Spirits&Tobacco AUGUST 2021 · SPECIAL ISSUE
IWSR Drinks Market Analysis p.16
Spirits roundtable p. 8 m1nd-set's key takeaways p. 32 CBD integration p. 38
DUTYFREEMAG.COM
Letter from the Editor
The
time is now T
he potential restart of travel, the potential opening of borders, the potential for recovery — uncertainty is the only certainty in travel retail in 2021. Despite this, many Spirits and Tobacco companies have taken full control and are at the point of becoming truly excited for the future, with new product launches and plans to be at TFWA WE in Cannes. While turning the lockdowns into a positive might be a bit of a stretch, the quiet time did offer some opportunities that simply are not there when everyone is running to catch up, as is usually the case. For Mazaya, the slower time offered the chance to become more innovative with flavors. For KTI, it meant the opportunity to find new retail partners for further expansion. For JTI, it meant creating ways to help consumers in a low-staff, contactless environment. For Stoli Group, the time offered the ability to create a partnership with ReSea Project to fight ocean plastic pollution. Despite the inevitable and sometimes unfortunate circumstances and challenges faced in 2020/2021, Spirits and Tobacco have made it through. PMI boasted increased revenue in H1 2021, and while BAT’s revenue may not have increased, its profits did. And all is not about survival. While activations and tastings may not have happened as in the past, new items such as Amarula Coffee were still launched, and more launches and creative tasting and marketing solutions are on their way. While some cigar events have been canceled this year, Procigar 2022 is once again in the planning, and Oliva cigars recently held a live event in Beirut. As the world evolves, so do we. You’ll hear lots of news from us in the near future, but to begin with, new in this issue is our Roundtable, wherein we speak with a variety of people in the industry to gain their collective insight on challenges and strategies. The Spirits-focused Roundtable was a huge success, and you can be sure to find more coming in future. While travel in the coming months remains uncertain, our industry — and these two categories more than any other — are strong, and more than capable of taking on challenges to find success. We very much look forward to seeing as many of you as possible in Cannes and MEADFA this year as live events return, and we look forward to working with you toward a brighter 2022 and beyond.
AUGUST 2021 · SPECIAL ISSUE Global Marketing Company Ltd. It is distributed throughout Central America, South America, the United States, Canada, U.S. Virgin Islands, U.S. Pacific islands, and the islands in the Caribbean. The views expressed in this magazine do not necessarily reflect the views and opinions of the publisher or the editor. August 2021, Special Issue. All rights reserved. Nothing may be reprinted in whole or in part without written permission from the publisher. © 2021 Global Marketing Company Ltd.
AMERICAS, GULF-AFRICA, ASIA DUTY FREE & TRAVEL RETAILING Tel: 1 905 821 3344; www.dutyfreemag.com PUBLISHER Aijaz Khan aijaz@globalmarketingcom.ca EDITORIAL DEPARTMENT EDITOR-IN-CHIEF Hibah Noor hibah@dutyfreemagazine.ca EDITORIAL AND DEVELOPMENTAL DIRECTOR Wendy Morley wendy@dutyfreemagazine.ca DEPUTY EDITOR Laura Shirk laura@dutyfreemagazine.ca SENIOR WRITER Rebecca Byrne rebeccabyrne10@yahoo.com.sg SENIOR EDITOR Mary Jane Pittilla maryjanepittilla@hotmail.com ART DIRECTOR Jessica Hearn jessica@globalmarketingcom.ca
Kindest Regards,
CIRCULATION & SUBSCRIPTION MANAGER accounts@globalmarketingcom.ca
HIBAH NOOR Editor-in-Chief hibah@dutyfreemagazine.ca
4 AUGUST 2021
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Contents
WHAT’S INSIDE
16
Lead Stories 8 Spirits Roundtable
32 m1nd-set Category Analysis
20 Mazaya Update
36 Gebr. Heinemann
In agreement As the first in what will be a growing series of roundtable discussions with experts in the duty free & travel retail industry, we spoke with representatives of three different perspectives on the Spirits category: A brand, a retailer and a retail designer, on how they feel improvements in the industry can be a benefit to all
High-octane solutions Thriving off youthful energy and a contemporary presence in the TR channel, the shisha company says the pandemic has little bearing on its current performance and future outlook; what sets Mazaya apart from competitors is its use of premium blend ingredients, food-grade flavors and state-of-the-art production facilities
28 Tobacco Report
China tops Habanos’ sales Although Europe remains the leading region for Habanos S.A. exports, in 2020 China became the top country to import Habanos cigars, displacing Spain as the lead market for the first time
24
Key takeaways In an interview with Peter Mohn at m1nd-set, we learn post-COVID changes registered during Q1 2021 in the S&T category regarding consumer profile are slowly returning to pre-pandemic; however, TR can expect to continue experiencing no or low interest among senior citizens
Cigar specialist Over the years, Gebr. Heinemann has nurtured a relationship with cigar aficionados and luxury cigar manufacturers such as Oettinger Davidoff and Habanos, earning the retailer and distributor a lofty and exclusive space from which to benefit all
38 WB Canna Co & Wellness Portfolio
CBD integration During this Q&A, we hear from Phillip Jarrell at WB Canna Co & Wellness about the integration of CBD; Jarrell elaborates on the subsidiary’s 360° approach to the Caribbean, Central America and travel retail
40
40 Future of Virtual Tastings
The post-pandemic landscape Representing the three top selling Mezcals in the duty free channel, Mezcales Casa Armando explains mid-pandemic presented the opportunity to re-engineer the tasting process
Features IWSR: comparing prices & levels Davidoff Update At the heart of JTI Stoli Group prepares to expand 6 AUGUST 2021
16 24 26 31
38
A new take on an old concept Editor’s Picks Distell talks positive signs
34 44 46
Spirits Roundtable
In agreement
Lewis Allen, Director of Portland Design, believes airports need to provide either optimal convenience or optimal experience, and right now they are not doing either
AS THE FIRST IN WHAT WILL BE A GROWING SERIES OF ROUNDTABLE DISCUSSIONS WITH EXPERTS IN THE DUTY FREE & TRAVEL RETAIL INDUSTRY, WE SPOKE WITH REPRESENTATIVES OF THREE DIFFERENT PERSPECTIVES ON THE SPIRITS CATEGORY: A BRAND, A RETAILER AND A RETAIL DESIGNER, ON HOW THEY FEEL IMPROVEMENTS IN THE INDUSTRY CAN BE A BENEFIT TO ALL by WENDY MORLEY
8 AUGUST 2021
Justin Guay, Vice President of Importations Guay Ltée, says despite inexpensive duties, a simple increase in duty free allowances from one to two bottles would make a huge difference in his spirits sales
D
uring our recent roundtable discussion on various aspects of Spirits sales and marketing in the travel retail channel, taking part were: Retailer Justin Guay, Vice President, Importations Guay Ltée; John McDonnell, Managing Director International, Tito’s Handmade Vodka; and Lewis Allen, Director, Portland Design. If we suspected any argument might ensue, we quickly discovered that would not be the case as these three gentlemen offered insightful agreement to the letter. (Responses have been edited for space)
On smaller brands breaking in
John: Airport operators need to be cognizant of small craft brands and what they bring to the party. What I mean by that is they need to change their model. It’s very expensive to enter that channel, and it’s coming to the point where I’m back and forth whether or not to stay in duty free in airports because of the cost of doing business.
John McDonnell, Managing Director of Tito’s Handmade Vodka, believes strongly that the duty free industry is missing the boat by not having one effective, engaging app for consumers to use
Consumers want brands that they can’t necessarily get in their domestic markets — a brand that comes to mind is Whistlepig rye, out of Vermont. That’s a very small brand but has a great following, and people should be able to find it in some duty free outlets. An operator that’s doing a great job I think is International Shoppes out of Boston and New York. They bring in craft brands that are specific to that city. I’m based in Boston and they have brands from Boston like Harbor Distillery and Bully Boy Distillery. Justin: The way that I always understood it with airport duty free was that generally the larger companies running airports are based on global buying, so they’ll more or less choose the brands they want for a variety of locations rather than the local market. With the land border we’re perhaps a little bit more flexible to try things because we don’t have a large multinational company behind us; we’re all family owned and operated. Also I think if it’s a new brand coming into the market
Spirits Roundtable
the way that I understand it is that if the brand gets picked up by a larger representative like Diageo or Pernod Ricard there’ll be a lot of marketing but if they’re not picked up perhaps the best way to start is actually with the local market and really concentrating on your strengths then building up from there. Lewis: If you look at feedback in travelers’ surveys a lot of them say they don’t really engage with duty free stores because it’s boring; it’s the same old same old. Local brands have a key role to play in that, as John says, they’re not available in your local market. They’ve got a new story and experience to tell. Airports need to understand that they can drive football to their retail propositions if they’ve got a healthy balance between the unfamiliar, the exciting, and the familiar. I think the balance isn’t quite right at the moment. People don’t expect to see new and different; rather they expect to see the opposite, and that’s a problem.
On a better way to sell
Lewis: You have to respect that there are different types of shoppers on different what we call missions, so some are interested in locating their favorite bottle of vodka quickly and they just want to
10 AUGUST 2021
get in and get out. Lots of other shoppers might be looking for vodka but interested in trying a new local brand or niche brand kind of product, so I think then the question becomes, well how do you sell to that type of person who knows what they don’t want but not exactly what they do want. I think then the experiential part comes into it. Then there’s the whole 360-degrees around how do you promote your brand to that person before they even step into the store? If we’re going to focus on the store experience I think we need a total rethink around what happens at the moment that I’m in the shop. There will always be price-conscious consumers but I think there are a lot of people looking for that something extra special. We need to be thinking about what is that specialness. John: I think duty free operators have failed miserably in e-commerce. If we learned anything during the last 18 months is people want home delivery. Why can I get off of an airplane around the globe, click, order an Uber to pick me up at that airport in the local currency with a tap of my finger but yet when we go to duty free each operator has their
own website — the consumer doesn’t understand this duty free operator is here and this one is here. Why don’t we have one application or platform that all duty free operators are on, so when you order your ticket right away you get an email saying hey when you come to NYC Kennedy airport please visit your duty free shop. Here’s a coupon for a discount, or come in because we’ll be tasting Johnnie Walker? It boggles my mind that between all of us we haven’t cracked the code on this. I’m working with a group of guys that have engaged with TravelX.ai. They empower travel retail partners to increase sales and passenger engagement – it’s a digital retail marketplace where you can see the inventory, you can order food, it has a chat bot 24/7, personalized offers, it’s in all the local currencies. It’s great for brand owners because you can run campaigns on it and get analytics back. I’m hoping TFWA, IAADFS, FDFA, MEADFA, all these organizations come together and find us a platform that we should all adopt. I don’t buy the excuse operators will say oh you know you’re going to compare prices. That ship sailed a long time ago. Anybody can Google anything and check the price.
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Spirits Roundtable
Justin: One of the biggest problems I have in my store is that the customers don’t even know that they can stop. They don’t know the duty free is for them. When you’re walking through an airport a lot of the time you’re forced through duty free. If you’re on the highway and you don’t know what duty free is, which is the majority of the passengers on the highway, how do you pull them into the store? We actually opened a Starbucks in our store to really make people feel comfortable with stopping.
On how to work with no activations or tastings
John: I have no earth-shattering suggestions. It’s putting videos in the stores to explain your brand or have special packages to entice the consumer to pick you up. I don’t think samplings are going to go away forever. The presentation of how you sample will change, whether that’s giving a miniature away in the store whatever. It’s going to be very different for awhile ’cause everybody wants to be contactless. There’s a place for brand ambassadors
12 AUGUST 2021
but more efforts have to fall on the store operators to train staff better to educate the consumers. I personally don’t like somebody coming up trying to sell me on something. If the question is are suppliers going to furnish brand ambassadors in the store that’s just another expense. One of the things I learned during COVID is a lot of our customers are really true partners and work together with suppliers, but there were some situations where the operators try to pass more of the cost on to the supplier. Foot traffic would be down 90 to 95% in some airports and they still want to charge you full price for the light box. I’m very serious when I say we’re at a fine line here whether to continue in duty free, taking more expense to increase the duty free airport operator’s margin. The other thing is some operators shipped our product to places they weren’t supposed to and created destabilization in domestic markets in an effort to raise cash during COVID. So on top of paying all these costs they’re damaging the brand equity and then your distributors are upset because hey wait a minute I have the exclusive right to sell
in this market where is this product coming from? Then I have to become a policeman. Lewis (on cost-effectiveness for brands in this part of the discussion): I’m going to slightly cheat the answer and say let’s imagine a world where the metrics have changed, so cost effectiveness is now different, and we we take the consumer-centric view, like how on earth are we going to get people to stop and take an interest? Brands are learning to get better at experiential. In the UK for example Hendricks Gin took an ordinary bus shelter and created an experience. They’re not doing tastings but they are piping into the air around the bus shelter the smell of cucumber and roses which are part of the ingredients of the botanicals in in their gin so that they are engaging different senses. Obviously getting the liquid on the lips is kind of golden in terms of converting but I think there are other ways to convert people. I think we have to move beyond the transaction mentality; just selling something on the day is not good
enough. I think that you have to say we want that person to become a fan of our brand we want them to love our brand we want them to know something about our brand. I think duty free and airports generally need to get their heads round the idea that basing everything on volume of transaction is not the future and we need to enable a different form of engagement through reengineering of the metric. Justin: At the end of the day the really long-lasting products are the ones that speak for themselves without a lot of arm waving, so I think the packaging is going to be really important; something very simple that the consumer understands
very quickly. We’ve done pricing combos we’ve done mix and match with certain brands, and that has traditionally worked, but when you’re having a reduction in tastings and maybe even in staff, that packaging is going to be really important.
tion in July. People get a kick out of the ugly sweaters. They gift them in a big way and then they post pictures on the social media platforms, so it’s been very successful. It’s been so successful we’ve seen a couple of brands copy us.
Duty free exclusives
Justin: I think that duty free exclusives specifically for our customers heading to New York are very important. The opportunity to pick up a certain type of bottle that they can’t find the local market is very appealing. We put a little sticker or something to immediately grab the consumer’s attention and that’s been an important thing for us.
John: Well I think this is a very strong place in within the duty free stores, especially with the advent of all the different bourbons and rye finishes and the gin explosion in Europe, but we only make one type of Tito’s so our answer is we do different ugly sweaters for every holiday, and then the red, white and blue bags during America’s birthday celebra-
For Importations Guay, which operates on the Canada-US border between Quebec and New York, one of the biggest challenges to overcome is simply to get motorists to understand they can enter and shop there
www.dutyfreemag.com
13
Spirits Roundtable
Lewis: This is a big one, again back to the passenger or the traveling consumer, they’re very often interested in giftability. What makes something giftable? It’s different and unique and tells a story about where they’ve been. There are many ways to take something quite ordinary and make it a little bit more extraordinary and therefore more giftable, and different price points around that as well. There’s a definite strong role for exclusivity, and one thing is taking price comparison out of it — how can you compare price like for like if there’s nowhere else to buy it? Justin (on selling high-end bottles): A lot of the time it’s word of mouth. Someone will see it in the store and they’re call someone immediately ‘hey they’ve got this bottle here.’ We’ve had a couple of bottles that you can’t find anywhere else; we’ve had some Balvenie 50s, some Glenfiddich 50s, and they sell out fairly quickly. Even during COVID our inventory is actually quite low. Generally the customers come in and look around and they call their friends and that’s the fastest way to sell. Really the marketing is word of mouth because you can’t find it anywhere else. Even if I bring something in and I hang onto it for a couple of months it gets
14 AUGUST 2021
people talking and gets people excited. It’s a very different story for beauty but for alcohol it’s not necessarily the price it’s more the exclusivity and not being able to find it anywhere else. Lewis: With any brand [high-end selling] should be a bit special. The sales associates are big part of it in terms of their knowledge, sense of passion and love for the brand. There’s obviously an aesthetic but I think that’s an evolving thing and we sort of rail against what we call luxury ghettos in airports because they’re a big turn-off in some markets. In more developing markets luxury needs to look a certain way but in other markets it needs to feel a certain way. Obviously the product exclusivity comes into it.
Improving spirits sales in duty free
John: I’m repeating myself but it’s all about going digital. We need a duty free app. I’m sure all of you have seen Drizly is an app in the United States that connects liquor stores with consumers or vice versa. Home delivery in the States exploded up like 400% during COVID. Uber just purchased Drizly because they want to access that market. As an industry
— and I’m not just speaking spirits, this is all the categories — we need to be on this platform and we all need to embrace it. We’re so far behind on this initiative it’s not even funny. I was in Oman just before COVID hit talking about this. Everybody comes up and goes, you’re 100% right, but nobody wants to take the bull by the horns. That’s why we’re talking to this TravelX.ai group to see if we can tie in with them. That’s all I’ve got. Lewis: Yeah I agree there needs to be some kind of streamlining of that whole digital world because there are too many platforms. Too many duty free [operator] brands who are just not known to people. Within stores themselves I think again repeating myself it’s about shifting away from just set transaction-based experience. You need a better balance between buying stuff and doing other things with your time in in that moment. If you’re talking about airports, think about the value of the passenger in terms of who they are in that demographic, and take the idea of recruiting the customer to your brand — I can make money from selling my audience a positive sentiment connected to the experience they have with any particular airport, because it’s
about good personalized data and brands can create personalized relationships. I love the example of Le Clos in Dubai, the wine store. They create relationships with their customers, who can talk with them in the store and then you can talk to them online through WhatsApp. It’s a personal shopper experience if you like but it’s migrating that passenger to a digital relationship. The sales pie needs to increase outside of the store as well as in the store, and we can do that through these different forms of engagement. Digital is a perfect way to do that, not just as a fulfillment platform but also a conversational tool. I can also be asked to think about things before I travel or be recommended things before I travel. That sort of digital platform can be a great fulfillment platform, but it can also be a relationship-forming and building and maintaining platform, and I think if there is a platform to be made out there it shouldn’t just look at fulfillment; it should look at the biggest stories. Otherwise brands will just go direct to consumer and create their own platforms and will struggle with that, because this becomes very fragmented for the consumer. Fans
will navigate to that for sure, but others will struggle to discover those niche .com venues to go to, so yeah lots of things need to be done. As John says, we’ve been talking about this for a long time; it’s been frustrating that we seem to be roadblocked all the time and going nowhere. Justin: Speaking as a land border operator, the best thing to improve sales would be to increase the customs allowances. Currently they’re a bit restrictive. It’s one bottle per person duty free. Although the American duty for example is really not very high, it might be a couple of dollars, the customer is usually intimidated to buy the second bottle. They’re about to cross the border and they don’t want to be stopped or searched. If it was a more flexible customs allowance I think sales would definitely increase because if it says on the card two bottles I’ll buy two bottles. John: Just going back to the duty free app to follow up on Lewis’ point, it can’t just be transactional. The app needs to be fun, social and addictive, so people want to come to it all the time. It needs to be more than just putting products on a page.
Wendy: I’m going to bring China into the discussion because I think that they’ve really got it figured out with WeChat, where you have social and transactional and brand; everything is combined together and there’s interaction with the brand and the consumer. You have everything in one place and virtually everybody in the country uses it. Lewis: Yeah I think that that level of convenience and John as you mentioned yeah it’s not just about you know how much is how much are they selling or how much I can buy it for; it’s a whole world of experience socially from different events, different programs, the inside track on stuff, the opportunity to win things — lots of reasons to use the app stay with the app, follow the app rather than just look at the price comparison. So yeah that’s the kind of platform that I think the traveling consumer would really sort of enjoy. You know, something that is really engaging across a broad spectrum of interests and as you say Wendy I think there are interesting models for that out there but we should look at.
Click to watch the entire roundtable.
Developing a fan base is important for the success of any brand, and John McDonnell says a lot of Tito’s fans have come from its Vodka for Dog People program, which supports a great many dog rescue nonprofits
www.dutyfreemag.com
15
Comparing
IWSR Drinks Market Analysis
PRICES & LEVELS
IWSR discusses national spirits, non-air travel channels and the flow of info by LAURA SHIRK
Thorsten Hartmann at IWSR says if the at-home experience continues to grow at the expense of depressed hospitality channels this should provide additional growth for GTR
A
ccording to new data from IWSR Drinks Market Analysis (IWSR), the global beverage alcohol market is demonstrating gradual signs of recovery after COVID19 caused alcohol volume sales to drop by 6.2% globally. It’s expected that total beverage alcohol consumption will return to pre-crisis levels with consumption steadily increasing until 2025. More specifically, Thorsten Hartmann, Director of Custom Analytics, IWSR, states the company expects volume sales of spirits sold via global travel retail to return to pre-COVID levels by 2024. On a more positive note, Hartmann advises that the channel will likely experience an earlier return to pre-pandemic levels in terms of value by 2023. Since IWSR is expecting a more long-term decline in business among air travel, particularly in connection to intra-company, Hartmann says its recovery will be “a touch slower” than among domestic markets. This is the case even with e-commerce and greater digital content playing a significant role. “Nowadays, it’s easier for consumers to compare prices between GTR and domestic markets and departures duty free and arrivals duty free. In other words, consumers can research high-price ticket items and select their channel of preference pretravel to receive the best available deal,” he comments.
16 AUGUST 2021
IWSR Drinks Market Analysis
When asked about how the recovery of global travel retail will be impacted by the momentum of e-commerce and the sophistication of the at-home experience, Hartmann points out that as an offpremise channel, GTR has always catered to the home occasion. He explains if the at-home experience continues to grow at the expense of depressed hospitality channels this should provide additional growth for GTR.
Shochu, soju & baijiu in GTR
Published by Global Drinks Intel, IWSR recently reported the Top 100 Spirits Brands of 2020 with national spirits leading this year’s rankings. With a limited number of minor exceptions, national spirits are believed to only be prevalent in their country of origin. With this in mind, the domination of national spirits applies to global travel retail in the form of shochu (Japan GTR), soju (South Korea GTR) and baijiu (China GTR). However, their presence elsewhere is curtailed – especially with respect to shochu and soju. As a subcategory, Hartmann says baijiu offers select premium and luxury products, which means its presence in the channel is slightly more pronounced than shochu and soju. The subcategory is starting to expand its GTR presence and appear in other airport locations, primarily at hubs and destinations that are heavily frequented by Chinese nationals. “Importantly, the taste profile of most national spirits has yet to make the necessary leap to consumers outside their natural target group, which means any GTR activity remains limited to their traveling populace. Even in Japan, South Korea and China GTR, international spirits are far more prevalent than their national counterparts,” he explains.
Shifting behaviors and bulk purchases
Along with the cruise industry, border store business is guiding recovery. Hartmann believes that shifting behaviors of the post-COVID consumer such as traveling by car (vs. airplane) will lead to brand owners implementing a more refined approach to different types of GTR business. “The events of last year demonstrated that non-air travel formats are more important than they had originally been given credit for. Broader trends such as sustainability might impact choices around business and leisure air travel. Many businesses are believed to have figured out how to operate without extensive travel and will be asked in the name of sustainability to reduce their dependence on air travel. Additionally, some environmentally-minded consumers might start to increasingly prefer holiday plans that don’t involve boarding an airplane,” adds Hartmann. The IWSR representative also notes that captive browsing time, which exists more at airports and on cruises and less at border crossings, needs to be re-assessed. This is mainly the instance because a conscious effort needs to be made on the part of the consumer to make a stop, leave the car and enter a border shop. Due to the
The specialized taste profile of most national spirits has caused GTR activity to remain limited to their traveling populace
18 AUGUST 2021
presence of a vehicle, ferries and border shops lend themselves well to bulk purchases including cases of wine, beer and RTDs, which aren’t feasible in an airport or cruise environment.
The flow of info
As the transition to the new normal continues, industry professionals are urging businesses to embrace the sharing of data to create personalized offers across the industry. Moving forward, this will likely become a priority within the spirits category. Hartmann reveals e-commerce and digital content not only provide immediate commercial opportunity, but also a greater way for a brand to learn more about its consumers. From brand owners to GTR operators, he states in any trading environment there are varying levels of co-operation. “It’s true that the flow of information between GTR components has not been the best in the past – in our assessment of the sector this is primarily a result of the frequent tender system, which appoints GTR operators for a set period of time. This system by nature encourages the restriction of information flow. However, there are existing legislative restrictions regarding data sharing across borders and indeed a reluctance on the part of operators in particular,” concludes Hartmann.
Luxury in the Details
The Relentless Pursuit of Perfection
Mazaya
Highoctane solutions Youthful energy, excitement and a contemporary feel describe Mazaya’s presence in the travel retail environment. This enthusiasm and zest helped to create an environment where a pandemic has little bearing on the brand’s present and future outlook by WENDY MORLEY
M
azaya truly exploded into global travel retail a few years back, and has been dynamically visible in the channel ever since. While the past year has been tough on everyone, this shisha company made use of its seemingly endless energy to make sales happen. Although forced to liquidate some goods, Mazaya’s aggressive promotions and attractive gifts with purchase combined to create an atmosphere where consumers felt compelled to buy. “The challenge of liquidating expiring goods was particularly felt in markets where the digital tracking stamps
20 AUGUST 2021
were introduced,” says Rawan Elayyan, Mazaya’s Global Travel Retail Manager. “In the UAE for example, tobacco brands had to retrieve all their existing non-DTS stocks by end of 2020, but Dubai was not open to travelers during this time. A lot of brands were not able to deplete their nonDTS stocks before the deadline, and had to physically return stocks to the country of origin or sell them outside of the UAE. This process is complex and requires a lot of paperwork.” In other countries, Mazaya was able to react very quickly with promotions: “One example is replacing the state-of-the-art on-ground activations that Mazaya is
known for with aggressive multi-purchase and price-off promotions,” says Elayyan. “As a brand we had to take this direction to stand by our duty free partners in those difficult times even if this meant lesser profit margins.” In addition to aggressive pricing promotions, Mazaya offered its signature glass shisha as a GWP in select locations. “Mazaya glass shishas stand out. They are unique and very recognizable. Our shishas are easy to clean and do not hold flavours; they also have exceptional designs that keep changing from year to year so they never go out of trend, and they come in unique bags that make
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Mazaya
them easy to carry. We can proudly say that the Mazaya glass shisha has become a collectible item in travel retail. The premium GWP strategy helped in introducing new shoppers to shisha molasses and contributed to growing the tobacco category overall, which was very much appreciated by operators, especially during times of recovery,” says Elayyan. “As we are closely monitoring the market, we must continue our close collaboration with retailers and operators and allocate the needed funds to accelerate recovery; be it promotional through multi-purchase and price-off promotions, experiential through a welltrained fleet of BAs to assist shoppers and educate them about the brand and premium GWPs, or strategic through range rationalization and listing new SKUs with high potential.” The promotions offered by Mazaya created an environment where consumers stocked up, especially as they were
concerned that another lockdown could occur at a moment’s notice — they did not want to risk running out of shisha molasses. “One interesting observation during the pandemic was the reduced time people spend in the duty free stores. Since the decision making at the shopfloor has become faster, we do feel that there’s a tendency for shopper to stick to tried-and-trusted brands. For shisha smokers in particular, we noticed that shoppers go to the extent of buying more than they need, fearing that supply will get disturbed, or having to endure a second round of lockdown where they have to stay home for an extended period of time,” says Elayyan.
Positive insight
While the HORECA channel and travel both virtually disappeared overnight, Mazaya’s domestic business thrived. “We did very well in some domestic markets during the pandemic, especially markets
Mazaya offers an attractive glass shisha as a gift with purchase; these shishas are redesigned each year to stay on trend, and they come in unique bags that make them easy to carry
STATE OF THE ART
Rawan Elayyan, Global Travel Retail Manager, Mazaya
22 AUGUST 2021
“One thing that sets Mazaya apart is the premium ingredients we use in our blends. We only use single-origin French tobacco leaves with pure honey and high quality glycerine. “French tobacco leaves are the most premium in the industry and they have a high absorption quality that allows the flavour to last longer. We are also known to strictly use food-grade flavours, and our molasses has the perfect balance of tobacco strength and flavour intensity; this is guaranteed to take the shisha smoking experience to the next level. “Our molasses is made in highly developed facilities and it goes through several stages before it is packed and ready to be shipped all over the world. We invite you to take a virtual tour at our state-of-the-art production facilities in Jordan HERE. “In addition to our superior ingredients, we have a wide range of flavours that cater to different tastes and we have established a strong distribution worldwide. In fact, Mazaya’s portfolio comprises over 150 flavours and we are currently listed in 50 countries worldwide and 25 duty free shops.”
The company’s 1000g pack performs exceptionally well in duty free as it is a more economical option for the frequent smoker, and Mazaya is currently in talks with a number of operators to list more 1000g flavours
pack sizes. “In our case, the 1000g pack performs notably well wherever it is listed, as it is an economical option especially for frequent smokers,” says Elayyan. “Not having this item listed in Arrivals is definitely a lost opportunity for us and the operators alike. If such governmental regulations ease up, this would do well for both brands and operators.”
Moving ahead in TR
Mazaya is releasing two new flavours aimed at the growing South Asian market, especially given the importance of the South Asian demographic in the GCC and the UAE in particular
where we have a steady supply and are well established,” says Elayyan. “In fact, Mazaya had considerable sales growth during the pandemic in some local markets, especially when consumption shifted from HORECA to in-house. While the HORECA channel was affected because of the sharing aspect of the shisha, this was in a way compensated by the rise of in-house consumption, coupled with consumers stocking up their favourite shisha molasses products.” Elayyan says the company was excited about the change of regulation in KSA, with the Saudi government giving the go-ahead to list tobacco brands in duty free and duty paid stores. “We are very proud to announce our listing at Lagardère KSA. Now shoppers can find
their favourite shisha molasses brand at Riyadh, Jeddah and Dammam airports, and we are currently in talks with a number of local operators to expand our duty free presence in Saudi Arabia, where the potential for shisha molasses is huge and Mazaya enjoys a strong local presence.” She also professes excitement about the live TFWA WE event in Cannes. “This decision was eagerly anticipated by the TR community, as it is very refreshing for brands and operators to meet in person and help revive the industry. At Mazaya, we are very excited to go back to Cannes and meet up with our partners after a long wait, especially that this event is so dear to our heart.”
Arrivals business
According to Elayyan, one regulatory challenge currently being faced is that some countries are abolishing the tax exemption in Arrivals shops. “For example, Jordan is now in the process of applying tax in the arrivals shops on liquor and tobacco. This will make Arrivals lose its competitive edge over the domestic market, and will definitely slow down recovery, as Arrivals contribute substantially to our sales,” she says. Additionally, most locations have a weight restriction of 1kg in Arrivals, preventing brands from listing bigger
Mazaya recently refurbished its furniture across Cairo Terminal 2 and Terminal 3, Sharm el Sheikh and Hurghada airports. “These are important airports for tourists and we wanted to give our brand a facelift to welcome the influx of travelers expected to head there in Q3 and Q4 this year. Soon we will be installing new furniture in Jordan’s Queen Alia International airport at both Arrivals and Departure, especially since Amman is a very strategic location for us as a Jordanian brand,” says Elayyan. She adds that the company consistently expands its fleet of brand ambassadors, ensuring they are well trained on product knowledge as well as the different sales technique to assist shoppers with all their queries. “In addition to that, we are in constant talks with our duty free partners to see how we can optimize our portfolio, discussing which flavours we should add, which SKUs should be replaced and how can we improve our operations overall, be it through achieving high forecast accuracy, streamlining our supply chain and engaging more with our end users.” Especially interesting additions to the Mazaya portfolio that will start rolling out in the Travel Retail channel later this year are the Pan Masala and Pan Raas flavours. “Given the importance of the South Asian demographic in the GCC and notably the United Arab Emirates, and with shisha growing in popularity in South Asia, Mazaya has decided to launch these two flavours to cater to the South Asian smoker,” says Elayyan. “True to Mazaya’s superior quality, Pan Masala and Pan Raas are blended with food-grade flavours like the rest of Mazaya portfolio to offer the end user a very authentic smoking experience. These two flavours will be listed in key duty free shops when the business picks up and operators are ready to expand their offerings.”
www.dutyfreemag.com
23
Davidoff
INDISPENSABLE PA R T N E R
The new Zino brand is inspired by people who celebrate a lifestyle and state of mind driven by experiences, open-mindedness and an unwavering curiosity
Davidoff Cigars is a visible, respected and wellknown brand both in and out of the duty free channel. The company’s focus on providing quality cigars including exclusive and limited editions continue to serve it and its partners well as we all begin to emerge into the international traveling light
JeanChristophe Hollay
by WENDY MORLEY While creating the new Zino cigar brand, Davidoff aimed to suit Zino Davidoff's sense of discovery and spirit to live in the moment
24 AUGUST 2021
J
ean-Christophe Hollay, Head – Partner Markets & Duty Free EMEA, Oettinger Davidoff AG says that for Davidoff Cigars, the duty free channel plays an important role. “Duty free has its place in the global economic circuit; it generates value, employment and business,” he says. “We continue to consider the duty free business as a legitimate channel where legitimate consumers can buy their legitimate and preferred products.” While in the last months, duty free sales were “de facto” severely reduced by the lockdown measures and travel restrictions put in place by the authorities around the world in response to the
New cigar line Davidoff Dominicana Limited Release is blended with vintage tobaccos exclusively, with a fuller-bodied taste experience paired with Davidoff’s signature sophistication
sales similar to those of 2019, as would be surmised by anyone who keeps abreast of travel numbers. Though Hollay says those who are shopping are purchasing at good levels. “We are continuously supporting our partners on this recovery journey,” he says. “What is noticeable is that shoppers are buying at the same level as prior the start of the pandemic, if not even more. Tobacco is one of the 'fundamentals' of the Duty Free channel. Indeed, we can see that tobacco, and cigars in particular, recovered faster than any other category in the channel.”
Global strategy
pandemic, the imposed limits to reduce travel and therefore access to duty free zones were a fact for all in travel retail and not only for the tobacco category, Hollay reminds. When asked about how Davidoff dealt with expiring stock in the channel, as it cannot be sold domestically, Hollay’s response is that the question is not how the company dealt with expiring stock in the channel. “The question is more, how did our consumers manage to buy our products in those exceptional circumstances. The answer is clear: they continued to buy in the domestic markets. By this demonstrating their loyalty to us and to our brands. This is definitely an advantage of being a global actor in the premium cigar category. But of course this is a temporary and exceptional situation. With the progressive lifting of the travel restrictions, we expect shoppers soon back in travel retail.”
Limited and exclusive additions
Regardless of any travel restrictions and limitations in the channel, as in previous years Davidoff has developed an
exceptional program of Limited Editions to complement its ongoing range of products. “Exclusive editions have been prepared for different major duty free operators and will soon be on shelves,” Hollay says. “These Limited Editions are expected of us, and are particularly important in the travel retail / duty free channel all around the globe.” The company has two other major launches this year to join its ongoing portfolio. These are the Davidoff Dominicana and the Zino Nicaragua, which have both already been released in domestic markets — from May 2021 — and are currently being actively rolled out in travel retail.
Improvement in 2021
Oettinger Davidoff AG is thankfully seeing an improvement in sales in duty free in 2021 vs 2020, but Hollay says, “The frame of comparison is always important. ‘Good sales’ compared to what? Compared to 2020 — yes, definitely. But if we compare to 2019, it is a different story.” Hollay confirms that recovery has been strong in recent months, but there is a journey ahead before reaching duty free
As the Swiss cigar company is a global player in both duty free and domestic channels, Hollay says the company’s main attention goes to shoppers and consumers. “Our activities and new launches are deployed globally,” he says. “In terms of products, our current focus is the continued successful deployment of our new Davidoff Dominicana and Zino Nicaragua in all channels. — two launches that we coordinated globally on the same day.” Hollay confirms that Asia is part of the company’s global strategy, representing an obvious important potential for additional growth. “That said, and in particular with regard to Asia, the question is more related to the speed of recovery of the travel retail business and thus the number of shoppers traveling,” he says, adding that any traveler needs to be approached on a global level, not only locally or regionally as perhaps might have been the case in the past. “Like everywhere else in the world, the situation of travel retail in Asia and elsewhere strongly depends on the strategy of the authorities with regard to travel limitations and vaccination programs,” he says.
Precise and dedicated
Hollay says Davidoff will continue to lead the category through dedicated programs of activities and a precise selection of product range and offers while supporting its partners on the recovery journey. “We also know that major operators will have to focus more on ‘true values’ and well-known brands to be successful and rapidly regain business and volume,” he says. “It is our aim to accompany them in this process as indispensable business partner.”
www.dutyfreemag.com
25
JTI
At the
heart For Japan International Tobacco ( JTI), consumers are at the heart of what they do. This is leading the company to create new systems to aid in consumers’ comfort and information gathering plus new sustainability measures by WENDY MORLEY
A Corporate Affairs and Communications Director, Worldwide Duty Free at Japan Tobacco International (JTI), Antonio Vencesla, says JTI put QR codes on showcasing units to help ensure consumers can check information easily as travel ramps up and staff levels in duty free shops might be low
26 AUGUST 2021
ntonio Vencesla, Corporate Affairs and Communications Director, Worldwide Duty Free at Japan Tobacco International (JTI), says the high level of uncertainty remains in duty free, especially given that research shows the recovery is slower to happen than initially planned. “The lack of visibility as of the re-opening of certain borders does not help. Therefore, we have adopted a region-by-region approach that allows us to re-visit our plans regularly and bring flexibility as we have learnt to adapt and embrace change in this new normal,” he says. Vencesla says consumers are still at the heart of JTI’s business, and this means the company carefully checks new purchasing behaviors, new point-of-sales options and digital trends to ensure the best possible consumer’s comfort level when they
return to duty free stores. “As reported by ACI, we know that 52% of travelers would increase their shopping behavior at airports through click & collect points; the same is valid for virtual queuing apps (47%) and online pre-ordering of products (46%),” he says. “Therefore, at JTI we developed a fast-track counter as an easy tool to put in place for the first stage of the recovery, when there are limited shop staff and therefore speed is important. We have also put in place QR codes on our showcasing units in international airports so consumers can check product information, price, savings vs. domestics, allowances and country of origin of our products from their phone.’
Illicit trade and regulations
Regulatory actions continue, and Vencesla says the most pressing challenge to the tobacco category is the Protocol to Eliminate Illicit Trade in Tobacco Products, which is the first protocol from the World Health Organization Framework Convention on Tobacco Control. “While JTI supports the Protocol because it has the potential to provide a global response to illicit trade, we believe that it must address the source of illicit tobacco rather than introducing ineffective additional controls on the legitimate distribution channels,” he says. “Any study should be carried out in a fair, objective and transparent manner with in-depth knowledge on the issue and peer-review process. Studies must serve to eliminate illicit trade and should not be used as a means to pose an undue burden on the legitimate trade channel.” Vencesla believes it’s imperative to ensure the tobacco industry is better understood: “Creating awareness through our national and regional duty free association is therefore critical, as is dedicating resources and exploring all company connections.”
Sustainable future
Sustainability is critical for JTI’s future business success, says Vencesla. “We’re committed to making a positive difference wherever we operate and we’re serious about identifying, understanding and reducing the environmental effects of our business activities. We make sure we take an environmentally minded look into all aspects of our business on a global and local level, from the way we source raw materials to the way we ship finished products. To ensure this approach translates into meaningful results, we’ve set ourselves some key sustainability priorities and targets. We’re continually implementing responsible practices to mitigate and reduce the environmental impact, focusing on four areas: energy and emissions, water, waste and forestry.” Within the global duty free channel, the company looked at the environmental impact of all its showcasing units, and made changes. “We are re-using our current brands’ promotional point of sales materials to reduce our waste,” says Vencesla. “More precisely, we also worked on creating clever disassembly plans, so we can recycle the most materials possible.” Vencesla adds that as the company builds the next generation of units, they will also source the most sustainable raw materials.
www.dutyfreemag.com
27
TOBACCO NEWS
China tops Habanos’ sales While Europe remains the leading region for Habanos S.A. exports, in 2020 China became the top country to import Habanos cigars, displacing Spain for the first time. By region, Europe still remains the leading market for Habanos, with 60% of the company’s sales by volume. Asia Pacific comes next, with 16.4%, then the Americas with 13.6%. Gulf-Africa combined makes up 10.4% of the company’s sales. While China’s increased sales improved the company’s coffers over what they would otherwise have been, Habanos still had a drop in revenue of an estimated 4% in 2020. This is at least in part because of the drop in duty free sales. In 2016, it was estimated that approximately 25% of Habanos’ sales were in the duty free channel. Considering this, the 4% drop in revenue is surprisingly low.
In 2021, Cohiba celebrated its 55th anniversary with this special release
PMI revenue up Philip Morris International reported an increase in net revenues of $7.59 billion during Q2 2021, up 14.2 percent from Q2 2020. Adjusted net revenues were $7.84 billion compared with $6.65 billion in the 2020 second quarter. Second-quarter 2021 operating income stood at $3.13 billion versus $2.73 billion for the previous year’s second quarter. Adjusted quarterly operating income was $3.45 billion, up from $2.8 billion a year ago. “Growth rates presented on an organic basis reflect currency-neutral underlying results,” the company stated. “Adjusted net revenues exclude the impact related to the Saudi Arabia customs assessments. Adjustments, other calculations and reconciliations to the most directly comparable U.S.” “We delivered strong financial performance in the quarter, with adjusted diluted EPS of $1.57 up by 17.8 percent on an Acquisitions of non-tobacco companies will reinforce long-term growth potential for Philip Morris, Lausanne headquarters shown here
28 AUGUST 2021
organic basis,” said Jacek Olczak, CEO of PMI. “IQOS continued its impressive growth, surpassing an estimated 20 million total users by quarter-end and driving sequential quarterly heated-tobacco unit in-market sales volume growth of 8 percent. We expect this momentum to be bolstered by the launch of IQOS ILUMA starting next month in Japan.” “We are increasing our full-year adjusted outlook, with organic net revenue growth of 6 percent to 7 percent and adjusted diluted EPS growth of 12 percent to 14 percent on the same basis, mainly reflecting improved total industry volume. This outlook further supports our recently announced three-year share repurchase program of up to $7 billion.” “In addition, the proposed acquisitions of Fertin Pharma and Vectura Group will reinforce our long-term growth potential in the beyond nicotine space.”
TOBACCO NEWS
Events: live, postponed and digital Global tobacco events have gone the way of all major events in the world recently — mostly canceled. The 23rd annual Habanos Festival of 2021, which would have taken place in February, was canceled as a live event, though a virtual event called Habanos World Days was held in May. The virtual event featured presentations, tours of cigar factories and fields and announcements about new products. Each year the Habanos Festival features a cigar, and in 2021 that is the Cohiba, which is celebrating its 55th anniversary. The company released a special commemorative 55th anniversary cigar with humidors for the occasion. By many accounts, cigars are Cuba’s top export, and the festival is an especially important event for marketing and raising revenue both. As of yet, the world-renowned Cuban cigar company has not announced whether the Habanos Festival of 2022 will take place. Another event postponed is the 2021 International Cigar Expo in Chengdu, which had been scheduled to take place this November 8-10. New dates for the show will be determined later depending on developments in the situation. The translated official statement reads: “We are very grateful to entrepreneurs and friends in the global cigar industry and related industries for their care and support for this expo, and we apologize for the inconvenience caused by the postponement of the expo. I hope you will continue to pay attention to the follow-up information of this expo, and welcome to Chengdu, Sichuan, China for exchanges, business negotiations, and cooperation. “We highly appreciate the concern and support to Expo from the entrepreneurs and aficionados of global cigar and
related industries and apologize for the inconvenience caused by the postponement. We hope you continue to pay attention to the follow-up information of this Expo and await your coming to Chengdu, Sichuan, China for business exchanges, talk, and cooperation at that time.” The Procigar Festival, which was also canceled in 2021, has announced that it will indeed be a live event in 2022, to be held from February 22 to 25. At this point all normal activities are planned, including: • Cigar field and factory tours • New and unreleased cigars • Lunch with the gurus of the cigar industry • Insightful seminars and workshops • Admission to all dinner parties with a premium open bar • Premium cigars during all activities • Transportation to all tours and dinners from main hotels The second International Cigar Expo in Chengdu, which had been scheduled to take place November 8-10, has been postponed
Procigar has been announced to take place live in February of 2022
www.dutyfreemag.com
29
TOBACCO NEWS
BAT new categories drive revenue New categories helped BAT to keep revenue from falling for BAT in H1 2021. The company reported revenue of US$16.89 billion, which was down 0.8% but up 8.1% adjusted. New categories’ revenue increased more than 50%. BAT CEO Jack Bowles stated: “This has been an exciting period of growth in new categories, with new category constant currency revenue up by 50 percent in the first half. We added 2.6 million consumers—our highest ever increase—to our noncombustible product consumer base to reach 16.1 million. This demonstrates our accelerating transformation driven by our multi-category portfolio, with continued key market share gains in all three new categories. “We are building strong, global brands of the future with Vuse, Velo and Glo. These are underpinned by industryleading multi-category consumer insights and science with increasing digitalization. We have invested a further incremental £346 million in the first half, funded by continued value growth from combustibles and expect to reach our £1 billion Quantum savings target 12 months early. We have now increased our savings target to £1.5 billion by 2022. “Our rapid growth in new categories is driving significant scale benefits and 2021 is shaping up to be a pivotal year in our journey toward ‘A Better Tomorrow.’” Meanwhile, BAT is investing US$38 million in its Savar, Bangladesh, factory. This is the company’s second investment in the area in 2021, as BAT announced an investment of It’s the company’s second local investment in six months.
In February, the cigarette manufacturer announced an investment of US$22.6 million to increase its manufacturing capacity. Net revenue from BAT’s Bangladeshi operations increased by 25%, with profits increasing 43%, as the plant exports to China, the Maldives and other countries.
BAT’s new categories and new brand identity demanded a new logo, which was unveiled in 2020
Beirut, Fidel and Oliva Fidel Cigars and Oliva Cigars together held an exclusive Sunset Ash event in Beirut 2nd of July 2021. The first event was held in 2019. Lebanon-based company Fidel Cigars, in cooperation with J. Cortès & Oliva Cigars, presented the second Sunset Ash night in Beirut, which featured Oliva cigars exclusively. The event was held at sunset bar “Beit Misk,” with an amazing view over Beirut that showcases the sunset over the Mediterranean. More than 400 cigar aficionados attended the Fidel & Oliva event., where they enjoyed three Oliva cigars (Serie G, V and O). On big screens, guests enjoyed the film that documented the story of how the families Vandermarliere and Oliva cigars found each other, and then they were treated to music, food and Oliva cigars. The event was graced with a live band and well-known Lebanese singer, Chady Nashef. At the end of the evening, DJ Charbel Helou took over, creating a spectacular end to the event. During the event, a raffle was organised with Oliva cigars and various high-quality accessories. Danny Ibrahim from Fidel Cigars and his skilled team organized the one-of-a-kind event, which had enormous resonance throughout Lebanon and the entire Middle East. The second Sunset Ash event was held in Beirut in July, after a successful first event in 2019. Guests enjoyed food, music, drinks, a beautiful view, and of course a selection of Oliva cigars
30 AUGUST 2021
Stoli Group
ready
E X PA N S I O N
Stoli Group is on track to expand its premium and super-premium brands, with the Americas and the cruise market in particular showing strong signs of recovery, with a large opportunity for further growth by WENDY MORLEY
Unfortunate times
I
Stoli Group’s Global Travel Retail Director Jean-Philippe Aucher says the company has an exciting schedule of new launches and range extensions planned for the last quarter of this year: “Watch this space!”
f the time of global lockdowns afforded one positive for Stoli Group, it’s the partnership with ReSea Project to fight ocean plastic pollution. “Recognizing that the ocean is our most important eco-system, which produces over 50% of the air we breathe, and home to an abundance of life and biodiversity, Stoli is committed to turn the tide by actively removing plastic waste from oceans and rivers through its ocean mission with ReSea Project. Stoli’s sustainability efforts also lead to an accreditation as the first distillery to win the ‘Green-LeafCompromiso Ambiental’ by the Mexican Ministry of Environmental Protection,” says Jean-Philippe Aucher, Stoli Group’s Global Travel Retail Director.
But to be clear, this is one bright light in a very dark time. “It has been a catastrophic year for the wine & spirits industry in terms of duty free sales,” says Aucher. “Really, everything came to a standstill for much of 2020 with airports closed, cruise ships and ferries docked, airlines grounded. All sectors have suffered; probably Scotch whisky in particular which is the largest sales category. Most large- and medium-sized drinks groups/companies have specific duty free/travel retail divisions, and many have had to reduce the number of employees — even after long years of service — and this, we would have to say, has been the toughest part,” Stoli Group kept its full portfolio available for our customers and, in return, Aucher says the company’s partners have by and large retained their chosen assortments throughout. “This has been very fair for all parties during very challenging times,” he says.
Know your strength
While many companies in GTR are turning their gaze eastward, the Americas remain the key region for Stoli Group. “The USA, Canada, Latin America and Caribbean are all key distribution markets for our growing portfolio of premium and super-premium brands and we’re
Moving forward, Stoli Group will continue to position itself as a key player in the super-premium spirits category. We have developed our portfolio with that in mind, enabling us to become a competitive force in many territories worldwide and particularly our core markets of the US and Mexico.
pleased to see recovery in these regions,” says Aucher. “We are fast developing our cruise ship business, which is starting to operate again from July and that is super news for us. We are listed on many ships for both duty free sales and pouring, and it’s a market where we see much opportunity for further growth. We are also seeing recovery in some border stores as Brazil begins to reopen and, elsewhere, the Nordic ferries have remained quite buoyant while diplomatic sales have performed nicely.” As tastings are such an important aspect of simply helping get your brand known, let alone new product launches, it’s truly imperative to figure out a solution. Aucher says, “We are working with our retail partners to see how best to offer travelers tastings – which we know are vital in leveraging sales, particularly of new products/range extensions — taking into account all health & safety measures and expectations.”
www.dutyfreemag.com
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m1nd-set Report
Key takeaways A look at the short term
Among m1nd-set’s key spirits & tobacco takeaways, post-COVID changes registered during Q1 2021 regarding consumer profile are slowly returning to pre-pandemic; however, travel retail can expect to continue experiencing no or low interest among senior citizens and the tendency to self-indulge
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Among m1nd-set’s key spirits and tobacco takeaways, it’s noted that post-COVID changes registered during Q1 2021 regarding consumer profile are slowly returning to pre-pandemic levels. However, Mohn points out two current trends that travel retail can expect to continue experiencing over the next 12 – 18 months. Firstly, with senior citizens showing no or low interest in the return of travel because of health concern – even among those who are partially or fully vaccinated – brands and retailers need to focus on catering to the Millennial and Gen Z consumer. Secondly, in line with the megatrend of practicing self-care, travelers are showing an increase in self-indulgence. Although with a return to normalcy, the idea of “treat yourself ” will decline, it’s believed that this trend will maintain a higher rate than preCOVID.
by LAURA SHIRK
eading up to the release of its Spirits & Tobacco digital report, Americas Duty Free & Travel Retailing Magazine connected with Peter Mohn, Owner & CEO at m1ndset, for an update on all things travel retail. Featuring shopper insights research and retail analytics based on face-toface and online recruitment from around the world, the agency’s current sample is made up of 120,000 respondents and covers the main regions, categories and subcategories. Following the peak of the pandemic, the agency is currently conducting interviews per quarter and focusing on international travelers based on the previous six months of activity. According to Mohn, as a response to COVID-19, international travelers on the whole have become more comfortable spending time online and gathering information. He states many travelers have a better idea of what type of product(s) they want to purchase and how they want to experience the consumer journey. Moving forward, this shift in consumer behavior from pre-COVID will become permanent. “A hybrid business model will only become more and more relevant. Brands, retailers and players in the spirits and tobacco category will need to clearly communicate with consumers pretravel. Once on-site, brands and retailers can surprise visitors with in-store elements such as samplings, giveaways and excellent customer service to increase sales. Personal interaction will remain key to the consumer journey,” says Mohn.
Alcohol takeaways
According to the latest research by m1nd-set, compared to Q1 2021, the alcohol consumer’s profile in Q2 2021 is less skewed toward female and younger travelers. Although in Q1 2021, the share of female alcohol visitors increased, this figure is returning to pre-COVID levels. The average age of the alcohol consumer is lower vs. pre-COVID levels for both Q1 and Q2 2021; however, this also applies to the profile of overall travelers. Footfall, conversion & demographics: • Alcohol footfall has remained relatively stable the last several years until Q1 2021 when footfall reached its minimum (10%); this rate is normalizing in Q2 2021 • Alcohol conversion has significantly increased in 2021 revealing that post-COVID alcohol visitors are more likely to convert into buyers; this trend is reverting to pre-COVID levels in Q2 2021 • Q1 2021 shows the alcohol consumer to be the highest share of duty free buyers among total duty free visitors • Q1 2021 exhibits the maximum level of pre-travel purchase planning and exposure to touchpoints pre-shopping
ALCOHOL CONVERSION HIGHEST SHARE OF DF BUYERS OUT OF TOTAL DF VISITORS 55%
Elaborating on the agency’s breakdown of the spirits category, Mohn points out that travelers shopping in this category are more likely to try something new and add an extra item or two to their cart. The m1nd-set representative states alcohol brands and retailers need to highlight in-store elements, activate pre-travel touchpoints and communicate leading drivers of purchase such as value for money and travel retail exclusives in an appealing way to increase sales.
52% 47% 43%
42%
39%
12%
2017
12%
2018
12%
12%
2019
Q1-2020 Footfall
10%
Q1-2021
13%
Q2-2021
Conversion
12
Q1 2021 shows the alcohol consumer to be the highest share of duty free buyers among total duty free visitors; m1nd-set reveals alcohol duty free buyers are less likely to purchase completely on impulse
32 AUGUST 2021
Tobacco takeaways
On the tobacco front, the tobacco consumer’s profile in Q2 2021 is less skewed toward male and younger travelers – many of who are traveling for leisure. Although the share of male and
leisure shoppers increased in Q1 2021, this statistic shows to have stopped in Q2. Similarly, the average age of the tobacco consumer is lower vs. pre-COVID levels for both Q1 and Q2 2021; however, this also reiterates the reluctancy of older citizens to board an airplane. Footfall, conversion & spend: • Tobacco footfall has doubled this year from 5% preCOVID to 10% in Q2 2021 • Tobacco conversion has been following a downward trend since 2017 confirming that tobacco visitors are less likely to convert into buyers • Tobacco spend has decreased in 2021 (especially in Q1 when average spend was $45 USD); this trend is normalizing in Q2 2021 • 2021 shows the tobacco consumer to be the lowest share of duty free buyers among total duty free visitors Referencing m1nd-set’s latest research, Mohn explains the tobacco category is not benefitting from the current shopping
TOBACCO CONVERSION LOWEST SHARE OF DF BUYERS OUT OF TOTAL DF VISITORS 76%
73% 67%
64% 54% 41%
6%
2017
5%
2018
5%
5%
2019
Q1-2020 Footfall
9%
Q1-2021
10%
Q2-2021
Conversion
pattern that indicates while passenger traffic is significantly down, those who are heading to the airport and browsing duty free tend to be visiting more retail categories than pre-pandemic. He says tobacco brands and retailers need to communicate leading drivers of purchase like price advantage and convenience and target undecided shoppers to increase impulse shopping. With the prioritization of health and wellness on the rise, key players also need to consider all of the existing methods of tobacco and nicotine consumption and the ongoing expansion of the category. From the great availability of smokeless tobacco products to the development of CBD integration, Mohn notes that the travel retail channel is a valuable platform to initiate change. Since travelers often experience increased dwell time and a break in routine, they are more willing to temporarily change personal habits.
Planned vs. impulse purchasing
To a certain extent, planning among the alcohol consumer increased significantly in Q1 2021 meaning that alcohol duty free buyers are less likely to purchase completely on impulse. As we entered Q2, this trend reverted to pre-COVID levels. Supporting the push to plan, the share of alcohol shoppers who notice touchpoints before entering duty free increased significantly in 2021; this trend had been steadily decreasing since 2017. Moving forward, category players need to present their offer via an omnichannel approach and focus on the complete travel experience. Conversely, tobacco duty free shoppers are somewhat more likely to purchase completely on impulse and stock up on product. m1nd-set recaps “to boost conversion a substantial number of in-store elements come into play when influencing the decision-making process – especially considering the increasing number of undecided shoppers and impulse shoppers.” The agency concludes in-store touchpoints such as posters, leaflets, billboards, lightboxes, digital screens and promotional ads and consumer experience factors including price comparison, ease of navigation and staff interaction are powerful ways to impact on-site purchasing decisions. 6
2021 shows the tobacco consumer to be the lowest share of duty free buyers among total duty free visitors; m1nd-set reveals tobacco duty free shoppers are somewhat more likely to purchase completely on impulse and stock up on product
www.dutyfreemag.com
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Ladoga Group Update
A new take on an old concept
Located at Pulkovo Duty Free Store, the new installation conveys the spirit of Tsarist Russia and features Ladoga’s Imperial Collection
Ladoga Group reveals Russian-inspired wallbay at Pulkovo Airport; the new installation displays Ladoga’s Imperial Collection, Vodka Tsarskaya range and Ivan the Terrible Vodka
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by LAURA SHIRK
s a strategic partnership of several independent enterprises, Ladoga Group encourages the responsible consumption of wine and spirits in a drinking culture of all interested consumers. The strategic alliance lists Ladoga Group distillery and distribution in Russia as its two leading independent enterprises. Along with its others, the company produces more than 100 spirit SKUs, imports more than 100 brands from across the globe and exports products in over 50 countries. Recently, the group installed a new wallbay at Pulkovo Airport in St. Petersburg, Russia. Located in the airport’s duty free store, a component of Dufry at Pulkovo St. Petersburg, the installation displays Ladoga’s Imperial Collection, Vodka Tsarskaya range and Ivan the Terrible Vodka. Along with the premium status of the vodka brands, the Imperial Era plume and palace interior design of the Russian Empire inspired the design concept and vodka-specific brand selection of the in-store merchandising. The installation aims to convey the spirit and tradition of Tsarist Russia and the splendor of the original Russian drink. Ladoga Group teamed up with Merchant Brand Designers to develop the 34 AUGUST 2021
design and entrusted the production to its partner marketing agency, Smart Project. Reflecting the cultural heritage of the country, Ruslan Grigoryev, Export Director at Ladoga Group, notes that many of the décor elements of the furniture are handmade with a deep respect for historical detail.
Pulkovo Duty Free Store & Tsarskaya Vodka
Since its production facilities are located in St. Petersburg, Ladoga Group has a long-established partnership with Pulkovo Duty Free Store. During its years of operation, the group has become the number one supplier of spirits at the store. “Tsarskaya Vodka is the best-selling premium vodka brand in Russia. St. Petersburg is the home city of Tsarskaya, which is why it’s the most popular vodka brand at Pulkovo Duty Free Store. In addition, we offer a collection of special and limited editions exclusive to travel retail,” says Grigoryev. When asked about the vodka subcategory being recognized as offering some of the fastest-growing international brands of 2020 (based on % growth), Grigoryev comments the company expanded the presence of its ultra-premium brand
Imperial Collection. The brand is considered to be the most expensive serial vodka in the world and is extremely successful in Russian travel retail.
LADOGA Brand Ambassador Digital Assistant
With the ongoing recovery of travel retail in mind, Grigoryev states it’s important that on-site sales consultants be able to communicate with every customer – meaning language should not act as a barrier. According to him, Smart Project has created an application for Ladoga Group, which enables consultants to present products in almost any language including Hindi, Arabic and Mandarin. As a result of the agency’s knowledge of consumer behavior and experience in offline promotion, Smart Project developed and executed its first electronic application: LADOGA Brand Ambassador Digital Assistant. “With the development of this application, our brand consultants can tastily present our entire product range in Russian, English – or even the most exotic language. “Featuring design elements, visual assets, informational content, promotions, quizzes and more, this program is individually designed for each of our products. Our goal is to provide quality intuitive service and maximize coverage of Ladoga Group’s international audience in order to increase sales,” adds Grigoryev.
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Heinemann
CIGAR SPECIALIST Over the years, Gebr. Heinemann has nurtured a relationship with cigar aficionados and luxury cigar manufacturers such as Oettinger Davidoff and Habanos, earning the retailer and distributor a lofty and exclusive space from which to benefit all by WENDY MORLEY
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ebr. Heinemann has set itself apart as a retailer of choice for cigar enthusiasts. In 2015, the operator partnered with Oettinger Davidoff to create a Davidoff of Geneva – since 1911 walk-in humidor at Frankfurt Airport. The success of this endeavour has spurred the expansion and optimization of the retail assortment in order to best satisfy customer needs, with the close relationship between the companies bringing continuous growth for Gebr. Heinemann in the cigar category. “Over the last years, we have been able to offer a unique and exciting brand experience within the premium cigar segment, where cigar aficionados and newcomers can find a wide range of handcrafted premium cigars, limited editions and travel retail exclusives,” says Niels Altmann, Head of Buying Tobacco at Gebr. Heinemann. The reaction Gebr. Heinemann received from cigar aficionados has been “positive without exception. Heinemann was quickly recognized as a top address for buying premium cigars as the walk-in humidor is a clear symbol of know-how and excellence for our customers and reflects our dedication and passion for premium tobacco products.” Currently, Gebr. Heinemann is working on an overall category manage36 AUGUST 2021
The walk-in humidor that started it all, Davidoff of Geneva – since 1911 at Frankfurt Airport
ment approach together with Oettinger Davidoff in efforts to take the business to a whole new level. This approach includes strategies for different shop concepts, the development of limited and exciting products and new ways to communicate at point-of-sale.
Expanding humidors
As the retailer established itself as the place for cigars in travel retail, Gebr. Heinemann has been able to implement new walk-in humidor concepts all over the world. Along with certifications as a “Habanos Specialist” at Frankfurt Airport and Amsterdam Airport Schiphol, Gebr. Heinemann has ten walk-in humidors at the new Istanbul airport including six humidors certified by Habanos. “We set luxurious highlights for the cigar category in travel retail. A clear signal for aficionados, who can expect a unique, high-class selection here – including the rare and highly coveted Limitadas,” says Ruediger Stelkens, Director Purchasing Liquor Tobacco Confectionery at Gebr. Heinemann. At the new Istanbul Airport, Gebr. Heinemann also added more Davidoff of Geneva – since 1911 walk-in humidors, possible thanks to many years of successful collaboration with Oettinger Davidoff. “At Istanbul Airport cigar enthusiasts can
Niels Altmann, Head of Buying Tobacco at Gebr. Heinemann
discover the outstanding quality of the full Oettinger Davidoff product range and in doing so, they can utilize this first class service provided by well trained staff. The concept represents quality, exclusivity and a unique shopping experience,” says Altmann. In May 2021, Oettinger Davidoff relaunched the brand Zino. A brand that follows the current trends and a brand which will delight novices as well as experienced cigar aficionados. Gebr. Heinemann received the right to sell the brand exclusively in the European travel retail market for the first couple of months after launch. “This is once again a proof of our strong, successful and trusting business partnership which both companies have shared for more than 45 years,” says Stelkens.
Smaller options
While the walk-in humidors offer an undeniable experience and selection, the physical space is simply not available at all airports. Stelkens adds: “Due to space limitations at smaller airports, we are not able to implement walk-in humidors in
Gebr. Heinemann has certifications as a “Habanos Specialist” in Frankfurt Airport and Amsterdam Airport Schiphol
Ruediger Stelkens, Director Purchasing Liquor Tobacco Confectionery at Gebr. Heinemann
each outlet which is relevant for cigars. This is exactly why we are working on a strategy for smaller shop concepts in order to provide the same expertise, excitement as well as excellent service to the customer. In this context, we will focus on charter airports in Turkey and Tunisia, our Nordic outlets as well as Vienna Airport, which has become one of our top outlets in terms of cigar sales.” Gebr. Heineman is also seeing an increasing demand for quality cigars within its distribution business. This includes customers running duty free shops all over the world, free zones and customers who are supplying diplomats around the globe.
Booming subcategory
Over the past few years, the cigar segment has been experiencing a real boom. This is not only among younger people, but according to Gebr. Heinemann, the Millennial demographic is an important driver. In Germany, roughly 25% of cigar consumers are between 25 and 34 years old. In the US market the share for this group is greater, at 37% in 2020. The
majority of cigar smokers are still men. In Germany only 8% of cigar smokers are women. “Among our shoppers you can find four customer groups: The Traditionalist, who is a symbol of superiority; The Enthusiast, who smokes cigars for a special moment; The Rebel, who sees the cigar as a rule-breaking symbol; and The Poser, who smokes cigars for a social rise and luxury. The last two groups are dominated by the so-called Milennials. They are looking for an extraordinary and exclusive experience. We pursue these requirements and offer a wide range of exclusive and limited articles such as the Cohiba 50th Anniversary Humidor or the Romeo y Julieta Grand Churchill Humidor manufactured by Elie Bleu,” says Stelkens.
Secure channel
Gebr. Heinemann shares the view that responsible trade in tobacco products needs rules, because that is exactly what duty free and travel retail stands for. “Like no other trade channel, duty free and travel retail relies on trusting cooperation with customs and other authorities in distribution. Our certified Secure Supply Chain (ISO 28000) must meet exceptional standards and daily controls. We pay special attention to preventing access by
unauthorised third parties at all process stages such as delivery, storage, handling, packaging, transport, etc. through appropriate structures and processes. And retail at the airport is also a strictly monitored marketplace.”
Reliable shopper
“Tobacco purchasers have a higher spend overall. This is one of the reasons why the tobacco sector continues to be of enormous importance for Gebr. Heinemann,” says Altmann. Tobacco is a category that, beside the new general conditions, requires little service in logistics or the sales area. In addition, the tobacco sector is the driver of the whole idea of duty free, with an attractive price saving on tobacco products. Because of this, more than 82 percent of tobacco purchases are pre-planned. For Gebr. Heinemann, this helps ensure that customers are entering the retail outlets at the airports. Moreover, the conversion rate among tobacco buyers is 71 percent, significantly higher than with other buyers. Tobacco consumers are also the ones who are willing to make purchases in other categories on premium products such as Cognac, whiskies and P&C. In Heinemann stores, on average, every Euro spent on tobacco products brings an additional 1.5 Euro turnover in other categories. www.dutyfreemag.com
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WB Canna Co & Wellness Portfolio
The integration of CBD The new subsidiary’s brand portfolio showcases cbdMD, Marley, Secret Nature, Dream Water and BioSteel and includes products that will be available for the first time in the regional markets; available for purchase: oil tinctures, topical creams, capsules and more
Expanding into the cannabidiol realm of the growing cannabis industry, WEBB Banks’ new subsidiary taps into health & wellness
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by LAURA SHIRK
efore the implementing of unprecedented social cues and travel restrictions, WEBB Banks started to question how it could successfully diversify its brand portfolio and evaluate a number of business opportunities – some of which are still under review. Considering its history, the top distributor of wine and spirits in the Atlantic basin believed that expanding into the cannabidiol (CBD) realm of the cannabis industry offered the greatest opportunity to succeed. With this in mind, WEBB officially launched WB Canna Co & Wellness earlier this year, with the mission to distribute quality CBD and wellness products in domestic markets in the Caribbean, Central America and travel retail.
WB Canna Co & Wellness team
According to Phillip Jarrell, COO, WB Canna Co & Wellness, and previously VP of Sales, WEBB Banks, the new subsidiary’s brand portfolio showcases cbdMD, Marley, Secret Nature, Dream Water and BioSteel and includes products that will be available for the first time in these markets. Available for purchase: oil tinctures, topical creams, lip balms, capsules, edibles, hydration mixes and more. Realizing the existing regulatory issues within the cannabis industry, WEBB Banks strategically established its presence in the health and wellness industry at the same time. Following a basic formula, similar to its approach in the wine and spirits category, Jarrell explains WB Canna Co & Wellness aims to develop quality brands with the support of great partners in the marketplace.
Contributing to the local culture
Describing the domestic markets in the Caribbean, Central America and travel retail as inter-related, Jarrell reveals the company applies the same 360° approach to the CBD and wellness category as it does the wine and spirits category. Having spent more than two decades working on the ground and not only getting to know, but also learning from the local
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population, WEBB Banks is rooted in the people and culture of the Caribbean and Central America. Therefore, it made sense to maximize the company’s established working relationships and knowledge of the marketplace. By improving local availability of its innovative range and educating its consumer base, WB Canna Co & Wellness seeks to act as a cultural contributor. “Whether being of the region by birth or choice, WEBB Banks considers giving back to the community a big piece of its company mission. Through its philanthropy work behind-the-scenes, WEBB has supported hurricane and earthquake recovery. “Our personal and professional relationships with those living in the Caribbean and Central America have allowed us to add value to family-owned and local businesses throughout the COVID-19 pandemic. We’re familiar enough with its people, culture and business network to help navigate the ongoing challenge and find a solution to strengthen partnerships,” states Jarrell.
CBD integration & casual consumption
Although WEBB Banks continues to cater to the tourist population and vacation lifestyle, since some of its products naturally move in this direction, there are many segments to WB Canna Co & Wellness’ curated portfolio that allow the subsidiary
in its regional markets – even in countries where CBD is legal there is a severe lack of product and category education at all levels. From the federal government to consumer base, existing regulations act as a primary obstacle or “mental hurdle” and cause shared uncertainty. Although there is “an underground of people” that know exactly what they’re looking for, it’s often a challenge to access CBD in their home country. Jarrell adds it’s the responsibility of the category representatives to educate and convince “the gatekeepers” of the health and wellness benefits and revenue streams offered by the growing industry.
A permanent change in habit
to become a part of everyday life among the local population. Jarrell compares the integration of CBD into one’s day-to-day to the casual consumption of a vitamin or mineral supplement. WB Canna Co & Wellness plans to prioritize the availability of better choice items to improve both physical and mental health and cover a wide range of need states such as pain relief, stress management, quality of sleep, skincare, diet and hydration. Referring to himself as a “convert,” Jarrell points out that it’s easy to make believers out of the CBD category. After conducting a series of studies in which participants might be suspect to the benefits of its casual consumption, he expresses the high conversion rate is universal with many people finding value in WB Canna Co & Wellness’ product range. As someone who suffers from sleep deprivation, Jarrell has personally integrated CBD into his daily regimen. In addition to serving as a sleep aid, he expects CBD to be used more and more as a relaxation method, a skincare product and/or an alcohol replacement.
category. For example, the expansion into the health and wellness industry is leading the innovative team to think outside the box and consider new channels including pharmacies, wellness centers, hospitals, schools, fitness clubs, yoga studios, salons, spas and smoothie bars. Additionally, leaning on its team to learn more about consumer profiles, behaviors and habits and counting on Instagram to generate awareness, Jarrell says the type of social influencer and brand ambassador selected to represent the company will be different from the ones recruited to promote the luxury side of the wine and spirits category.
Product & category education
Defining education as a critical pillar to the success of WB Canna Co & Wellness, Jarrell states the company needs to understand the local culture and political scene
When asked about category and subcategory growth, Jarrell expects the health and wellness subcategory to experience a quicker path to success via broader distrubtion simply because of less regulatory issues. He comments the priorities and routines that consumers picked up while staying at home throughout the pandemic in regards to wellbeing will carry over post-recovery. “We often need something ultra-disruptive to occur in order to force a change in habit. The pandemic took effect globally and caused an explosion of consumer demand for this type of product range. “When it comes to complementing WEBB Banks’ wine and spirits offering, the company has championed premiumplus, super-premium and luxury brands that people recognize, trust and include in their day-to-day. In many cases, consumers discover WEBB’s portfolio while traveling and purchase a product to bring home. This kind of brand loyalty is available to tap into within the CBD and wellness category,” concludes Jarrell.
A new take on direct marketing
WB Canna Co & Wellness is made up of a young, dynamic team that is social media and tech savvy and combines traditional and non-traditional relationship and brand building techniques. The unique position of the subsidiary offers the opportunity to further explore direct marketing channels in comparison to the fixed channels of the wine and spirits
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Future of Virtual Tastings
The post-pandemic
landscape
Within the duty free channel, Mezcales Casa Armando represents the top three selling Mezcals: El Recuerdo Mezcal, ZIGNUM Mezcal and Señorío Mezcal; the team is prioritizing the way in which it shares information to provide a full 360° experience
Since each Mezcal has its own distinct profile, the company is constantly pivoting between three different outlooks; Valdor at Mezcales Casa Armando says midpandemic presented the opportunity to re-engineer the tasting process and consumer experience
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eading into the second half of 2021, Mezcales Casa Armando continues to navigate the global pandemic and authentically share its product offering by collaborating closely with its partners in both the duty free channel and domestic market. While in conversation with Gustavo Valdor, International Commercial Director, Mezcales Casa Armando, about the future of virtual tastings and hybrid business models post-recovery, he tells Duty Free & Travel Retailing Magazine that the company is encountering each daily circumstance as a team. Although current megatrends in the wine and spirits travel retail category include convenience, “better for you” options and at-home consumption, Valdor notes that Mezcales Casa Armando is focusing on its consumer engagement since genuine connection is more important than ever during these unprecedented times. With this in mind, the team is prioritizing the way in which it shares information about how to consume and where to find its product range, providing a full 360° experience. Within the duty free channel, Mezcales Casa Armando represents the top three selling Mezcals: El Recuerdo Mezcal,
Starting with the seedlings in its greenhouses, Mezcales Casa Armando systematically plants, harvests, cooks, mashes, ferments, distills, ages and bottles all of its products in-house
stuffs for pairing, which are curated to complement each audience members’ background. “To enhance the remote tasting experience, we include sensorial dynamics and elements that help to define the difference between taste and aroma and encourage attendees to ‘visit’ the city of Oaxaca and our distillery. As an example, we include sample pieces of our oak barrels and the local black ceramic in our kits,” states Valdor. Pointing out that mid-pandemic presented the opportunity to re-engineer the tasting process, he adds that the company’s new approach to the overall consumer experience is a product of the pandemic that has helped to maintain the interest of its virtual audience and an invaluable tool.
Listen & learn
Zignum Mezcal and Señorío Mezcal. Since each Mezcal has its own distinct taste profile and character, the team is constantly pivoting between three different outlooks; however, when it comes to communicating with its duty free partners, the company acts as one. “The industry has had to balance different venue restrictions, requiring close coordination between partners. As we continue to experience airports with varying degrees of restrictions around the world, from limited in-store capacity to ‘hands-free’ purchasing, we are in regular communication with our duty free partners,” explains Valdor.
Tasting kits & sensorial elements
With the return of travel in sight, Mezcales Casa Armando expects that the post-pandemic landscape will present consumers with the choice to participate in virtual or in-person tastings. Valdor notes that the constantly adapting role of brand ambassador is important to successfully sharing Mezcales Casa Armando’s message across its wide consumer base. According to Valdor, considering positive feedback and the convenience and efficiency of the experience, the team believes that even through virtual sessions, participants can learn more about the mysticism, heritage and history of Mezcal. Moving forward, it’s essential that brand ambassadors can communicate their passion, energy and knowledge both online and in-person. “Mezcales Casa Armando has developed a dynamic range of materials to support virtual tastings such as tasting kits that comprise our product range, glassware and non-perishable food-
When asked about key takeaways from the last year that Mezcales Casa Armando has applied to its business model in travel retail, Valdor responds with three lessons. Firstly, he remarks the reaction time from production to point of sale needs to remain the same as pre-COVID. “When a consumer is seeking a product and not seeing their regular brand, they will find an alternate option, which potentially translates into the loss of a consumer,” he comments. Secondly, quality cannot be compromised. The company operates its production from seed to bottle and takes pride in overseeing every step of the process. Starting with the seedlings in its greenhouses, Mezcales Casa Armando systematically plants, harvests, cooks, mashes, ferments, distills, ages and bottles all of its products in-house. Thirdly, listen to and learn from the consumer. When all is said and done, the team creates Mezcal for the consumer with the goal to share the spirit and its culture with the rest of the world – and this requires Mezcales Casa Armando to deliver without exception. The team’s most recent promotional focus involved delivering a DIY tasting experience to reveal how Mezcal is truly relished in Mexico.
El Recuerdo Mezcal 5 Seconds
Discussing upcoming plans in the travel retail channel, Valdor states Mezcales Casa Armando is working on the launch of El Recuerdo Mezcal 5 Seconds; a Reposado Abocado variant with five worms in the bottle. This variant celebrates UFC’s Jorge Masvidal’s fastest knockout in Ultimate Fighting Championship history, which occurred in 2020. He says El Recuerdo’s partnership with Masvidal represents Mezcal’s fighting spirit – a spirit born from family tradition – and adds the category is now a “heavy hitter” in the market. El Recuerdo Mezcal 5 Seconds will first launch in the US domestic market; followed by the Mexico domestic market and Mexico duty free. A select number of cases will be available at duty free outlets worldwide.
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KT INTERNATIONAL
Staying true
KT INTERNATIONAL HAS FOUND THAT KEEPING ITS VALUES TOP OF MIND CONTINUES TO HELP THE COMPANY IN ALL ASPECTS, FROM GETTING THROUGH THE PANDEMIC TO GAINING NEW CUSTOMERS AND GROWING ITS GLOBAL MARKET by WENDY MORLEY
Launching the world’s first Shellpack in 2016, Corset, our second global brand, won international awards for design and innovation. Founded on the success of our first generation Shellpack, the 2020 edition’s design takes a new direction, moving away from minimalism in design to ornate detailing, complex movement and high tactility that are all inspired by the fashion world. This year’s premium Shellpack range will present the latest flavour trends in its collection Corset Double Capsule with mint and blueberry.
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KTI’s leading brand “The King” has evolved to meet market demands, offering additional ranges with various formats and flavours. “Last year we launched the new KING Superslim range, which was further enhanced with flavours: apple, cherry, mint, strawberry and chocolate. In 2021 the King Nano range will offer consumers the fusion of mint and berry flavours, with the new The King Nano Double Blast product. We are also launching The King Compact product in Queen Size format with two capsule flavours, mint and berry.”
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ithout belabouring the point, tobacco companies have faced particular difficulties during the pandemic, as they had both expiring products and, unlike some other categories, no way to sell them outside of the duty free channel. For KT International, being independent and small when compared to the big five has been helpful, as the company has been able to do small production runs for individual airports. “While we had some finished goods for destruction, this was not a significant amount. Our biggest impact has been on packaging materials, where we will have significant write-off costs if the recovery continues at the current very sporadic and slow rate,” says Stuart Buchanan, KT International’s Chief Commercial Officer, adding that the company’s duty free operations were down in excess of 70% for the 2020 year period. The overall domestic market performance for KTI during this time has been exceptionally strong, however. Buchanan says, “Our well positioned portfolio (in terms of consumer value and price) in European domestic markets has enabled us to achieve record volume and share in France, Italy, Czech Republic, Austria, Spain, Germany and Romania. We have been very fortunate through this period that our overall growth strategy is focused on sustainable domestic markets and this has ensured that although
our duty free sales were significantly down our overall business is performing very well through the pandemic.”
Returning and expanding
Now that travel is returning, KT International is seeing its brands back on airport shelves. “We are very pleased to see our brands back on the shelf in the Dubai airport and we will be supporting the recovery with a specific trade program for DBX. We have adopted a similar approach to all of our travel retail clients and operators. We believe the activities we execute are not only a promotional tool for our brands and products but also a way to strengthen the relations with our partners. Long-term partnerships and business relationships are what will ultimately drive the recovery that we see starting from Q4 2022. For this reason we have been consistent in maintaining our commitment to partners without a drastic withdrawal from the channel, and we continue this support through 2021.” Buchanan says many operators have used this time to consider their supplier base, seeking new brands and better value. This afforded KTI the opportunity to explore potential new operators and buyers, and the company has made a number of new clients, enabling the expansion of its footprint when the global climate improves.
Attractive channel
Regulations are a constant reality for tobacco companies. As a company KTI supports realistic regulation in the category for adult consumers. “The restrictions and regulations on tobacco sales and display are growing worldwide and we
KTI CCO Stuart Buchanan says global travel retail remains one of the few channels where tobacco products can be visible to adult consumers while still observing all regulations
witness more and more domestic markets adopting legislation for plain packaging and dark markets. Most of the digital world including social media is also closed for tobacco products, which limits the recovery vs other categories,” says Buchanan. “For us the regulatory environment is well documented and foreseeable. COVID brought new frustrations that were not regulatory driven, however. Delays in shipping of materials, high inflation driving up supplier costs, cashstrapped customers requesting changes in payment terms, significant increases in product listing fees. These are the areas that, while not unique to tobacco, will shift the travel retail landscape in the medium term. Both retailers and manufacturers will need to play their role in ensuring the channel remains attractive for consumers as a source of both value and a source for innovative products.”
stresses they are always open to the right business discussions with credible partners. “Our focus remains on Europe where we have a significant footprint domestically,” Buchanan says. “This is not a surprise considering our multimillion Euro investment in the relevant systems and technologies for EU regulation compliance, including the 2019 Track & Trace. Our plans for expansion in Eastern Europe, Asia and the Middle East were delayed through 2020, but we are now re-starting these initiatives and hope to be back on track by Q1 2022. As a high-growth independent company, it is ultimately our future expansion plans that were affected by COVID and to a much lesser extent our current business, but we are now re-focusing back to expanding in these regions.”
Branching east
Throughout the pandemic and the lockdowns, KT International stayed in touch with clients, adapted plans to the “new reality” and developed joint recovery strategies, in addition to picking up new retail partners for future expansion. “While this pandemic has been traumatic for millions of people around the world, I hope that in the context of global travel retail some positivity comes out of it. That could be a realization that the channel is not only about big luxury brands; and we hope the industry creates space for new entrants and learns from the past. I think this applies not only to tobacco but across all categories,” says Buchanan. “The key to our growth is that our pricing philosophy ensures that consumer prices are market relevant and accessible. Whilst our brands are certainly not price discounters we ensure fair margin through the supply chain. This has been our philosophy for a number of years but in 2020 and 2021 it has been particularly relevant. As the global economy has contracted and disposable income has become a key concern for many households, consumers have become aware of abusive pricing. We have seen a shift to price-accessible, reliable, quality international brands.” KT International sees these The King range and Corset as the main focuses for growth in 2021. “Although we expect a slow global recovery from COVID, we believe our plans and business philosophy will continue to apply in a post Covid world,” concludes Buchanan.
Innovation is a central pillar for KT International. The company’s motivator is to provide choice in terms of format and taste, combined with the overriding philosophy of offering international brands at accessible price points. “We continue to invest in the expansion of our portfolio with new formats and flavours and we believe our portfolio is uniquely suited to Asian markets where innovation is a key driver. Currently we have a small base in the region but we are exploring new opportunities as we emerge from frustrations of the past year,” says Buchanan. As the world looks to China, KTI is not an exception. “China is an attractive market and a great challenge for us,” says Buchanan. “When KTI started its international journey a number of years ago, we found it very difficult as a newcomer to build presence in the travel retail channel. Our success has been achieved through years of perseverance supported by a professional approach to consumers and what are now very good retail partners. Our achievements and global footprint brings us confidence that we can also compete on the Chinese market. Considering, however, the size of the market and the Chinese travel retail channel, it is about finding the right partner that shares our philosophy of international brands, innovation and accessible pricing.” Because of this, China is not a core target for KTI at the moment, but Buchanan
Staying true to philosophy
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Editor's Picks
Editor ’s Choice
A few of our favorite finds
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1. Bowmore 18-YO Single Malt Whisky x Aston Martin GTR Exclusive: As one of three expressions in the first range of Bowmore’s Designed by Aston Martin limited-edition GTR collection, this rare, high performing single malt celebrates exceptional attention to detail. Performance is the force that unites this 18-YO gem and the Aston Martin DB Mk III, which captures technical prowess and optimal execution. Described as on the eye: deepest sunset, its sip is noted as bitter sweet orange peel and peat-smoked roasted coffee and its savor as velvet mocha and macadamia nut chocolate.
2. Demerara Distillers Ltd. El Dorado 15-YO Rum: Offering a full nose packed with dark coffee, candied orange, dark chocolate, almonds, pepper and vanilla, this 15-YO rum is artfully blended using marques from
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its prized heritage stills – the Enmore and Diamond Coffey Stills, Port Mourant Double Wooden Pot Still and Versailles Single Wooden Pot Still. It is moderately full-bodied and perfect for any occasion.
3. Fraternity Spirits Nobushi Blended Japanese Whiskey: Created with an appreciation of samurai tradition and the spirit of honor, Kiyokawa Japan pays homage to the natural setting and life of its barrelhouse. Providing a distinct rum-like aromas of warm caramel, spun sugar, mint and wood, this blended whiskey offers a light palette and quick finish “with a bit of heat on the tail.”
4. Halewood Artisanal Spirits Samuel Gelston’s Blended Irish Whiskey: Made from a blend of locally-sourced Irish malted barley and grain, this triple-distilled blended whiskey is matured in the finest quality ex-bourbon oak casks. Consisting of a smooth, rounded flavor profile, this favorite can be savored neat, over ice or mixed into a long refreshing serve.
5. Kavalan Solist Vinho Barrique: Fully matured in used American oak wine barrels that have been toasted and recharred to enhance its fruity vanilla notes, this complex expression was named “Best
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8. Maison Lanson Coeur de of the Best” at the 2020 Tokyo Whisky and Spirits Competition and “World’s Best Single Malt Whisky” at the 2015 World Whiskies Awards. Kavalan Solist Vinho Barrique offers a multi-dimensional background of pepper and spice. This expression combines kiwi, ripe melon and mango and dates to create a delicate fruit blend bursting of citrus.
6. Pöschl Tabak PUEBLO Brand: In 2008, Pöschl Tabak developed its own cigarette production, which produces additive-free factory cigarettes under the name “PUEBLO.” As the global market leader in the additive-free tobacco segment, PUEBLO uses electronic
measurement units to ensure exactly equal tobacco quantities, moisture levels and drawing resistances. The range is available in PUEBLO Classic, Green, Blue and Orange.
7. Tito’s Handmake Vodka GTR Exclusive: Tito’s Handmake Vodka is distilled from corn and is certified gluten-free. Deemed the only thing better than a bottle of America’s Original Craft Vodka – a bottle of the product dressed in a fun, eye-catching futbol jersey. A fitting follow up to this summer’s play, Tito’s presents a twist on the wearable product trend.
Gamme Combo: Available exclusively in travel retail and at select on-trade establishments, Maison Lanson’s two new cuvées within its Coeur de Gamme: Le Black Réserve and Le Blanc de Blancs have already been recognized by Wine Enthusiast. A non-vintage brut champagne, combining freshness, complexity and fullness, Le Black Réserve is a descendant of the Black Label. This cuvée retains the same freshness and vitality, but with a more gastronomic vocation. For Le Blanc de Blancs, winemaker Hervé Dantan wanted to magnify the freshness of the 100% chardonnay by combining it with the vitality and elegance of the Lanson style. With its golden color and fine bubbles, this cuvée is a great option as an aperitif. www.dutyfreemag.com
45
Distell
Positive signs DISTELL’S STRONG RELATIONSHIPS WITH RETAILERS HAS HELPED THE COMPANY TO SEE POSITIVE TRENDS WHERE TRAVEL IS POSSIBLE, WITH INNOVATIONS SUCH AS UPCOMING DIGITAL ACTIVATIONS HELPING TO SET THE STAGE FOR MORE by WENDY MORLEY
Luke Maga, Managing Director Global Travel Retail, Distell, says the unpredictability of everything is the biggest challenge. “The entire industry will need to remain flexible for the foreseeable future. What worked pre-pandemic may not be the case anymore. Retailers also need to be open to new brands, products and concepts that will help engage and excite travellers when they take to the skies again.”
F
or Luke Maga, Managing Director Global Travel Retail, Distell, while the company “inevitably” lost SKUs, the biggest challenge during this time has been the constant opening and closing of borders and airports, making planning and order management challenging. “We are fortunate to have good relationships with retail partners, so the impact has been manageable,” he says, adding that the uncertainty brought challenges: “At Distell, we usually look to achieve 80% accuracy in our demand planning however the unpredictability of legislation at a local level has made this very challenging to accomplish.”
Asian outlook
It’s not news that China has been the region of attention in GTR, given that the domestic duty free market has been incredibly strong. For Distell, this is the case, with that country a key focus for 46 AUGUST 2021
the company’s whisky portfolio, but its regional interest expands beyond that country’s borders. “Asia is still very much a priority region for Distell,” says Maga. “Throughout the pandemic, encouragingly, we’ve seen a positive performance for our blended malt brand Scottish Leader, which has been selling well at Singapore Changi Airport. We are also looking forward to the opportunities that will arise in Asia through our partnership with Camus. A big priority for us is to get operational in Hainan where we have a fixed visibility agreed. We’re currently working on the implementation plan, locking in promotional calendars and starting to get wall bays installed.”
Postponed and future launches
As expected, a few of Distell’s launches and activations were postponed due to the pandemic. “Amarula Coffee was due to launch in April 2020, but all planned activations were cancelled when the world went into lockdown. We developed an ‘Islands to Highlands’ merchandising concept for our single malts, which was due to be showcased at Sydney Airport in August, but with Sydney in lockdown again, we will have to reschedule.” Maga says he is finding retailers keen to implement activations again, but changing regulations and limited resources make the planning difficult for brands and retailers both. That being said, the company does have some activations in the pipeline “We are rolling out a digital activation with Dufry at London Heathrow, which aims to build awareness of our GTR SKUs and build 360-degree consumer relationships. The initiative involves promoting all our GTR ranges on our domestic social media channels so that consumers are reminded about our brands being
Amarula Coffee was to launch in April 2020, but all launches and activations were postponed, though retailers all have stock
available in GTR. Then, at the airport our brand ambassadors will have business cards with a QR code that travellers can scan to visit the innovation pages of our malts. Here they can learn more about the brand and our brand homes,” says Maga. The company is also holding tastings, following legislative guidelines and the latest consumer research from m1nd-set and ETRC. Maga says the world is a bit of a mixed picture globally. “Overall, we are seeing a positive trend, with positive signs in the ferry business in Europe, and also in border and diplomatic stores.” Distell will be in Cannes this year, in Harbour Village. “This new position gives us greater flexibility and more space to work with in a COVID-safe environment,” says Maga.
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