to provide memorable brand experiences for customers. Patience Gould finds out more

With a 12% share of the action in the duty free spirits arena, liqueurs are the third most important drinks category after whisky with 46% and vodka with 15%. While the size of the share is somewhat surprising considering the huge diversity and breadth of the liqueurs offering, not to say the sheer number of brands, it clearly indicates that there is a lot of potential out there. More importantly, with the return to growth in Europe’s travel retail playground, positive signs in the US and emerging markets in the East, fronted by Russia, confidence is rising and producers are sharpening up their act.

“The trend is positive again after the abolition of the intra-Europe duty free allowance in 2000, which triggered a drop in sales at that time,” says Malibu-Kahlua International’s regional director, travel retail, Lionel Fromont. “In general, liqueur brands are more and more present and active in the channel.”

Malibu-Kahlua International (MKI) was formed following Pernod Ricard’s acquisition of Allied Domecq, and, as its name suggests, it’s Malibu along with the Mexican-orientated coffee liqueur Kahlua that are fronting the action. Furthermore, both are top players in the arena; after Diageo’s Baileys, Malibu is the number two and Kahlua the number three. However, tthe company also handles another coffee liqueur, Tia Maria, which makes for an interesting challenge.

“Duty free represents a fantastic opportunity for our three brands,” says Fromont. “The channel drives significant volumes for sure. It is also a ‘medium’, allowing us to interact with our consumers through the exclusive packaging offers, brand displays and promotional activities. Malibu, Kahlua and Tia Maria are all about appealing destinations [the Caribbean and Mexico] and they fit perfectly in duty free.”

Happily for MKI, Kahlua and Tia Maria enjoy a geographic synergy. While Kahlua’s heartland is in North America, Tia Maria’s stronghold is Europe and the brand also has more of a female bias in terms of consumers.

However, in terms of investment the company’s immediate priority is Malibu. Overall it’s a high maintenance brand as the core consumers – the youth market –  are the most fickle when it comes to brand loyalty.

“We have made and are still making significant marketing investments,” says Fromont. “As a result, Malibu is among the fastest growing brands in the industry with an 8.6% long-term growth rate. In duty free we have started to invest in order to better reflect the potential of Malibu in the channel.”

The overall aim is to improve the brand’s visibility through new displays and merchandising, while at the same time increasing “the offer” with promotional packs.

“We want to improve our visibility with new displays and increase our offer with new promotional packs. The large majority of our volume is the one-litre size,” says Fromont. As a result of these efforts, duty free is now Malibu’s sixth largest market in the world. It’s the same for Tia Maria, but it’s fourth in Kahlua’s export league. 

Of course with Baileys Diageo wields the big gun in duty free and it’s interesting to note that with annual case sales well exceeding seven million the brand’s duty free business is growing apace. Now accounting for 10% of Baileys volume the global travel and Middle East is now the brand’s third largest market after the US and  the UK. No surprises then that the company used the arena to launch its flavour line extensions, Crème Caramel and Mint Chocolate, in BAA’s World Duty Free Autumn 2005 programme. This proved to be one of the most successful product launches for Diageo, and in the last two years sales have increased by 40% in duty free. To date overall volume on the flavours alone is over 1m cases a year. 

“The Baileys flavours are performing very well and this success has in turn driven awareness and sales of original Baileys,” says Jonathan Roberts, brand category director, Diageo Global Travel and Middle East. “The duty free markets have contributed to a large proportion of this success by using fantastic displays with sampling opportunities, engaging consumers, and helping them establish a relationship with the brand, by giving them memorable experiences.”

Engaging customers
Clearly duty free is a very important market for Baileys and over the past few years the company has been really working the channel to underpin brand growth internationally. Indeed, the retail environment it affords is an ideal sampling environment in which to introduce the consumer to new experiences and Baileys has used this to good effect. 

“Over the past four years we have offered consumers new ways to enjoy the brand with the ‘Baileys Experience’,” says Roberts. “Working closely with our customers we’ve developed memorable and engaging experiential marketing environments that stretch the occasionality of the brand in a way that drives footfall into stores and drives additional sales, for example, showing people new ways to enjoy Baileys.”

In a recent promotion at Gatwick Airport the company “engaged” with around 1,000 consumers a day over the course of a two-month period. It has had similar successes in other airports, border stores in the Americas and on ferry services.  

While the emerging regions include the Asian duty free markets and Russia, where Baileys has seen “good growth rates”, it is Central and South American duty free, which is showing “strong growth” in terms of volume. Ongoing promotional programmes and the launch of Baileys flavours have “contributed to this excellent performance”.

“We do have a very loyal fan-base for Baileys in the duty free markets, and we are always looking for ways that we can promote the brand to them, as well as engage new customers,” says Roberts.

Overall liqueurs are sold mainly in North America (50%) and Western Europe (32%), and while premium liqueurs, together with white spirits, are growing faster in the other regions they are still quite new and underdeveloped compared with the brown spirits category. Encouraging news then for both established liqueur brands, like Baileys, and for relatively new contenders to the arena like C&C International’s Frangelico.

Untapped potential
"Duty free provides an important shop window for liqueurs, and gives brands the opportunity to reach consumers at a time when they are most receptive to new products. This is particularly true in situations where tourists are looking for souvenirs or gifts to take home,” says the company’s Kevin Abrook.

While duty free hasn’t played a huge part in Frangelico’s growth to date, C&C International is aware of the “great deal of untapped potential”.

“Historically, much of Frangelico’s success derived from its popularity in style bars and so sales were driven by the on-trade, and consumers discovered the brand in that setting,” says Abrook. Now, though, change is in the air and consumption trends are more and more towards at-home consumption. To this end the company is concentrating on advertising and marketing campaigns in domestic markets to drive sales in duty free.

“Duty free offers huge potential for us and we recognise that whenever and wherever the brand develops in domestic markets, so duty free should play its part,” comments Abrook. “It is also an important avenue for new brands trying to get established, particularly in the emerging markets, such as Russia and the Far East.”

Currently C&C is running promotional programmes including TV and print advertising in the US, Spain and Australia, supplemented by sampling campaigns and PR. These campaigns target “ordinary indulgers”, those consumers who like to experiment with mixed drinks and who are often most likely to buy Frangelico in duty free.

Evidently, following the abolition of duty free within the EU, the travel retail environment has taken on a different dimension from merely being a shop window for brands. Of course, this is still a vitally important aspect of the business, but producers are clearly using the environment as an extra retail opportunity and another means of getting closer to their consumers.

“The ending of duty free in Europe after 1999 meant that suppliers and retailers in the travel retail sector had to look at new ways to make it work,” says Baileys’ Roberts. “At Diageo we looked at how we sold our brands and what we offered customers and consumers. From our own extensive customer research we knew that travellers were more open to new experiences and so we looked at creating these with Baileys.”

This is precisely what is happening in the Drambuie camp. “Historically, duty free has been incredibly important to Drambuie – and it’s a vast arena,” says the company’s Miranda Rennie. “It’s our sixth largest market and we are doing particularly well in the US, where we are driving value back into the brand using cruise liners out of Miami.”

Window of opportunity
The last few years have been marked by consolidation as the company has wrestled to halt the brand’s slow decline, which has been ongoing for the last two decades. Now, with volume steadying at around 350,000 cases, the company is taking a new look at duty free, and looking to use it as an educational opportunity through getting consumers to look at different drinking options.

“We have been concentrating on our brand strategy in domestic markets, making sure that Drambuie is the focus,” says Rennie. “As a result duty free has fallen into an off-trade world – but we are now looking to get a more educational programme underway.”

Whether it’s sampling, educational or gifting opportunities, liqueur producers are sitting up and taking notice of the duty free channel and incorporating it into their brand marketing strategy. In short it is no longer just a shop window – it’s an opportunity to engage the consumer and introduce different aspects to brands, which may well go unnoticed in the domestic setting.

© db October 2007