If for whatever reason Scotch, Irish and American whisk(e)y had to be stripped from duty-free shelves around the world tomorrow, the travel-retail liquor category would teeter on the brink of total collapse. In 2012 these three sub-categories accounted for over 40% of all duty-free liquor sales, according to figures from the IWSR Research and all three outperformed the liquor category’s total growth rate of 4.8% with US whiskey close to doubling it at +9%.
In short, whisk(e)y matters a great deal to travel-retail. Thankfully both suppliers and operators are responding to the need for continued category innovation–both in terms of new and exclusive products, but also exciting new in-store activities and promotions.
Not everything is rosy, however. Continued industry consolidation on both sides of the operator/supplier divide and the ever higher rents demanded by airport landlords are making it harder for smaller brands to live with the high costs associated with this retail channel.
Within the broad whisk(e)y sector there are clearly some sub-sectors, which are driving growth more than others. US whiskey is one (see box overleaf); single-malts are definitely another. In fact, with a CAGR of 8% between 2007 and 2012, duty-free is the fastest growing of any of the top 10 single-malt whisky markets and annual volumes are now in excess of 1 m cases.
Travel-retail exclusive malts, often featuring no age statements (NAS), have been a key growth driver for the sector in recent years. Over the past year alone Glengoyne, Bowmore, Bruichladdich and The Glenrothes have all brought out core travel-retail exclusive ranges. However, the biggest recent launch of them all was undoubtedly that of market leader Glenfiddich, whose The Cask Collection comprised three different NAS expressions–Select Cask, Reserve Cask and Vintage Cask–each matured in a different type of oak cask and finished in three specially constructed Solera vats.
Glenfiddich owner William Grant & Sons has also been responding to the demand from leading operators for expressions, which are exclusively created for them. In February the company released a micro-batch Strathspey Reserve 21 yo collection with World Duty Free Group (WDFG) taken by master blender Brian Kinsman from the Grant family’s private collection. Priced at 99 [pounds sterling] ($168) per bottle (pictured), the 11 micro-batch blended whiskies were sold at WDFG’s airport stores in the UK and Spain with the smallest bottling created for Aberdeen airport amounting to just 60 bottles.
For their part, travel-retailers are increasingly turning to seasonal whisky fairs and festivals to shine the spotlight on the category to stimulate customer interest and excitement. In the airport arena WDFG has undoubtedly led the way in this area with its annual Whisky Festival, which this year ran at the retailer’s UK airport stores throughout May and June. The company worked with two whisky experts, Scottish whisky writer Charles MacLean and Canadian expat journalist and editor Alwynne Gwilt, to help put together a free giveaway booklet suggesting different ways for consumers to enjoy whisky, including cocktails and food and whisky pairings
In terms of specific price savings, the Whisky Festival featured prices on selected whiskies that were 30% cheaper than the UK high-street and 60% cheaper for a more limited range of duty-free whiskies. Multi-purchase deals included “2 bottles for 22 [pounds sterling]” ($37.30) on Johnnie Walker Red Label, Bell’s Original, Bushmills, Jim Beam, Canadian Club and The Famous Grouse, and “2 bottles for 70 [pounds sterling]” ($118.75) on Glen Garioch Founder’s Reserve, Aberlour 12yo Sherry Cask and Old Pulteney Noss Head.
As well as Scotch whisky the WDFG Whisky Festival also featured whisk(e)ys from other regions including the duty-free exclusive Jack Daniel’s Master Distiller No. 2, the peated Connemara Irish whiskey from Beam-owned Cooley Distillery and Yamazaki 12yo single-malt from Japan. Among the travel-retail exclusive whiskies showcased were The Chivas Brothers’ Blend, Auchentoshan Spring Wood and The Balvenie Triple Cask 12yo.
In malt whisky-loving Scandinavia Viking Line’s annual Whisky Fair continues to go from strength to strength. Now in its sixth year it has become a highlight of the Nordic travel-retail calendar. Three one-day sailings in February and May between Stockholm and the tax-free Aland Islands attract thousands of Scandinavian whisky fans and many of the world’s biggest whisky producers, including Pernod Ricard, William Grant & Sons, The Edrington Group and Moet Hennessy.
With over 4,000 guests spending a total of nearly 1.5m [euro] ($2m) onboard last year, this year’s trio of cruises staged master classes and tastings from Laphroaig distillery manager John Campbell, Glenmorangie global brand ambassador Karen Fullerton, Old Pulteney distillery manager Malcolm Waring and senior whisky ambassador at Finnish whisky distillery Teerenpeli Jussi Oinas.
The astonishing range of whiskies available for sale on the ship’s third level car deck included single-malt whiskies from Texas (Balcones), India (Amrut), Sweden (Mackmyra, Roslags), Japan (Yamazaki, Nikka and Yoichi), Norway (Gjoleid) and Finland (Teerenpeli).
Among the rare single-malt Scotch whiskies exhibited were Fettercairn 40yo (SKr6,700/$973), Glenury Royal 36yo (SKr6,299/$915), Mortlach 32yo (SKr2,599/$377), Glenfarclas40yo (SKr2,699/$392),The Balvenie 50yo (SKr26,500/$3,850) and Highland Park Vintage 1964 (SKr33,000/$4,795).
For those companies with deep enough pockets, travel-retail is the ideal channel to launch or re-launch single-malt brands. Consider the case of Distell, which views travel-retail as a key market for two single-malt brands it acquired from the 160m [pounds sterling] ($270.3m) purchase of Burn Stewart distillery last April: the Islay whisky Bunnahabhain (pictured) and Deanston, a small Highland distillery located close to Stirling.
Says Burn Stewart CEO Fraser Thornton: “Both are small-batch production whiskies, internationally awarded and bottled at 46.3% abv,” he explains. “They appeal to consumers venturing into the single-malt category, seeking authentic, artisanal whiskies beyond the mainstream.”
Deanston and Bunnahabhain will both be repackaged and have their ranges extended with new expressions. “Deanston is being slightly repositioned to accentuate its craftsmanship and the pack upgrade will reflect this,” explains Fraser. “In the case of Bunnahabhain, the packaging update is intended to strengthen the brand’s visibility and celebrate the remote and rugged beauty of its location.”
Fraser adds: “Travel retail is a big focus for new brand owners Distell, which is aggressively investing in building duty-free marketing infrastructure, skills and distribution in a variety of markets. Bunnahabhain is a priority travel-retail brand, with new duty-free exclusives being developed. Deanston whiskies will also be represented in this channel, but on a more modest scale, given stock constraints.”
Already dominating the whisk(e)y category with its enormous Johnnie Walker brand, Diageo Global Travel and Middle East (GTME) is also keen to grab a bigger slice of the growing single-malt pie. Says Diageo GTME global marketing director Steve White:”Single-malt whisky is a growing category in the channel with travellers willing to explore new tastes and flavours and we have seen great success with the launches of The Singleton Reserve Collection and [the duty-free exclusive] Talisker Dark Storm.
This November will see the re-launch North American whiskey flexes its muscle Bourbon and Tennessee whiskey is on an unprecedented roll both at home and overseas. For instance, exports of both spirits smashed the $1bn barrier last year for the first time, according to the US Distilled Spirits Council, growing 5% on 2012. That $50m overseas growth for US spirits was well spread too with exports up in markets as far apart as China (+40%) and Nigeria (+475%) to Georgia (+47.6%) and even recession-hit Greece (+72%).
Travel-retail is also performing well with sales up 9% to stand at nearly 1,2m cases in 2012, making US whiskey the best-performing spirit sub-category. In recent years category leader Jack Daniel’s has been spearheading the category’s growth through product innovation and high-visibility in-store activations, releasing the Frank Sinatra-themed line extension Jack Daniel’s Sinatra Select in 2013, and promoting the full Jack Daniel’s portfolio and Woodford Reserve bourbon with branded tasting bars, eye-catching merchandising displays and extensive staff training programmes.
“We are very fortunate to have a number of great brands that have the right credentials to lead the dynamic American whiskey category,” says Brown-Forman global travel retail marketing director Jeannie Wise. “Woodford Reserve has already started to take a leadership role not only in our US airports but also globally. We’ve seen great success with Woodford promotions in Dubai as well as in Hong Kong where we recently had a first of its kind American whiskey large-scale activation.
“We’re really seeing solid growth from all regions but currently and the US are growing the fastest,” she adds. “There’s a rising global demand for American whiskey and consumers flying through the major airports, particularly in these regions, understand the value of our portfolio.”
The product innovation has continued into 2014 with the launch at Sydney and Melbourne airports with The Nuance Group of Jack Daniel’s 27 Gold Tennessee Whiskey, an expression which has been finished in maple barrels and filtered through sugar maple charcoal to impart maple flavours and what is described as an “exceedingly mellow” finish. Exclusive to Asia/Pacific duty-free, Jack Daniel’s 27 Gold is priced at AS94.99 ($89.20) for a 70cl bottle.
Commenting on the launch Nuance Australia CEO Philippe Boyer said: “We know that Jack Daniel’s 27 Gold will be particularly attractive to certain customer segments, including our growing Asian and Chinese customer base. Because it is currently available only in duty-free in the region, we have a great opportunity to deliver a differentiated and special service to all our premium whiskey and bourbon customers at Sydney and Melbourne airports ahead of its launch in domestic markets.”
in travel-retail of Mortlach, a distillery Diageo has announced it is investing 30m [pounds sterling] ($50.9m) to double its capacity. Previously used for Diageo’s many blended whiskies, Mortlach has considerable history and heritage behind it. It was the first distillery to be built in Speyside in 1823 and the whisky it makes is created with a complex distillation process.
Four new Mortlach expressions will be unveiled in November and travel-retail is set to play a key role in the rebirth of the brand. Says White: “Three of the variants–Mortlach Special, Mortlach 18yo and Mortlach 25yo will be available in the travel-retail channel and aimed at super-deluxe whisky shoppers, businessmen and travellers in their late 30s who seek rarity and quality in their whisky.”
The travel-retail channel is becoming harder to gain a meaningful presence due to higher costs, according to some smaller whisk(e)y suppliers. Andre Levy is founder of The Wild Geese, an independent, award-winning Irish whiskey brand. “The dynamics of travel-retail have changed quite a bit in the last two or three years,” he argues. “Instead of being turnover based, it’s now much more about real estate. When you walk through travel-retail stores, they are dominated by the big brands almost exclusively.”
“Travel-retail has become quite a challenge,” he continues. ‘I don’t think it serves the category very well at all. I do know that in travel-retail outlets where our products are in when people ask: ‘Do you have any other Irish whisky other than Jameson?’ our product is very well received.
“Our business in travel-retail isn’t contracting,” he stresses. “We haven’t lost our placements in the travel-retail outlets where we are listed, but I’d say it is harder to expand our presence in travel-retail because of the changing nature of the business model.”
Many smaller brands DFNI has contacted share Levy’s views and it’s an opinion duty-free retailers should perhaps take more note of. The lion’s share of floor space will always go to the major brands given the economics of dutyfree, but without variety, the typical in-store whisky assortment could become too narrow to sustain the interest of whisky-loving travellers.
Buyer in the spotlight: Aelia’s Sandrine Verrecchia-Godin
Looking across Aelia’s store network both in France and overseas how has the overall whisky category performed over the first half of 2014?
The whisky category enjoyed growth over the first half of 2014 however exchange rates (the Russian rouble, Japanese yen, etc.) affected purchasing as did the Chinese austerity campaign. The Crimean crisis also affected sales.
Sales of premium whisky to Russian and Chinese passengers underperformed. We saw marked growth in the American whiskey.
What have been the most successful whisky launches for Aelia in 2014?
The new Glenfiddich travel retail range.
Many duty-free exclusive whiskies seem to be non-age statement these days because of shortages of older whiskies. Do you find travellers like this type of whisky or do they prefer traditional age statements?
Both apply: there are those who attach great importance to the age of the whisky. However, thanks to our staff training and customer understanding of the different non-age whiskies as well as tasting sessions, the non-age whisky sales have been very good. Our customers continue to appreciate travel-retail exclusive and innovative products.
How open is the Aelia buying team to stocking new whisky brands? Can you give any examples of new whiskies from independent companies that the company has listed recently? We are open to new whiskies and it is important that we offer a wide range of current whiskies to meet our clients’expectations. Examples of this are single-grain whiskies, Japanese whiskies, sales of which are all increasing.