The Flybuy Zone

The Flybuy Zone

The explosion in Global Travel Retail, especially ‘Exclusives'

Travel Retail | 04 Sep 2015 | Issue 130 | By Joe Bates

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Whisky and duty-free have long been inseparable companions. Whether a highly flammable product like whisky, packaged in fragile, yet heavy glass bottles, ever should have had any place in the history of aviation is a moot point. Yet for decades airports have partly relied on the income from duty-free sales of Scotch whisky, fragrances, confectionery and other products. The cash helps airports lower airlines fees, which in turn allows airlines to reduce ticket prices, fuelling the ever growing appetite for international travel worldwide.

Duty-free is now a giant £40 billion business encompassing airport shops, ferries, cruise lines, airlines and border stores worldwide. Yet the modern era of duty-free shopping has humble origins. It started at Shannon airport in windswept County Clare in 1947. The early transatlantic planes of the time had to stop at Shannon on the west coast of Ireland to refuel on both legs of the long, bumpy journey. Weary passengers took the opportunity to stretch their limbs and warm up with an Irish coffee.

The airport's enterprising catering controller Dr. Brendan O'Regan decided to open the world's first airport dutyfree shop to extract a few extra dollars from this captive audience. He argued that as the passengers had already cleared passport control they had effectively 'left' the country and therefore the duties and taxes applicable no longer applied. The shop, more of a shack in truth, was an instant success. Within a few years Irish whiskey was added to the list of products sold there.

Not every country's customs authorities were so keen on the idea of duty-free. It wasn't until 1959 that UK Customs & Excise allowed wines and spirits to be sold after passport control. In the US travellers still aren't allowed to take bottles off the shelf with them to their plane. Instead, security staff hand their goods over in sealed bags at the boarding gate. It's a less than glamorous sales transaction, which perhaps explains why duty-free has never taken off Stateside as it has elsewhere.

The rise of the European package tour holiday in the 1970s and 80s led to duty-free shopping taking off in popularity. So synonymous was it with cheap package holidays that a 1980s UK sit-com about British ex-pats in Spain was simple called 'Duty Free'. As far as whisky was concerned, in those early days the focus was almost exclusively on sales of popular blended Scotch whiskies with the main reason to buy being price savings.

In Europe at least the pile-it-high-sellit- cheap era of duty-free couldn't last forever, however. Brussels bureaucrats felt the booming business was an anomaly in a supposedly single European Union (EU) market. They axed it in 1999 despite a public outcry. Many travellers supposed that airport shopping was to disappear completely, while many in the drinks business downgraded its importance.

They were wrong; airport retailing survived. Duty-free inside the EU at least became 'travel retail'. Retailers and brand owners cut their profit margins, and continued to try and sell products at a discounted price to downtown retail. By the early years of the new century the focus of the industry had moved on from Europe. It now fixated on the emerging markets of Russia, India, Latin America and Asia, especially China where the country's nouveau riche were anxious to travel abroad for the first time.

Today, nobody in the whisky world dismisses duty-free and travel retail. Instead, marketing executives now commonly refer to this 6.8 million case market as the 'sixth continent.' Here are a few facts and figures to ponder: all forms of whisk(e)y account for four per cent of all global duty-free spirit sales, while duty-free itself generates seven per cent of all Scotch whisky sales by volume. As for single malt, one in ten bottles sold worldwide is now purchased in a duty-free shop.

What has catapulted duty-free into the major league is the astonishing growth of air travel in the past decade. No longer the preserve the rich, taking a plane several times a year for work or pleasure has become second nature to most of us. A record 3.3 billion people caught a flight l staggering 44 per cent of the world's total population.

"The travel retail market is surging with a huge increase of travellers in the upcoming years," says Cristina Carmueja, consumer marketing manager at Pernod Ricard Travel Retail Europe, revealing that duty-free accounts for over 11 per cent of Chivas Brothers' total volumes. "More than a billion people travelled internationally in 2013 - equivalent to about 15 per cent of the global population.

"Travel retail is of huge importance to us and we are continuing to explore new, exciting and innovative ways for consumers to interact with our brands whilst on their journey," she adds. "We are doing this through partnerships with key retailers, positioning our products in strategic airports, new product developments that are exclusive to the global travel retail market, and digital and social media activations."

"Travel retail has become an extremely important part of our overall strategy, especially for our whisky brands," agrees Ian Taylor, head of marketing global travel retail at William Grant & Sons, who reveals the company has released 56 exclusives products into travel retail in the past five years. "The whisky category is a high value category, one that is fast growing and critical to our overall growth. It gives us the opportunity to showcase the diverse range of whiskies that we have on offer to an international audience."

If 'price' and savings were the watchwords of the old world of dutyfree, 'premiumisation' and 'exclusivity' are the industry's new buzz phrases. With hundreds of thousands of newly affluent and aspirational travellers venturing abroad from markets like China and India for the first time each year, the display units of major duty-free stores continue to be filled with often stratospherically priced vintage malts and ultra-deluxe blends beautifully packaged in crystal decanters and heavy wooden gift boxes.

Recent examples include the exclusive release at Singapore Changi airport of Glenfiddich Residence Cask Vintage 1992 - a 58.7 per cent ABV cask strength whisky drawn from a single ex- Bourbon cask, limited to just 200 bottles, and priced at S$2,100 (£986). Similarly while Dubai airport has recently staged the world exclusive launch of Chivas Regal The Icon, a $3,500 (£2,243) collectors' item containing a blend of 20 different whiskies, including several from lost distilleries, and presented in a Dartington crystal decanter.

These eye watering price tags are commonplace in travel retail, but for those travellers with shallower pockets in markets such as Europe and North America the long held association of duty-free and price savings is increasingly questioned. Rarely does a summer go by without stories in the mainstream press querying whether 'duty-free' shopping actually offers customers real price savings and rightly so to my mind.

The truth is that with the notable exceptions of high tax markets such as India, Brazil and Scandinavia, duty-free prices on spirits rarely offer travellers the sort of savings worth the extra inconvenience of purchasing at an airport, navigating the labyrinthine security rules of carrying liquids in hand baggage, and lugging heavy bottles to your final destination.

The real attraction of travel retail for the whisky connoisseur these days has to be the flood of exclusive products whether it's in the world of blends with the likes of Chivas Brothers' Blend or the Johnnie Walker Explorers' Club Collection, or the numerous exclusive single malts that have appeared on airport shop shelves in recent years, several examples of which we've tasted in this issue.

Many of the exclusives launched in recent years have tended to be no age statement expressions, a reflection of the inventory constraints many distilleries in the industry are facing. With some 7.2m cases of aged stock in its warehouses, Bacardi, a self-confessed latecomer to the single malt party, is bucking the trend, however. Over the past two years the company has released a string of age statement exclusives from its five distilleries such as Craigellachie 19 Years Old, Aberfeldy 18 Years Old, Royal Brackla 35 Years Old Aultmore 21 Years Old and Glen Deveron 16, 20 and 30 Years Olds, as well as Dewar's 15 Years Old.

"Age statements have proven themselves over a long period of time to be a vital and fundamental sales driver in travel retail," says Richard Cuthbert, Bacardi's global marketing manager for whisky. "I am a firm believer that removing age statements in travel retail is not a good thing for the Scotch whisky category. The one thing consistently understood is age. The worry is that shoppers will then simply move away Scotch altogether if this backbone to Scotch is removed."

As you can see from the range and variety of exclusive whiskies sampled in this issue, that journey towards 100% exclusivity is well underway and I for one can't wait to see where it leads.

The very best airport stores

Over the past decade the typical whisky offer at major international airports has improved considerably but the stores at certain airports are clearly streets ahead of the rest. Here in no particular order are in my view three of the best airports to buy whisky:

Singapore Changi

DFS Group's new two-floor wine and spirits store in Terminal 3 is a real treasure trove for the whisky lover. Johnnie Walker, The Macallan and Glenfiddich get their own in-store boutiques within the store, selling rare whiskies and exclusives.

DFS T3 Wines and Spirits Duplex

Flagship Store
Telephone: +65 6891 9168

London Heathrow

Opening in 1992, World of Whiskies was the first airport shop dedicated to whisky. This award-winning chain has kept up with the times, being one of the few travel retailers to run a decent website:

World of Whiskies has a store in each of Heathrow's four terminals and stocks nearly 350 malts with a focus on exclusive bottlings to WDF. Current exclusives include the £3,500 Balvenie Private Vintage, the £98.99 Strathspey Reserve 21 Years Old Heathrow Cask, and the £6,995 Brora 40 Years Old.

World of Whiskies

Terminal 2: +44 (0) 782 545 2591
Terminal 3: +44 (0) 79 1755 3392
Terminal 4: +44 (0) 20 8745 2034
Terminal 5: +44 (0) 75 0008 9527

Dubai International

Crowned last year as the world's busiest international airport Dubai International is fast cementing itself as the top place for travel retail exclusive whisky launches. Examples include Chivas Regal The Icon, Dùsgadh 42 Years Old and Glen Grant 50 Years Old.

Le Clos

Telephone: +971 4 220 3633
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