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SEPTEMBER 2014 • PRE-TFWA WE ISSUE • VOL 18, NO 3

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Dufry acquires Nuance p.

24064 cover 198x180.indd 2

DFP boosts revenues p.

Next generation p. retailing

DRINK RESPONSIBLY

Inver House looks back p.

19/09/14 16:16

Letter from the Editor

Platform for change

he emergence of a new service proposition in the region’s aviation sector is stimulating the commercial prospects for Asia Pacific’s duty free and travel retail industry as low-cost carrier fleet expansion and increased regional connectivity help drive duty free’s growth. As the industry at large faces a paradigm shift given the evolution of the low-cost carrier business model, this has major implications for airport retailers and suppliers alike, chief of which is the not insignificant task of learning to cater to potentially new passenger profiles. In this issue, Peter Harbison, Chairman of the CAPA Centre for Aviation, shares some research statistics and talks opportunities. We also take a closer look at some of the milestone developments continuing to drive aviation forward in Asia. Now operational for nearly six months, klia2 is evaluating the early successes of the airport-in-a-mall concept with its “destination retail” positioning marking a step change for the airport operator, and one that has not been without its detractors. The shift of airports from infrastructure providers to commercially accountable businesses is exemplified in the development of Indonesia’s Angkasa Pura Airports, with its Bali operation being the first location to undergo a non-aeronautical revenuefocused transformation as its Marketing and Business Development Director, Robert Waloni, explains. Next-generation retailing is also front of mind for Singapore-based Brand Alliance. In this issue the company offers a unique insight into how we can win the hearts of Gen Y, tipped to be the wealthiest generation in years to come. By 2020, these smart, connected shoppers will account for 50% of total duty free revenues, so the clock is ticking when it comes to understanding their motivations and values, and just as importantly developing responsive strategies. Operators like China Duty Free Group, whose Haitang Bay Shopping Complex business is majority driven by 25 to 30-year olds, are already analyzing e-commerce trends. The results so far? Up to 73% of Chinese consumers are researching high-end products online and 70% indicate a willingness to purchase via the Internet. It’s clear that with few exceptions, the industry at large has some catching up to do to cash in on this very significant shopper demographic. One company at the cutting edge of e-commerce is Cathay Pacific. We talk to the airline about pushing inflight innovation by encouraging loyalty with online pre-flight ordering. Also expecting big things from shoppers’ reliance on their computers and mobile devices is Duty Free Philippines; the operator is looking to overcome the Sin Tax hurdle to sales profitability by increasing its social media presence. As we count down to this year’s TFWA World Exhibition & Conference it’s a timely opportunity to get on board with change and stay ahead of the game. I invite you look through this issue of Asia Duty Free & Travel Retailing and get inspired by the above stories and much, much more as the industry begins to kick into high gear ahead of the biggest travel retail event of the year. Kindest Regards,

Hibah Noor Editor-in-Chief hibah@dutyfreemagazine.ca 4

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

Asia Duty Free & Travel Retailing (ISSN 1360-9548) is published by Global Marketing Company Ltd. 26 Pearl Street, Mississauga Ontario L5M 1X2 Canada. It is distributed in the following countries, states, regions and territories on the Asian continent and in the Pacific Rim: Australia, Bangladesh, Bhutan, Brunei, Cambodia, China, Fiji, French Polynesia, Guam, Hawaii, Hong Kong, India, Indonesia, Japan, Macao, Malaysia, Maldives Islands, Myanmar, Nepal, New Caledonia, New Guinea, New Zealand, Philippines, Saipan, Samoa, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Tonga, Vanuatu and Vietnam. The views expressed in this magazine do not necessarily reflect the views and opinions of the publisher or editor. September 2014, Vol 18, No.3. All rights reserved. Nothing may be reprinted in whole or in part without written permission from the publisher. ©2014 Asia Duty Free & Travel Retailing.

ASIA DUTY FREE & TRAVEL RETAILING 26 Pearl Street Mississauga, Ontario L5M 1X2 Canada Tel: 1 905 821 3344; Fax: 1 905 821 2777 www.dutyfreemagazine.ca

PUBLISHER Aijaz Khan aijaz@globalmarketingcom.ca EDITORIAL DEPARTMENT EDITOR-IN-CHIEF Hibah Noor hibah@dutyfreemagazine.ca EDITOR Wendy Morley wendy@dutyfreemagazine.ca ASSOCIATE EDITOR Ryan White ryan@globalmarketingcom.ca OVERSEAS CORRESPONDENT Claire Malcolm claire@dutyfreemagazine.ca ART DIRECTOR Jessica Hearn jessica@globalmarketingcom.ca CONTRIBUTORS David Nusair

ADVERTISING SALES ADVERTISING & MARKETING EXECUTIVE Jacqueline Hammill jacqueline@dutyfreemagazine.ca CIRCULATION & SUBSCRIPTION MANAGER Monica Kucharski monica@globalmarketingcom.ca

SEPTEMBER 2014 • VOL 18, NO 3

Contents 6 8

The earth moved The center of gravity shifted earlier this year when Dufry announced its purchase of another travel retail giant

CENTRE FOR AVIATION

14 20

The largest purpose-built terminal in the world, Malaysia’s new klia2 low-cost carrier hub is putting retail first by positioning itself as an airport in a mall

ANGKASA PURA AIRPORTS

APTRA

Putting responsible retailing into practice

DUTY FREE PHILIPPINES

Duty Free Philippines covers all the bases in bid to boost revenues Promotional activations, CSR initiatives and social media presence key to driving sales as new government taxation hits hard and retailers report restrained consumer activity

26 28

34 36

JACOBSENS

New routes and innovative brands are adding value to Cathay Pacific’s inflight sales offering with the Hong Kong-headquartered carrier exploring onboard and online opportunities

BRAND ALLIANCE

Next generation retailing With hundreds of brands available in the market, how can you win the hearts of Gen Y-ers? A new study from Brand Alliance provides invaluable insight

Beauty and Braun Grooming gets a makeover as the German electronics manufacturer expands its travel retail portfolio with a new line in beauty products

Asia’s growing appetite for Denmark’s most famous export A sweet treat from Northern Europe that has become a household name around the world, Jacobsens Danish butter cookies are gaining ground across the region

SCHAEFER

BROWN-FORMAN

PERNOD RICARD

INVER HOUSE

J. CORTÈS

CATHAY PACIFIC

On board with innovation

Hershey’s sweet recipe for category management success

BRAUN

Head for business The commercialization of Angkasa Pura Airports’ operations may be a work in progress but the Indonesian state-owned company is already building on the early successes of its Bali business model

HERSHEY’S

Research and insights are underpinning the global candy giant’s new confectionary strategy with a three-in-one formula to drive category growth

Destination retail

With two member companies already signed up, the regional release of APTRA’s Responsible Retail Training Programme is raising the bar for industry integrity

ASPAC LCC order book a catalyst for regional change

KLIA2

Marchon takes a closer look at merchandizing New software solution to simplify the sunglass selection process under development as company aims to increase market share

DUFRY-NUANCE

Regional LCCs are potentially giving full service carriers a run for their money with orders for long haul aircraft and route expansion into previously underserviced markets

MARCHON

Making a play for Asia A relative newcomer to the travel retail market, toys and gadgets retailer Schaefer is banking on its tailor-made approach to win new business in the region

Down home in Asia Popularity of American whiskey has been ballooning around the world, and Brown-Forman is finding that nowhere is that more true than in the Asia-Pacific region

Regaining position A tough 2013 leads Pernod Ricard to change its structure and focus leading up to a positive coming year

Looking back, looking forward 50 years of Inver House are commemorated with parties and a limited edition bottling

Strong focus, big expectations Although the cigars of Belgian company J. Cortès are available in over 80 countries, its duty free business has lagged far behind domestic. That is about to change

Dufry-Nuance

The

earth moved The center of gravity shifted earlier this year when Dufry announced its purchase of another travel retail giant. by

WENDY MORLEY Even before the acquisition of Nuance, Dufry had locations around the world, as these stores in Bali, Houston and Sao Paolo suggest

The deal is done

t’s probably safe to say that on June 4th, 2014, a collective gasp was heard throughout the travel retail world as it was announced that Dufry had signed an agreement to acquire The Nuance Group in its entirety for CHF1.55 billion (US$1.72 billion using exchange rates of that day). The deal was financed with CHF1 billion (US$1.11 billion) in equity and CHF550 million (US$612 million) in new debt. The next month, the Swiss operation issued €500 million (US$646 million) in senior notes and sold five million new shares to help finance the purchase. The company offered 3,623,976 new shares to existing stockholders, while 1,376,024 shares not taken up by existing shareholders were offered to investors in Switzerland and in private placements in certain jurisdictions outside Switzerland in compliance with securities laws. Dufry expected to receive gross proceeds of approximately CHF 810 million (US$906.04) from sales of shares, covering most of the transaction’s cost.

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

On September 9, 2014, Dufry’s acquisition of Nuance was concluded, making Dufry the largest travel retail operator in the world with close to 1,750 shops in 63 countries and on five continents, and presence in 239 airports. Dufry is now in the process of integrating Nuance into its organization and expects to begin generating synergies in 2015. The company predicts an improvement of CHF 70 million (US$74.75 million) by 2016. This improvement is expected as a result of improved purchasing power and through the integration of Nuance into Dufry’s supply chain and logistics platform in addition to a consolidation of global and regional organizations and support functions. Julian Diaz, Dufry’s CEO, commented: “Today, another major step is achieved. With the Nuance acquisition we’re continuing our global strategy of profitable growth and diversification. The combination of Dufry and The Nuance Group strengthens our concession portfolio. It further adds countries and operations that fit well with Dufry’s regional strategy. Thanks to the Nuance acquisition, we increase our presence in Asia, the Mediterranean region, northern and central Europe, and North America. “We will focus on the integration in the coming quarters. In order to assure a successful process we developed an action plan which will be implemented immediately. I am convinced that combining the best of both Dufry and Nuance’s know-how will generate significant value and will transform the world of travel retail.” Diaz went on to welcome his company’s new colleagues at Nuance. 

Dufry CEO Julian Diaz engineered what was arguably the most exciting and talked-about acquisition in duty free history

This acquisition, the largest in travel retail history, adds Nuance’s strategic locations, especially in Europe and Asia, to Dufry’s already strong global presence

www.dutyfreemagazine.ca ASIA DUTY FREE & TRAVEL RETAILING

Centre for Aviation

ASPAC LCC order book a catalyst for regional change

ow-cost carrier fleet growth and increased regional connectivity is invigorating commercial prospects for Asia Pacific’s duty free and travel retail industry as a new service proposition emerges. “In this region the airline business is changing dramatically,” says Peter Harbison, Executive Chairman, CAPA Centre for Aviation. Statistics on regional airline growth released by CAPA illustrate how the fast growth of low cost airlines and the evolution of a business model that has striking similarities to the way that older full service network carriers used to operate has major implications for airports and retail. “We are starting to see these airlines connect. Until now they have been point to point, but are now starting to connect to the extent that one of the long-haul low

cost carriers—AirAsia X—connects 43% of all its passengers over Kuala Lumpur, and is becoming like a full service network carrier,” says Harbison.

Traffic growth

Traffic is growing globally at historic trend levels, notes Harbison, boosted significantly by long-haul Gulf carrier business and aided by the recovery of premium traffic, which is almost back to pre-financial crisis levels. The Gulf has the lion’s share of premium traffic movement at around 18%, and this is still growing, as Harbison explains: “Premium traffic between Europe and the Middle East is similarly growing by around 15%, and with this traffic going via the Gulf carriers, year on year they are sucking up a lot of the higher value passengers.” However, it’s not overwhelmingly positive on every front. According to IATA’s March 2014 Air Passenger Market Analysis, Asia Pacific airlines recorded the largest decline in international growth, with revenue passenger kilometres up by just 1.1%, which partly reflects the relative slowdown after positive impacts from Chinese New Year. Says Harbison: “The sluggishness of China is starting to affect air travel and, indirectly, is affecting regional trade, which influences air travel.” This partly reflects the relative slowdown after positive impacts from Chinese New Year in January/February;

Order book Peter Harbison, Executive Chairman, CAPA Centre for Aviation

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

The order book by region tells its own story, with Harbison reporting almost as many orders coming out of Asia Pacific and the Middle East as from North America and Europe combined.

Regional LCCs are potentially giving full service carriers a run for their money with orders for long-haul aircraft and route expansion into previously underserviced markets by

CLAIRE MALCOLM

“This is a massive shift in terms of the balance within Asia and is happening very quickly, and for all types of aircraft,” he points out. Some 2,000 short-haul aircraft are on order with over 1,000 picked up by lowcost carriers. Looking at the long haul order book, a staggering 75% of total global orders are coming out of the Gulf and Asia Pacific. Says Harbison: “It’s a massive wave sweeping towards the East in terms of where the long haul aircraft operations are going to be in the future.” However he also notes that while the low cost carrier sector is sizeable, it is also undergoing a degree of scaling back with the possibility of joint venture consolidation on the horizon as well as the debut of a number of new entrants from Indonesia and India to North Asia and China. Harbison flags North-East Asia as the region to watch, as he explains: “Within South-East Asia, six out of every 10 seats are on a low cost airline, whereas in North-East Asia it’s only one out of every 10, so you can immediately see that there’s going to be a big change in the region.”

Growth rates

There has also been significant airport capacity expansion over the last decade, with hub destinations like Changi growing by around 100% between the period 2003 to 2013 and considerable growth for Kuala Lumpar International Airport, supported by Air Asia’s extensive route network. “Jakarta’s Soekarno-Hatta airport has also seen growth over the last decade well in excess of 150%, making it one of the largest

airports in the region,” remarks Harbison. “And Beijing of course is way up there as the biggest, which is impressive considering that it started at almost the same level as Changi just 10 years ago,” he adds. The volume of domestic traffic has been a key factor in driving growth, with Harbison noting that there are around 37,000 city pair flight connections within the region. “In our research we identified the 50 largest city pairs. These are interesting because all other routes there are domestic, bar four, and almost all are in Malaysia and Indonesia. There are a few in China and again, the cost of influence domestically of low-cost carriers is interesting, with Indonesia as a case in point,” he says.

LCC&penetra@on&intraNorth East&Asia&&

11%

China growth

China’s own ambitions in the airline sector are particularly fascinating, according to Harbison, “Until now, Chinese airlines have not really tackled South-East Asia, partly because of the concentration of airlines in the country. “In November 2013, with the whole austerity program CAA changed its policy towards low-cost carriers. There hasn’t been a strong low-cost carrier culture before, with the exception of one or two airlines, but the country is now actively encouraging them to set up.” Harbison says that we can expect to see some new airlines take to the skies in the future. “Not just in North-East Asia but South-East Asia too. We will also see more Chinese investment in foreign airlines, partly long haul, but also within this region, supported by large tourism inflows. “A total of 15 new Chinese airlines will enter the market this year, and that’s just the ones that have been announced.” It’s not just China that is set to make its mark in the aviation sector. Says Harbison: “Indonesia has been a force for quite some time and Lion has something like 540 aircraft on order and is starting to expand outwards into Asia, in places like Vietnam and Thailand.” But the real phenomenon is long haul, as he explains: “Most of the long-haul narrow bodies aircraft are relatively small, but they can fly long distances. This means they can join smaller points together and be much more effective for low-cost airlines. “Most of the next generation of long-haul smaller aircraft has been ordered by low-cost carriers, and you are starting to see a major shift of the whole business throughout Asia. Add in connectivity and you start a whole new type of airline operation.” 

LCC&penetra@on&intraA South East Asia&

59%

Asian&airport&growth&2003A2013&

Source: CAPA – Centre for Aviation, OAG

www.dutyfreemagazine.ca ASIA DUTY FREE & TRAVEL RETAILING

Klia2

The Green Market on the new Public Concourse at klia2

Destination

RETAIL

Relax and refresh at klia2’s new Wellness Spa in the Satellite Building

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

The largest purposebuilt terminal in the world, Malaysia’s new klia2 lowcost carrier hub is putting retail first by positioning itself as an airport in a mall by

CLAIRE MALCOLM

estament to the persuasive power of a strong retail product, klia2, which opened on May 2, 2014, is taking an unconventional approach to marketing its 35,200-square meters of shopping floor space by leading with a unique consumer angle. Malaysia’s only dedicated low-cost carrier terminal, and the largest purpose-built terminal in the world at 257,845 square meters, klia2’s decision to run with the ‘mall within’ message is a reflection of the work that has gone into planning the groundbreaking facility, which was specifically designed to maximize its all-new commercial offering. The latest addition to the Malaysia Airports Holdings Berhad network, klia2 has 14% of its total gross floor area dedicated to commercial use. “The percentage of commercial space over the gross floor area at klia2 is one of the highest in the world,” says Faizah Khairuddin, Senior General Manager, Commercial Services, for Malaysia Airports Holdings Berhad.

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Klia2 “When you enter the airport, you are actually entering a mall. From the outset we decided that klia2 would be our ‘change platform’, hence the passenger fronting and centralized design of the retail spaces,” she adds. Located landside is the gateway@klia2 mall, which is also the transportation hub for the klia2 terminal. A joint venture between Malaysia Airports and a Malaysian public-listed company, after passing through this area passengers and visitors then arrive at the terminal departure hall and public concourse area. “Our landside offerings target both visitors to the airport and passengers while the airside facilities are obviously restricted to those passengers who are traveling. Airside is home to our duty free outlets and we also have a centralized shopping area located within the Satellite Building,” notes Faizah. klia2 has attracted a number of downtown retailers as well as new-to-airport players and brands according to Faizah, “We have a very interesting and balanced mix of local and international retailers

including a few that are unique to klia2 and that have chosen to use the new airport as a launch base.” The tender process for klia2’s retail offering, which saw unprecedented levels of interest from major international and established local players, was managed by Malaysia Airports’ commercial team, with prospective bidders required to show how they would integrate a strict set of brand characteristics into their operation. According to the company these five innate characteristics are ever changing, liberating, innovative, thrilling and experiential (ELITE) and are essential to the delivery of a successful operation. Working on the idea that choice is key to driving consumer spend, klia2’s commercial space can accommodate up to 225 strategically sited outlets in high-visibility and high-traffic areas. The creation of a flexible model featuring bars and island cafés, duplex storefronts and duty free walkthroughs has been physically realized with 118 retail-dedicated outlets, 81 F&B venues and 26 service outlets.

The new chocolate and confectionery concession at klia2

Discover Malaysia store at klia2

klia2’s Connect store in the Satellite Building

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

Just a little over four months into full operation, there are currently more than 100 outlets already open to the public. “The airport-in-a-mall concept was not without its detractors. It was a huge paradigm shift and, as with all changes, resistance is there,” remarks Faizah. “The challenge for us is to ensure that this new business model is sustainable, that it will enhance our non-aeronautical revenue and exceed expectations by not just delivering, but delivering far beyond.” she adds. While it is still early days, she confirms that, operationally and financially the company is happy with initial performance levels, “At this stage the F&B outlets are perhaps doing better because of the nature of the airline model operating out of klia2. We are optimistic given the positive outlook for the low-cost carrier industry in general.” Airlines already operating out of klia2 include AirAsia, AirAsia X, Zest Airway, Cebu Pacific Air, Malindo Air, Mandala Air and Tiger Airways; and once fully utilized, klia2 will be able to accommodate up to 45 million passengers per year. 

Angkasa Pura Airports

Head for

business The commercialization of Angkasa Pura Airports’ operations may be a work in progress but the Indonesian state-owned company is already building on the early successes of its Bali business model by

CLAIRE MALCOLM

Robert Waloni, Director of Marketing & Business Development, Angkasa Pura Airports I

Sultan Hassanuddin Airport, Makassar, Indonesia

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

newly elected president with an ambitious economic development agenda, a program of airport capacity enhancement and rising international investor interest are collectively helping Asia’s fifth-largest economy transform its air transportation offering. “The period 2011 to 2020 really is Indonesia’s aviation decade. We are developing our airport infrastructure, passenger numbers are soaring and local carriers are investing in new aircraft with Lion, among others, ordering 178 and 234 aircraft from Boeing and Airbus respectively, and Garuda adding up to 88 new planes,” says Robert Waloni, Director, Marketing & Business Development for state-owned Angkasa Pura Airports I. The company, which is split into two regional areas of responsibility covering 27 airports—Angkasa Pura I looking after Central and East Indonesia and Angkasa Pura II operating across Western Indonesia—is working on a number of new airport projects to enhance capacity and drive non-aeronautical revenue. “In the past, non-aeronautical revenue only accounted for around 20% of the total. Airports were historically infrastructure providers, not service providers, but for us this changed in 2010 when new government legislation led to the formation of an independent non-airport operated air traffic management body,” says Waloni. “Airport infrastructure revenues were typically generated by its users who would pay all the costs through a concession-type operation, so there was no driving need for airport operators to make money. But with air traffic handled externally, the substantial loss of revenue forced us to take action,” he adds. Angkasa Pura Airports launched a group-wide transformation program to tackle the critical dual issues of customer satisfaction and the need to increase revenues to mitigate the financial hole left by the loss of air traffic management services. Waloni and the team reviewed commercial operations at other airports including Dallas/Fort Worth, Incheon, Changi and KLIA, before refining their own strategy, “The next step for us was to plan a total restructuring of our business concept based around non-aeronautical revenue and how we could increase it in tandem with improving service levels. To achieve this, we knew that we had to expand our airports and capacity growth remains an absolute priority.”

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Angkasa Pura Airports

Leading by example

seen has been significant, not only in terms key to achieving its mid-to long-term comThe new Bali International Airport has been of revenue growth but also the technology mercial goals. the template for Angkasa Pura’s future busi- benefits, knowledge sharing etc., and this Makassar, Banjarmasin and Surakarta ness model, with a commercially focused has automatically upped the attraction of are some of the destinations under redevelstrategy that led to the launch of a new travel the airport and our financial results.” opment and Waloni is busy spreading the retail scheme at the airport in 2013. Its travel retail contracts are five years as word about the opportunities available to “Our future success here and at our other opposed to the previous term of just three international investors. “We are active with airports lies in a methodical and systematic years. “We know when working with big Public-Private Partnerships and also work approach to developing our product, ser- companies that they need to have a degree closely with the government, participating vices and overall offering,” notes Waloni. of security and two-to three-year contracts in trade missions and at global forums to “We have to be upfront when it comes are simply too short to achieve anything, highlight the opportunities and benefits to our service levels, which is still a work especially when they are investing a lot into of working with us to develop airports in progress despite marked improvement, the business,” he comments. in Indonesia.” as with capacity enhancement programs Based on Bali’s early success, Angkasa ongoing it is inevitable that service will Pura management is keen to replicate this Competitive edge continue to be impacted to a certain degree.” across its network. “We are doing something However, while the interest is there, transAccording to a recent Airports Coun- similar for Surabaya and Balikpapan with lating it into actionable reality isn’t quite so cil International (ACI) survey, the level international partnerships, and it’s working straightforward. Waloni elaborates: “One is improving at all Angkasa Pura I air- well,” says Waloni. problem that we are facing is regulatory ports, but Waloni accepts that they are With only two of its airports currently issues. The government is fairly keen to not at a regional standard just yet. “It is providing enough capacity and the remain- open up the market to international invesvery important for us to be surveyed by ing eleven over-utilized, Angkasa Pura I’s tors but unclear streamline the process to ACI as this gives us a realistic picture of infrastructure enhancement program is boost investor confidence. where we are and we can track our progress. Plus, Angkasa Pura I’s network covers 14 airports it is equally important located in Central and East Indonesia INDONESIA HAS THE MOST ANGKASA PURA AIRPORTS* for us to be transparUNIQUE OPPORTUNITY TRAFFIC GROWTH ent to our partners and customers.” 2009 2010 ASIA PACIFIC ANNUAL With Bali the model 70 94 TRAFFIC GROWTH 2010–2013 7% for success moving 2011 2012 forward, Waloni says INDONESIA 114 130 that the company is POPULATION extremely happy with 2013 134 the way the international MID CLASS open tender played out. TRAFFIC GROWTH “We had huge interest CAGR — DOMESTIC from international playGROWTH 2010–2013 ers and in forming a straCAGR — INT’L GROWTH tegic partnership with 2010–2013 GVK, the developer and operator of the upgraded Chhatrapati Shivaji RAISING NEW HEIGHTS TRAFFIC ANGKASA PURA I GROWING FLEET International Airport SHIFTING BUSINESS BASE (2007–2013) IN INDONESIA in Mumbai. We also benefited greatly from a CSI transfer of knowledge.” YEAR YEAR 2020 Wit h bi g name s GROWING 2020 FLEET including Dufry and 60% DFS bidding, Angkasa Pura I decided to 2013 approach the tender in PAX a slightly different way, as Waloni explains: “We CSI took the decision to not 2013 2011 stipulate a revenue figure CARGO and were pleasantly sur36% prised by the offers we received. The resulting increase that we have

INDONESIA MARKET OUTLOOK

240mil 56.5%

million

million million

million

2009–2013

12%

18%

*CONSOLIDATED DATA FROM ANGKASA PURA I & ANGKASA PURA II

900

12%

4,83

NON-AERO REVENUE

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

234

15%

230

3,52

NON-AERO REVENUE

Angkasa Pura Airports

11 9

14 13

8 10 1 2

4 3

AIRPORTS MANAGED BY ANGKASA PURA 1 1. AHMAD YANI - SEMARANG

8. SYAMSUDIN NOOR - BANJARMASIN

2. ADI SUTJIPTO - YOGYAKARTA

9. SEPINGGAN - BALIKPAPAN

3. ADI SUMARMO - SOLO

10. SULTAN HASANUDDIN - MAKASSAR

4. JUANDA - SURABAYA

11. SAM RATULANGI - MANADO

5. NGURAH RAI - DENPASAR

12. EL TARI - KUPANG

6. LOMBOK PRAYA - LOMBOK

13. PATTIMURA - MALUKU

7. SELAPARANG - MATARAM

14. BIAK - PAPUA

“We are confident that the changes with the new government, as well as being timely, will be very positive for the country and for our industry.” Waloni is also keen to see other initiatives implemented to increase the competitiveness of Angkasa Pura’s airports. “We have to earn money to reinvest to make our airports efficient for airlines and passengers. If we don’t have enough support revenue-wise from the commercial operation then we end up with higher passenger service charges and airport landing charges. “If you look at Singapore for example, where they have a healthy commercial operation, they were able to stimulate new demand through targeted initiatives such as reduced landing charges. If we could eventually be in a similar position then it would be a win-win for all parties.”

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

6 7

Non-aeronautical revenue projections are on an upward trajectory for Angkasa Pura with the airport operator forecasting revenue growth from 36% in 2013 to 60% by 2020

As well as bringing major retailers on board, Angkasa Pura is keen to embrace local partners and promote emerging local brands. “Depending on the character of each airport, we will fit brands to the destination. For example, through Angkasa Pura Retail, which is one of our six specialised airport services subsidiaries, we have introduced Tulisan, which is a collection of handcrafted lifestyle products created by an up-and-coming female Indonesian artist,” he explains. A diversified commercial portfolio is the starting point but Waloni knows that long term success is contingent upon delivering quality at every touch point in the passenger and partner journey. “Whether we work with the world’s best operators or new-to-market brands, we are committed to keeping our finger on the pulse.” 

APTRA

Putting responsible

retailing into practice by

CLAIRE MALCOLM

With two member companies already signed up, the regional release of APTRA’s Responsible Retail Training Programme is raising the bar for industry integrity

Jaya Singh, President, Asia Pacific Travel Retail Association

wo years on from the launch of its self-regulatory code of conduct for the responsible retailing of liquor in duty free, the Asia Pacific Travel Retail Association (APTRA) is ready to roll out its interactive successor with the official debut of the Responsible Retail Training Programme (RRTP). “We are about to launch with a major airport and airport retailer and will then be actively seeking take-up among other retailers; and will be talking to the retailers and airports directly on this,” says Jaya Singh, President, APTRA. The RRTP was developed on the back of positive industry response to the original self-regulatory code of conduct launched at Cannes in 2012, which identified the need for a comprehensive training initiative for the industry’s customer service personnel. A web-based training initiative for retail employees that focuses on driving and maintaining the highest international standards, following a year of development the new program was piloted earlier this year to a select group of APTRA members. “The pilot phase of the Responsible Retail

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

Training Programme was successful in that the participants were very positive about the whole experience. It was trialled by both front line staff and management staff among some of our member retailers, as well as by some suppliers from the liquor category,” says Singh. “Only a few minor tweaks were necessary, which is what we expected, given that we had made it a participative process by involving members in the development stages of the program to ensure that it is on target,” he adds. A one-size-fits-all program designed to promote an industry-wide standard, all staff undergo the same training as Singh explains: “It is important that we train all frontline staff up to the same level. “The training covers the various aspects dealt with in the code of conduct for the sale of alcohol products in duty free and travel retail; these include identifying customer profiles to ascertain whether the individual can and should be purchasing alcohol, merchandizing guidelines, advice on sampling, and techniques for handling customers who have to be refused the sale.”

A cost-effective training solution, the program will be offered to association members for a nominal fee that Singh says equates to “a few dollars per person”. Although it’s early day for the program, APTRA is already evaluating future program enhancements, especially given the nuances of operating in different legislative environments. Says Singh: “The RRTP is a standard program for all markets for the time being. However, for some markets we will need to adapt certain aspects of the programme to take into account the local market context.” Developed specifically for APTRA members by a third party company with experience and expertise in developing online staff training programmes, APTRA will be responsible for the monitoring of trainees and program success rate. Singh also notes that a review and any program updates are likely to be done annually. Program participants gaining a posttraining test result of 80% or above will be officially certified and there is also the opportunity to retake the training and re-sit the test either in the workplace or at home. 

Substance

withStyle

GOLD 2014

/hankeybannister

www.hankeybannister.com

Duty Free Philippines DFP’s liquor concession

T by

CLAIRE MALCOLM

he Philippines is back on the global tourism hotlist, with the country’s Department of Tourism reporting a yearon-year increase in visitor numbers of 2.47%, with two million international arrivals recorded in the first five months of 2014. President Benigno Aquino’s administration has also implemented a number of civil aviation reforms, with the liberalization of airspace through the Pocket Open Skies Policy and the rationalization of taxes on foreign carriers; as well as plans to upgrade vital transportation infrastructure hubs. However, while passenger numbers are on the rise, duty free is feeling the impact of the introduction of a Sin Tax on liquor and cigarettes, which has seen Duty Free Philippines (DFP) register a 4% drop in the first semester of this year although total sales hit a healthy US$110 million. State-owned, DFP is an attached agency of the country’s Department of Tourism and 22

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

an essential component in the department’s mandate to develop the country’s tourism infrastructure, programs and projects. “We are hopeful that revenues will mark a turnaround by year-end. The decline may be attributed to the effects of the Sin Taxes as the bill does not exempt DFP, hence prices of liquor and tobacco products have become uncompetitive thereby gravely affecting the viability of the business,” reports Lorenzo Enchong Formoso, Chief Operating Officer, DFP, which manages 17 locations across the country. “Retailers are also still bearing the brunt of the fallout from last year’s earthquake and super typhoon. These events led to a more cautious consumer with a significant shift in shopping behavior and spending habits,” he adds.

Fiesta flagship

At Fiestamall, DFP’s flagship store in Manila, a 6% drop in customer footfall in the first semester reinforces the sector trend, but

despite the drop in sales, Formoso is keen to highlight DFP’s proactive recovery strategy with a calendar of marketing initiatives and promotions in place aimed at enticing arriving travelers to shop and spend. Confectionery, liquor and fashion continue to dominate category sales with Hersheys, Toblerone, Cadbury, Mars & Nestlé leading confectionary demand; liquor sales are dominated by Johnnie Walker, Chivas Regal, Alfonso, Fundador and Jack Daniels; and Lacoste, Ferragamo, Longchamp, Pandora and Givenchy are the label leaders in fashion.

Fiestamall, DFP’s flagship Manila location

gift with purchase promotions and boosted communication through social media channels to increase market awareness. “We are quite active in social media with Facebook, Twitter, YouTube and Instagram presence, and we have also recently launched our newly redesigned website at www.dfp.com.ph,” says Formoso. “This has paid off and consequently we saw a 5% increase in April and 4% in May in terms of month-on-month sales, which proved the efficacy of our summer sales promotional campaigns,” he confirms. DFP is also upping its game to stay on a par with other international travel retailers by ensuring that merchandise quality and value are constantly improved, and its brand line-up expanded further through the introduction of new and popular global names, particularly in the fashion category. New listings include Chloe leather goods, the only Coach boutique in the Philippines, Victoria’s Secret, Desigual, Mandarina Duck, fragrances including Roberto Cavalli, Prada, Narciso and Loewe, and Kiehls.

The only Coach boutique in the Philippines

Chloe boutique

DFP gives back “If we look at nationality spend, downtown at Fiestamall the breakdown has remained consistent for 2013 and into 2014. First on the list are Filipinos, followed by Americans, Canadians, Chinese and Australians,” notes Formoso. Purchasing habits and buyer behavior trends undergo regular scrutiny by the DFP team and, according to Formoso, a recent study conducted by the Philippine Survey Research Center showed that customer buying behavior at DFP is influenced by three main factors: product uniqueness, comfort and frontline service. “Through the years at Fiestamall we have been promoting and selling unique range of product offerings to a distinct market, namely the overseas Filipino workers and returning Filipino residents. The specialized assortment of products includes supermarket goods, appliances/electronics, houseware/kitchenware and sports equipment; and we have even created specific marketing programs to better serve this market,” says Formoso. “Catering to its global traveling audience both downtown and at the airport, DFP also continues to expand its product offerings to accommodate more high-end, global brands,” he adds.

The company is also working to improve in-store facilities and enhance customer service with a focus on the rollout of exciting promotions with high-value prizes from a wide range of brands; something that Formoso says delivers a “truly satisfying shopping experience”.

Promotions go social

For the first semester of 2014, Formoso reports that the average purchase per customer at the Fiestamall alone remained stable at US$354, against US$342 in 2013. “To help arrest the continuing plunge in sales and reduce customer attrition, several aggressive marketing and advertising campaigns were implemented at Fiestamall, including our highly successful Peso Power promotion, where an exchange rate lower than the prevailing rate was applied,” he explains. Promotional activity also extended across various fashion and liquor brands, while the major chocolate brands held instore games and raffles with exciting prizes such as cars, motorcycles, cellphones and other gadgets up for grabs. In addition to classic promotional activity and savings-led campaigns, DFP has also worked with its roster of brand partners on

Corporate Social Responsibility is another fundamental element of DFP’s marketing strategy with its highly successful humanitarian fundraising program – DFP C.A.R.E.S., which was launched in the wake of the devastation caused by Typhoon Haiyan in November 2013, now entering a new phase. “In the aftermath of the typhoon, DFP C.A.R.E.S.’ projects were geared towards relief efforts. Now we have shifted our focus to long-term recovery and rehabilitation as we embark on a new mission called ‘Rebuilding Lives One Block at a Time’,” says Formoso. With thousands of displaced Filipinos still in need of shelter, DFP C.A.R.E.S.’ goal is to help resuscitate communities in Yolanda-devastated areas by raising funds to build a Travel Retail Village for the families who survived and are now trying to rebuild their lives. “We will be promoting this through a nationwide campaign in all our stores and via social media channels,” Formoso confirms. “We hope to achieve this by requesting a minimum donation of US$5, which will provide about 10 hollow blocks with US$5,000 needed to construct a single home,” he adds. 

www.dutyfreemagazine.ca ASIA DUTY FREE & TRAVEL RETAILING

Cathay Pacific

Cathay Pacific inflight duty free sales services

On board with innovation New routes and innovative brands are adding value to Cathay Pacific’s inflight sales offering with the Hong Kong-headquartered carrier exploring onboard and online opportunities

n expanding route network that has seen the addition of the Maldives and Doha, with Manchester launching later this year, is not only expanding Cathay Pacific’s global reach but also giving its inflight sales division room to maneuver when it comes to retail. “For inflight sales we try to tie up promotions with new route launches. For example, for the Maldives we ran a promotion with waterproof bags and watersports-related products where these items could be redeemed at a very low price with a regular purchase,” says Aldric Chau, Inflight Sales Manager, Cathay Pacific. According to Chau the most important region for inflight sales is still Asia, “At the moment, inflight sales demand is concentrated on regional flights. This is attributable in part to the passenger mix we have in this part of the world particularly by Chinese, Korean and Taiwanese passengers who have a strong propensity to spend inflight. In Korea for example, there is a also high domestic sales tax, so we benefit from that.” Skincare products, especially from “star brands” are still the airline’s strongest performing category in Discover the Shop, but the company is also a market leader when it comes to thinking out of the box. The Cathay Pacific inflight duty free magazine cover for July 2014

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

“Earlier this year we introduced some brands not commonly found in inflight retail. We really wanted to surprise our passengers, especially our frequent flyers who read our magazine so often that if we don’t bring in fresh products and ideas on a regular basis, would get bored,” says Chau. “We also work with Vivienne Tam, the acclaimed New York-based Chinese fashion designer, to create various exclusive products for Cathay Pacific, including charityrelated items,” he adds. A specially designed Vivienne Tam tote bag was retailed as part of collaboration with the Live Action Education Activity program (LEAP), with Cathay Pacific making a donation for every bag purchased. Customer research has been another focus for Chau and the team. “Last summer we conducted an extensive passenger feedback survey where we collected thousands of responses. This provided invaluable input for our strategies for this year with the results showing us who our shoppers are. “More than one third of our shoppers are people coming from Hong Kong and mainland China. We also have a lot of North American shoppers. Then the nationality breakdown moves into Europe followed by South-East Asian countries.”

Chau reports that while 2013 saw double digit year-on-year revenue growth, to date this year, has seen a softening in demand, with the airline investing significantly in tactical promotions in order to drive spend. “I think this was due to a post-Chinese New Year lull and also the impact of the Golden Week in May, among other things. We didn’t see as high a jump in sales demand as we expected, but that could also be simply attributable to the very strong performance in 2013,” he notes. As well as enticing onboard passengers with innovative retail opportunities, Cathay Pacific is turning its attention to online shopping channels, as Chau explains: “The e-commerce stream of revenue is becoming increasingly important. On our website— www.cathaypacific.com/dutyfree—we offer pre-flight ordering service as well as home delivery for Hong Kong residents or those in any of our five selected regional destinations including Japan, Mainland China, Singapore, South Korea and Taiwan.” “We have had a minimum spend threshold but we regularly offer free delivery to attract people to spend more as we see huge potential. With the challenge of confined galley space this allows shoppers to buy more and not have to worry about carrying the items home.” 

Aldric Chau, Inflight Sales Manager, Cathay Pacific

Cathay Pacific inflight duty free sales advertising campaign

www.dutyfreemagazine.ca ASIA DUTY FREE & TRAVEL RETAILING

Brand Alliance

Next-

generation retailing With hundreds of brands available in the market, how can you win the hearts of Gen Y-ers? A new study from Brand Alliance provides invaluable insight by

he wealthiest generation in years to come, retailers and brands need to capture the attention, meet the needs and earn the trust of Generation Y, says Jorge Rodriguez, Director of Asia Pacific-focused branding firm Brand Alliance. “One year ago we were wondering why we should be researching this group, but the answer is very simple. In 2020 Gen Y will account for 50% of total duty free revenue, so it is very important to understand what motivates them and what their values are,” he says. A research study conducted by Brand Alliance over a 12-month period surveyed more than 1,000 Gen Y-ers with the results highlighting the importance of multiple touchpoints. “The reality today is that shoppers need to be touched not only before but during and after [the purchase] and this is the time when all your touchpoint strategies come into play,” Rodriguez explains. “When they get to the airport they already know what they want to buy. Before they come they do their research, they understand what are the best offers, products and brands. And this will raise some questions about the value proposition because they are a very

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

smart group of shoppers” he adds. Going against the grain of the premeditated retail mindset he says that while they like to plan, Gen Y are also impulsive at times and are driven by exclusivity, new flavors and new brands. “When you present something very attractive to them then they will make a purchase in store, so having a very good reputation is extremely important for increasing loyalty and buy-in.”

Four fundamentals

Quality, affordability, brand reputation and recommendations are all factored into Gen Y’s purchase decision, with chemical-free skincare products, healthier confectionary options and healthier beverage choices also important. “For quality, they look at the product and the ingredients, while value for money is important in terms of affordability and brand reputation is already in their minds, where they are looking for ways to connect with you and understand what you stand for,” says Rodriguez. In the skincare category, chemical-free and organic products rated highly, with 36% of survey respondents stating that they consciously look for products with these attributes. The same criteria applies to

CLAIRE MALCOLM

confectionary and beverages where healthy options are considered important, with concerns over what they are putting in their bodies overriding a product’s visual appeal. Recommendations are a key influencer and something they take very seriously, especially when coming from friends and family, as is price, “Pricing is also relevant and while at this point in time they can’t afford many luxury items, this will change,” notes Rodriguez.

New impulse

If these elements are correctly aligned then Gen Y extremely open to trying new products, with Rodriguez citing particularly high interest in confectionary items (67%), with medium interest in alcoholic and nonalcoholic beverages (58%) whilst skincare was relatively low at just 38%. Impulse purchase decisions put apparel at the top of the list (73%) followed by confectionery (45%), bags (41%), beverages (32%), footwear (31%) and skincare (21%). The rational versus irrational thought process was most evident when it came to clothing and accessories, with design the most important success factor for apparel and bags and footwear selected for its comfort.

Good impression

Gen Y consumer tendencies to share their views and moments, as well as initiate activities and peer influence, is evident in survey feedback on the frequency of sharing personal moments, which was dominated by dining at 45% followed by fashion (30%) and fast-moving consumer goods (20%). The study revealed that if a Gen Y-er receives a dining or food-related photo from a friend then 50% will be keen to go and look for the venue, so this works nicely for F&B players and can be immediately translated to footfall and sales. “The duty free environment is very different to the domestic market environment; you have a captive audience but don’t take this for granted. Gen Y are very smart—they share their views and this can help to raise the profile, not only of duty free brands, but of airports,” he says. “We also understand that in airports there are cultural sensitivities in how you approach different nationalities and how you drive word of mouth is very important. For instance, among different Asia Pacific nationalities the Koreans are the most forgiving and tend to share the most positive reviews, while the Chinese tend to share more negative reviews,” he adds. This means that if operators and retailers have a high percentage of Chinese customers then it is essential to have good point of sale customer service and brand ambassadors to support those all-important touchpoints.

Engagement enablers

Investment into social media activity is a must-do according to Rodriguez, who recommends allocating a portion, but not all, of the marketing budget for social media activity, “E-commerce is happening with 75% of female active online shoppers versus 67% male, so you also need to determine if you are providing the right platforms to engage your Gen Y customer.” However, he noted, somewhat surprisingly, that just 7% of young men and 9% of young women are scanning QR codes despite the fact that mobile phones are increasingly enabling shopper engagement. A common denominator is that they all use their mobile phones as an enabler. Says Rodriguez: “They are very far ahead of the game and fully embrace the technology out there. In fact the only difference between Gen X and them is that Gen Y is making full use of the tools available and is very demanding.”

The spend trend

The average spend works out at around US$60 with 45% of those surveyed spending on footwear, 75% on apparel bottom and 27% on apparel top. “These are interesting numbers and duty free spend is much higher than domestic with 20% spending more than US$200 on a bag and we are seeing the most impulsive purchases in the fashion and accessories categories.

Jorge Rodriguez, Director, Brand Alliance and author of the research report Asia 2020: The Shopper of the Future

A new category—premium packaged food—is also enticing Gen Y-ers to open their wallets with local destination delicacies such as barbecue pork popular with Chinese, Taiwanese and Korean shoppers. Special products that complement their hair care are another area of opportunity as the trend for “cosmeceutical” lines gains momentum. “Although expensive now, Gen Y will have the capacity to buy the kind of products that offer inner beauty,” Rodriguez concludes. 

Changi International Airport’s iShop is one channel that Gen Y utilizes for research purposes

www.dutyfreemagazine.ca ASIA DUTY FREE & TRAVEL RETAILING

Marchon

MARCHON

takes a closer look

at merchandizing

New software solution to simplify the sunglass selection process under development as company aims to increase market share by

CLAIRE MALCOLM

Cypress from the Chloe 2014 collection capitalizes on the trend for round glasses

The Lacoste Neon collection comes in a range of fluorescent colors for on-trend seasonal style

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

The Ferragamo Buckle collection reinvents eyewear with the front of the sunglasses in the shape of a buckle

hoppers overwhelmed by the selection of sunglasses on offer in duty free stores across the region are the focus of a new initiative from Marchon, one of the world’s largest manufacturers and distributors of eyewear and sunwear, with the company working on the development and implementation of a new merchandizing software solution to improve the assortment selection process. “It will also provide merchandising guidelines and product information in a more sophisticated and systematic way for our partners,” says Erwan Le Guennec, International Travel Retail Director, Marchon. The need to beef up product accessibility is a must-do according to Le Guennec, “Despite a challenging environment, the sunglass category is still a significant category in the travel retail channel,” he says. Marchon hopes that this will support brand positioning objectives as the company looks to future growth, as Le Guennec explains: “We believe that a strong and balanced portfolio of brands with leading names in the sports, lifestyle, fashion and luxury segments, and an already high and constantly improving level of service provided to our partners, will continue to drive our growth and market share improvement in the future.” Driving category growth in a crowded market is something that he also says needs a rethink in terms of product prominence. “We are definitely looking forward to see-

ing more space allocated to the sunglasses category by retailers. A wider brand assortment and clearer segmentation will benefit the end consumer and drive sales of the category to higher levels,” he remarks. Competition between brands has taken a colorful turn this season, as Le Guennec explains: “The must-have styles for the season include aviators with flash lenses, contrasting finishes, as well as the classics such as wayfarers, rounds and tortoise.” According to Marchon, flash lenses are one of the current hot sunwear trends both on the runway and on the street. “The lenses are very colorful, reflective and have a futuristic feel,” he says. Matte finishing is also in with a flat matte finish lending eyewear a cool and funky look and even giving the appearance of texture. Says Le Guennce: “We are also seeing the use of contrasting finishes as a strong trend. A subtle pairing of matt and gloss finishes capture light as well as people’s attention.” Vintage continues to make its presence

felt in the market with retro refinement the style buzzword, translating into design terms as classics with a modern twist. “Plastic eyewear is the easiest way to get a vintage look. Plastic is bold and makes it easy to achieve a timeless style. Basic black and all variations of tortoiseshell are truly classic, but there are some beautiful new gradient blacks and browns that give a fresher feel,” he notes. In the high fashion sub-sector, metal rounds are back in vogue. “Round eyewear is seeing a renaissance, from perfect circles to panto shapes. It’s another version of the retro trend and they lend an extra air of eccentricity as well as being academic and adding character. One trend that will jump out at shoppers across the region is the amount of color on show this season. Le Guennec elaborates: “It’s great for someone looking to be a bit quirky and out of the box. Add color—the brighter the better—and the big hits of the season are both brights and translucents.” 

www.dutyfreemagazine.ca ASIA DUTY FREE & TRAVEL RETAILING

Hershey’s

sweet recipe for category management

success

The Brookside range currently comes in two flavour combinations and is presented in a re-sealable bag for portion control

Research and insights are underpinning the global candy giant’s new confectionary strategy with a three-in-one formula to drive category growth

CLAIRE MALCOLM

Hershey’s is adding ‘healthy treats’ to is portfolio with products like its Brookside dark chocolate pearls with their unique soft fruit center combinations

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

merica’s number one chocolate manufacturer is preparing to take its travel retail program to the next level as it ploughs resources and investment into an ‘insights driven’ global category management strategy that is currently being rolled out in all key markets. A global initiative that was first unveiled to Hershey’s Asia partners and customers at TFWA-AP earlier this year, the program is being headed up by Amy Wilson, head of Category Strategy & Insights, World Travel Retail, Hershey’s. “We are currently rolling out our global category management strategy which has three growth drivers. These are ease of shop, which is all about getting the right items in the store from merchandising to signage; the second is maximising impulse, which is all about the queuing area and checkout and making sure that confection is there as the category with the highest impulse purchase potential; and thirdly, unlocking snacking, because snacking is actually the largest category within confection and it is driving growth as well,” she says. According to Wilson, the secret to retailer and supplier success in this highly competitive category is in streamlining the ease of shop experience. “We know that if we get this right, it can increase the category by 10%, with no need for promotions or other cost implications; and there is interest from our partners in developing this,” she says. “Hershey is a very insights driven company, and my position is relatively new, so we really want to partner with our customers to deliver insights and then turn that into activation to drive category growth,” adds Wilson.

“I think there is definitely an unmet demand in confection. We know from our research and insights that 56% of people that walk into a store don’t buy anything, and there is confusion at the fixture point, so brand blocking is extremely important especially as when people walk into duty free they don’t have confection on their list of things to buy,” she adds. Patrick Pantangco, Customer Marketing Manager, Asia and Middle East, Hershey’s highlights the company’s years’ of US experience, where the application of research and insights has been a major contributor to successful brand and category growth. The translation of insight into passenger purchase may not be as customer service driven as in other categories, but Hershey’s is pushing the agenda when it comes to product knowledge. “We have different market share in different regions. For example, we are number two in Asia Pacific, and saw double digit growth in 2013, but in Europe we have insignificant market share so obviously we have a lot of white space in terms of opportunity and there needs to be a lot of education on the brands. This involves sampling training for the staff to make sure that they understand what Hershey is all about,” says Pantangco. The travel retail sector in Asia is still on an upwards trajectory according to Wilson, despite Hershey’s longevity in the region, but complacency is not an option, as she explains: “We realise we still have some white space opportunities to close distribution within this region, but we also realise that because we are so established [here] we need to start thinking of other areas and ways to grow the business, and that’s where our category strategy comes into play.”

Pantangco elaborates: “It’s no longer just about launching new product – we have an extensive portfolio and with duty free confectionary occupying small spaces that you need to get the most out of, this insights driven approach is going to be the key driver for us to sustain future growth. “A prime example is Changi, where we already have great distribution in the confectionary shops, but we believe that we can still grow further than the double digit growth we are having in this area.” Product diversity is a crucial element of Hershey’s growth aspirations with products like its Brookside dark chocolate pearls with their unique soft fruit center combinations like goji and raspberry appealing to a global audience. “We launched Brookside in the region last May, at Changi first and then Malaysia, and our initial shipment sold out in a weekend!” notes Pantangco. “We definitely see this as a global trend, the idea or perception of a chocolate item being better for you with the superfruit angle and a re-sealable bag for portion control,” she adds. This relates directly to the third pillar in the holy grail of confectionary category management - unlocking snacking, which Wilson points out is one of Hershey’s core business strengths, with snack packs of its leading brands a staple in the region’s airport concessions. “Some of the products are primarily available in the US but there is a conscious effort on our part to make Reese’s and its various products more available internationally, and travel retail is one of the key drivers to bring it to other markets,” says Pantangco. “Here in Asia it has been around for a

few years, and in Singapore and Malaysia in particular the acceptance has been good enough that there is actually dedicated instore space just for Reese’s,” he adds. Although Hershey’s Kisses has the biggest share amongst the company’s core brands in the region, Pantangco reports that sales of Reese’s are picking up throughout Asia. “We are just trying to make it available globally as a large percentage of customers, when they see it they recognise the brand but can’t buy it anywhere else and they pick it up,” he explains. ASPAC consumers will continue to see Reese’s products make their colorful presence felt on shelves across the region. Pantangco confirms that the Reese’s line is something that Hershey’s is looking to expand on in Asia with the white variation a key focus throughout the region, particularly with its bigger shared pouch format.  The company has extended its range to include miniature versions of the classic peanut butter cup candy

Reese’s is Hershey’s biggest brand with significant global domestic and duty free presence

www.dutyfreemagazine.ca ASIA DUTY FREE & TRAVEL RETAILING

Braun

Beauty

and

BRAUN

Grooming gets a makeover as the German electronics manufacturer expands its travel retail portfolio with a new line of beauty products

Grooming gets a beauty makeover with products like the SkinSpa for dual exfoliation and epilation

t’s been another busy year for Braun’s travel retail division with the addition of a number of innovative new products and a push to promote the benefits of the company’s display concept to airports and operators. According to Klaus Mellin, Travel Retail & Special Markets, Braun, there is a conscious move to expand into related grooming products, in addition to the brand’s sales stalwarts of shavers and epilators. “We are in the electronics business but also in the beauty business. For ladies, as well as epilators we have items like the Braun Satin Hair 7 hairbrush to de-frizz and shine,” he says. At the end of the year Braun will launch its latest top-of-theline range of men’s shavers but the development of other female grooming items is providing new opportunities for brand growth in key markets. 34

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

“We have a new beauty device called Braun Face coming out in the fall, which we gave a sneak preview of in Singapore. And for the airlines we are producing a special compact size box for inflight sales, with a pretty good response from the airline community and operators so far,” comments Mellin. Using its flexible in-store display concept as the hook, Braun is also targeting secondary placement opportunities, “With this we concept we have some products that can go into the beauty area. The question is always, how can we get ladies who are interested in in this kind of product to view it, as they don’t necessarily go into the electronics section but they do visit the beauty and fashion sections,” Mellin explains. “There is always the battle for space. Fragrances offer better margins but in our category there is a lot more cost involved in development and production, and we are working very hard to make it more interesting for the operators.” In an ideal world, Mellin would like to see Braun products on dedicated island displays or back walls with a strong visual brand presence, as well as offering more sales staff product training. “To help with product knowledge we try to put a lot of information on the packaging. This is particularly useful in places where we can’t do staff training and they can reference the product highlights on the box, which boosts any existing brand knowledge,” he says. The travel retail sector has grown consistently over the years and

Braun’s WaterFlex electric shaver that works with foam or shaving gel

Mellin reports positive single-digit growth in 2013 for the region, which includes niche markets such as the Philippines and smaller South-East Asian countries. “Braun has always done well in Asia, particularly in Korea, which is our singlebiggest duty free market in both downtown and airport stores, as well as onboard. We actually have a higher share in duty free in Korea than in the domestic market,” he notes. “We are also focusing more on opportunities in Australia. It can be difficult due to the specificities of the Australian electrical system, which means that you have to cater for a relatively small market with special adaptations. Getting space at the airports is a challenge but we offer decent margins and we have a strong brand position,” he adds. Inflight is another growth area according to Mellin, who sees a lot of gifting in onboard sales. “It can be a sensitive issue, but with products like our SkinSpa, which is an epilator with an exfoliation brush, we can position the product differently.

“If you look at Braun Face, it has cleaning, peeling and massaging functions as well as a facial epilator, so it’s an attractive gifting idea.” Special promotions and activations are not an essential part of Braun’s marketing strategy, as Mellin explains: “We believe that our products fulfill a practical need and are not promotion driven. Of course we do occasional seasonal offers, such as a gift with purchase for his and hers’ items during Korean wedding season, but we are investing more into our packaging. “We adapt for airline partners and also for premium airport retail areas where space is often limited. This isn’t available in the domestic market so it looks like a travel retail exclusive.” 

The new Braun Face, launching globally in fall 2014, offers cleansing, peeling, massaging and epilation, making it an attractive gifting option

www.dutyfreemagazine.ca ASIA DUTY FREE & TRAVEL RETAILING

Jacobsens

Asia’s growing appetite

for Denmark’s

most famous export Jacobsens famous Danish cookies in the iconic Marketplace presentation tin

A sweet treat from Northern Europe that has become a household name around the world, Jacobsens Danish butter cookies are gaining ground across the region

sia currently accounts for around 30% of total sales and is a fast-growing region for Jacobsens, which recorded doubledigit growth in the region in 2013. “We are a cookie manufacturer from Denmark and our focus is decorative tins. A local company that has gone global, we are all about growing our business quietly and in a measured way,” says Bo Keller, Export Manager, Jacobsens Bakery. And the penetration figures indicate that this strategy works, with Jacobsens’ products currently available in around 85 different markets, although domestic sales dominate with travel retail accounting for just 5% of global sales. “Our client base is very diverse; we work with very small and up-an-coming companies and massive multinational retailers. We have only been focusing on travel retail in the last four to five years and our biggest airport markets in Asia are Hong Kong, Beijing, Shanghai, Malaysia and Singapore,” says Keller. The Philippines is also big business for Jacobsens with emerging markets such as Vietnam also retailing its different ranges, and Keller says that China is another market where the company is building its presence. “By the end of 2014 we will be in 40 airports and border shops in China where we work with several operators including China Duty Free Group.” Jacobsen’s unique packaging is its biggest USP and, according to Keller, Chinese consumers are familiar with its products. “Everyone [there] knows the Danish

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

cookies in tins and our products require very little explanation. “They also offer the best value in the sense that when Chinese return home there is that big expectation that they bring back gifts to show appreciation, and you can get a lot of mileage out of S$100 for four tins when it comes to gifting.” Jacobsens smaller sized tins are a hit with Chinese and other nationality travelers as well as with retailers as they occupy a smaller footprint. “The profile of the shopper is different in traditional food retail versus travel retail with the latter perhaps slightly younger and with a different purpose. For example, young couples like the contemporary white Tivoli tins, so what we are offering is travel retail in mind,” explains Keller. The company also keeps it simple in terms of its strategy. “It’s about happy moments. For the retailer that’s having something that brings a little bit of excitement to their store, and decent margins, and for the consumer it’s the wow or cuteness Tivoli cookies range

Jacobsens collection of children’s lunch box designs

factor that makes it an easy gift purchase; plus the final test being the taste,” he says. “We are not experts in travel retail but we are learning. Distribution is the main challenge for us; there’s no need to explain the product and if there was a category for what we do it wouldn’t be crowded—we’re practically a category in our own right,” he adds. Keller admits that it is a fight for shelf space with conservative operators having high margin expectations, but is confident that the product has the ability to sell itself to a certain degree. New designs are released every year and Jacobsens has a product to suit every traveler, from its traditional Marketplace tin for traditionalists to the teddy bear collection that appeals to families. For Jan Jacobsen, Managing Director, it’s still the original tins that resonate emotionally with consumers everywhere, as he explains: “In Asia our bestsellers are the Tivoli brand, which is popular with younger female consumers and we know that we have to reach the younger consumers today. “But then there’s the traditional Danish butter cookies which have been around for years and it is the traditional audience that is buying more.” 

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Schaefer

Making a play for

ASIA

A relative newcomer to the travel retail market, toys and gadgets retailer Schaefer is banking on its tailormade approach to win new business in the region

Schäfer’s toy box includes uniquely branded airplanes popular with full service and low-cost carriers

The popular Pintoo 3D plane puzzles are a bestseller for Schäfer

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

he success of its own in-house construction toy brand, Brixies, has prompted Germanyheadquartered Schaefer Travel Retail to expand its popular duty free and travel retail line to include a new range focusing on destination icons from around the world. “We originally launched at Cannes last year with an introductory animal range, but from there we have diversified due to the high level of interest shown in the product,” says Chris Winstanley, Sales Director Duty Free, Schaefer. “We are currently specializing along regional lines. We already we have a collection of Singapore-themed products and this is the way that we will evolve the product with micro-brick buildings representing different country skylines,” he adds. Launched at TFWA AP in May 2014, Schaefer has high hopes for the range in the Far East due to a natural affinity for products with a strong home country link. The Brixies collection is already on airport shelves and onboard major carriers in Singapore, Hong Kong and mainland China, and Winstanley says that all markets are prospective targets with the range highly affordable. “In the case of Cathay Pacific, we worked with them to create an exclusive limited edition Junk Boat; this being a good example of the service levels we aspire to,” he notes. Regional bestsellers for the company also include the perennially popular Plush line of soft toys. Says Winstanley: “These always sell well and we offer a high quality product that can be tailored to particular markets, so if the client has a specific theme in mind we can come up with a design and create a unique item.” Schaefer is currently onboard around 70 airlines across its varied product portfolio, as Winstanley explains: “We’ve only been in travel retail for around three years and are slowly diversifying into electronic goods as well. We are no longer just a toy company; we want to be a one-stop-shop. “Toys will always remain an extremely small proportion of the airlines’ catalogue and so it’s a lot easier if you have something more to offer as part of a wider collection. Also, in building relationships, they will often suggest to you what they think will sell well so there is an opportunity for product development to meet a specific client need.” The company also has an extensive electronic gadget selection with Winstanley highlighting the Harman/Kardon brand

Picking up on the appeal of destination-themed toys and gifts, Schäfer’s Changi International Airport control tower from the Brixies line is a future collectible

The Cathay Pacific limited edition Junk Boat from the popular Brixies range by Schäfer

of speakers and earphones as a current hot ticket item. He also sees opportunity outside of the full service airline segment, as he explains: “Low-cost carriers are keen on branded items, which is something else we are very keen to develop for them. “Without question they are looking for lower-end spend but it does not necessarily mean that they are all the same with different airlines obviously having different demographics and therefore different opportunities.” Exclusivity is an additional selling point for the company when pitching to prospective clients. “Historically, if you want something branded you would be committed to very minimum order quantity, but we come

from a slightly different gift and premium background so we can potentially be more flexible when it comes to uniquely branded items and quantities,” he says. The exclusivity angle goes hand in hand with choice, which is another Schaefer USP according to Winstanley. “There is very little choice, certainly from a toy perspective, so we will always continue to develop our toy offerings, be it puzzle planes in an airline logo, the Brixies city skyline range or the Passporto activity game. Whichever airline or whatever the destination, we can create something tailored for their brand or location. “And being 100% open to customer feedback we will take the product to exactly where they want it to be.” 

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Brown-Forman

DOWN HOME IN

ASIA

The popularity of American whiskey has been ballooning around the world, and Brown-Forman is finding that nowhere is that truer than in the Asia-Pacific region by

Brown-Forman had a striking promotional area at Hong Kong International Airport

WENDY MORLEY

rown-Forman’s portfolio includes champagne, wine, liqueur, vodka and tequila, but it is best known as an American whiskey company, and it’s easy to see why. In addition to Jack Daniel’s, the most popular and recognized American whiskey in the world, the company has many well-respected bourbons such as Woodford Reserve and Old Forester, along with Collingwood, a premium Canadian whisky that is wowing fans of that liquid. The company is no doubt thrilled that sales of American whiskey have been skyrocketing throughout Asia and the world. According to the International Wine and Spirit Record (IWSR), North American whiskeys are the fastest-growing spirits in duty free and travel retail worldwide, at 9% growth year on year. Numbers from the US Trade Commission support this, showing liquor exports from the US to Asian countries have increased since the year 2000 in massive numbers that range from a low of 400% in Korea to almost 9,000% in Vietnam. Indeed, figures from the Distilled Spirits Council of the United States show that bourbon and Tennessee whiskey exports have snowballed over the past decade, from US$350 million in 2002 to over US$1 billion in 2013. And a large portion of that figure belongs to Brown-Forman. “The Brown-Forman Travel Retail portfolio is enjoying strong growth in Asia, particularly with our North American whiskeys,” says Jeannine Wise, Brown-Forman Global Travel Retail Marketing Director. “Over the years we have established a solid 40

Chris Fletcher is the Assistant Master Distiller of Jack Daniel’s. His father Frank Bobo was the fifth Master Distiller of the brand

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

foundation for such favorites as Jack Daniel’s Tennessee whiskey and Woodford Reserve bourbon. The fascination with American whiskeys that has been so strong and strengthening still throughout the rest of the world is definitely showing itself in the Asian market.” Support for Brown-Forman’s brands is also robust in Australia. In fact, the country is second only to the US in its percapita consumption of American whiskey in general, and Jack Daniels in particular.

Keeping activity strong

Wise is quick to point out that despite the company’s successes, it isn’t satisfied to simply rest on its rich heritage. Great thought and craftsmanship are put into the periodic introduction of exciting extensions to established brands. In the past year, for example, the company introduced travel retail exclusive double-barreled and doublemellowed Jack Daniel’s No. 27 Gold, which is twice charcoal filtered and extra matured in maple barrels. This process results in a whiskey with hints of maple and an especially smooth finish. This refined whiskey was exclusive to travel retail for six months, launching in Singapore in November of last year and then throughout Asia Pacific airports in the spring. The brand extension launched in the Chinese domestic market in May, and the company is currently preparing for rollouts in US airports in addition to Dubai and Frankfurt. In support of the No. 27 Gold and the entire Jack Daniel’s family brands, during this time Brown-Forman Travel Retail enlisted the assistance of Jack Daniel’s

Jeannine Wise, BrownForman Global Travel Retail Marketing Director, says the company’s portfolio is enjoying strong growth in Asia

Assistant Master Distiller Chris Fletcher. Fletcher had an interesting story to tell, having spent many childhood hours within the Jack Daniel’s distillery in Lynchburg, Tennessee at the heels of his grandfather Frank Bobo, the whiskey’s fifth Master Distiller. Fletcher traveled across Asia, conducting tastings and meeting with fans of Jack. Along with many market visits, his travels included time at the Brown-Forman booth at the TFWA Asia Pacific Exhibition in Singapore and a very successful promotion at the North American Whiskey display in Hong Kong International Airport. The visit served its purpose well, garnering plenty of attention for the brand and the company. 

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Pernod Ricard

Regaining

position by

WENDY MORLEY

A tough 2013 leads Pernod Ricard to change its structure and focus leading up to a positive coming year

s was the case with many companies, 2013 was challenging for Pernod Ricard in China. After years of massive growth and the establishment of China as a major market in luxury goods, the country’s austerity campaign knocked a number of companies for a loop. Pernod Ricard was no exception. Add to this the slowdown of passenger growth in the region and it’s no surprise that travel retail has been hit even harder. But although the colossal expansion has slowed, growth is still strong throughout Asia, and the region is expected to continue on this growth trend for the foreseeable future. So although 2013 and 2014 have both been tough years for Pernod Ricard, it is optimistic that things will gradually improve in the coming months and years.

Restructuring

Pernod Ricard has just gone through a major restructuring and refocus as sales of higher-end liquor have fallen. Deputy Chief Executive Alexandre Ricard, who is

Royal Salute, Martell, Chivas Regal and Ballantine’s and have been Pernod Ricard’s priority brands in Asia, though a shifting tide is offering opportunities to promote other brands

slated to take over as CEO in early 2015, says the company expects a gradual upswing in sales, and this has finally been taking place in China in the last quarter—a significant improvement over the previous quarter and indeed the previous year. As might be expected, the increased sales have been of the more moderately priced members of the Pernod Ricard portfolio as consumer habits have shifted. The challenge now is to learn about the changing passenger in the region and how best to serve him. And of course the company faces the same issues faced by all in the industry: how to get customers into the stores and then how to engage them and inspire them to purchase items once they’re in.

Focus on existing brands

Pernod Ricard is a company with very strong brands, and it is not especially keen on picking up new ones at the moment. The focus is instead on prioritizing within the existing portfolio. In Asia, this means concentrating on cognac and blended scotch, the company’s key categories in the region. Pernod Ricard knows the importance of activations to attract customers. As single malts are becoming more popular in Asia, the company has increased activations for The Glenlivet and Aberfour

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

As a result, Martell, Chivas Regal, Ballantine’s and Royal Salute have been the priority brands. The tide has been shifting recently, however, and the company has observed a move toward the single malt category. Therefore it has chosen to become more active with The Glenlivet and Aberfour in the region. The company is expecting the single malt category to continue improving in this region with its large brown-spirit-loving population, but Pernod Ricard is also seeing potential within the vodka and wine categories. For this reason it has increased its activations with Absolut and has also made the decision to increase activity with its wine portfolio. John O’Sullivan, Marketing Director Pernod Ricard Travel Retail Asia, confirms that the company has been presenting and will continue to present a great number of activations in the region. “We need to be regularly active in-store with initiatives that will attract and engage shoppers. We do this through a combination of launches and themed activation.” The company has certainly been doing its job in this regard, and the calendar is filled over the coming year. Pernod Ricard will have a booth at TFWA WE Cannes and is looking at the event as a good opportunity to showcase its portfolio, display new products, meet with customers and inform them about the company’s new initiatives. The event is also a great leap-off point into the holiday season and 2015. Well aware of the challenges it is likely to face over the coming year, the company remains positive. O’Sullivan states: “We have strong and leading brands in key categories, so we are in a good position.” As Pernod Ricard has some of the most recognized brands in the world, that statement cannot be argued. 

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Inver House

Looking back, looking forward

50 years of Inver House are commemorated with parties and a limited edition bottling by WENDY MORLEY

The history

The year was 1964. One of the oldest distilleries in the US, Publiker Industries of Philadelphia, had been selling its popular whiskies since 1913. In order to ensure a good supply of its recent addition, Inver House Rare blended Scotch whisky, the company purchased a disused paper mill in Airdrie, and Inver House Distillers was born. Publiker Industries soon constructed a fully integrated production operation, including malting, malt and grain distilling, warehousing, bottling and a cooperage. Before long Inver House Distillers was a going concern, steadily growing throughout the 1960s and ‘70s, but after the death of Publiker’s driving force Sy Newman in 1976, the company went into a period of decline. The turnaround came in 1988, when Scottish directors of the distillery led a management buyout. That same year, Inver House purchased Knockdhu Distillery. Throughout the 1990s, Inver House acquired a number of other distilleries including Speyburn, Pulteney, Balblair and Balmenach, which together with Knockdhu created the blend that makes up the company’s iconic blended whisky, Hankey Bannister. The turn of the millennium brought a new chapter for the now thriving company, as it was acquired by an investment arm of its former customer, the TCC group.

Formerly a paper mill, this building was purchased by Publiker Industries and turned into Inver House Distillers in 1964

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

Graham Stevenson, Managing Director of Inver House, thanked current and former staff

Inver House and parent company Thai Beverage held a glamorous party at the Assembly Rooms in Edinburgh for current and former staff and their partners plus other guests

The celebration

After 50 years of highs and lows, Inver House deserves a celebration, and a celebration it is having. June of this year brought a 1960s-themed party for current and former staff, along with their partners and other guests. The glamorous bash was held at the Assembly Rooms in Edinburgh. Later in the summer the Scotch whisky industry held a reception for the company at the Archerfield Links in East Lothian. While parties are a fun part of its semicentennial commemorations, the company is also taking a more reflective approach. An archivist is using never-before-seen records along with memories and mementos from former staff and the Airdrie community at large to create a definitive history. This will result in a beautiful 50th anniversary book. A whisky company would be remiss if it had a grand anniversary without a bottling, and indeed, Inver House’s 50 years of existence will be memorialized with a special limited edition whisky. This liquid is a blend of 10-year-old whiskies from Old Pulteney, Balblair, Speyburn, Knockdhu, Balmenach and the pièce de résistance, a hint of 50-year-old Hankey Bannister. While celebrating its past, Inver House has its eyes set clearly on the future. The company is continuously growing in sales and reach. Its whiskies are available in over 90 countries around the world. Production

is higher than ever, and the company has recently invested GBP 4 million (US$6.72 million) at the Speyburn distillery, doubling its capacity. And its successes continue. This year Inver House won an impressive 22 medals in the prestigious International Wine and Spirits Competition, including two Gold Outstanding accolades for Hankey Bannister Original and Balblair’s Vintage 1983. Inver House Distillers’ Managing Director Graham Stevenson commented: “We are immensely proud of the successful business over the past 50 years. Our thanks go to every member of the Inver House team past and present. Looking back and celebrating our journey has been a great pleasure, but 2014 is also about raising a glass to the future of Inver House Distillers. We are very much looking forward to what lies ahead for our business over the next 50 years and beyond.” 

Liquor News

NO HALFWAY MEASURES

For Illva Saronno, 2014 is a big year. Not only is it the company’s first year with a booth at TFWA WE Cannes, it has also branched out considerably in its portfolio. This is the first year Illva Saronno has owned a whiskey brand, having purchased family-owned Walsh Whiskey Distillery, based in Carlow, Ireland, late last year. Walsh’s line of super-premium and ultra-premium Irish whiskey, The Irishman, will be presented in Cannes alongside Illva Saronno’s incredibly well known namesake liqueur, DiSaronno, its popular coffee-flavored liqueur Tia Maria and its herbal aperitif Zucca. Illva Saronno also owns a number of successful domestic brands such Artic vodka and Isolabella sambuca. Illva Saronno is making full use of its booth in Cannes, with almost too many announcements and launches to mention. The company will be displaying the second in the series of limited edition Disaronno bottles, designed by a soon-tobe-revealed world-famous fashion designer. It has also announced an exciting launch of a new addition to its spirits portfolio, but is keeping mum in the weeks leading up to the unveiling. While Illva Saronno itself does not carry wines, its sister company Duca Di Salaparuta Group does. Keeping up with Illva Saronno, this year the company is bringing its three wine brands, Corvo, Duca di Salaparuta and Florio, to the world of travel retail. In Cannes, the Illva Saronno booth will present the Duca di Salaparuta and Florio lines. The highlight is Duca Enrico, the first single-varietal wine made from Nero d’Avola grapes in the history of Sicilian commercial wines. Produced for the first time in 1984, it is therefore celebrating its 30th anniversary. As part of the celebration, visitors to the booth can sample three vintages of the wine. According to the company, these three years, 1987, 1997 and 2008, are especially representative of each decade. Illva Saronno has made massive success of its brands, and its plans for TFWA WE leave no doubt; the company does not go in halfway.

Disarrono’s readily recognized bottle will soon have a new look, created by a world famous fashion designer

A bold direction Drambuie’s “Taste of the Extraordinary” campaign has taken on a whole new dimension with its compelling new limited-edition bottle created exclusively for travel retail. Launching just in time for the gift-giving holiday season, this is the company’s latest travel retail exclusive. The striking black-and-white zigzag pattern was inspired by Drambuie’s surreal marketing campaign, in which an infinite field of black and white is the sharp contrast for the amber liquid within a bottle or glass. This limited-edition shrink-wrapped bottle, available in a one-liter size, is intended to help fulfill the company’s objective to introduce Drambuie, the singular blend of fine aged Scotch whisky, spices and heather honey, to a new generation of drinkers. The distinctive new look is all but guaranteed to achieve this goal when it hits travel retail shelves this October. The stand-out limited edition will be released in specific locations around the world, including key airports throughout Europe and Asia. It will undoubtedly be popular as a gift choice for those who love Scotch whisky and Drambuie, especially with those customers who know it as part of the iconic Rusty Nail, favorite drink of the 1950s Rat Pack. William Birkin, Regional Manager for Global Travel Retail India, Middle East, Africa and Asia, states, “The ‘Taste of the Extraordinary’ campaign was intended to take Drambuie in a bold new direction. The unveiling of this limited-edition bottle in global travel retail will achieve this, as the distinctive new look will drive further awareness and stand out on shelf to better attract a fresh audience to Drambuie.” The limited-edition bottle will be on view at the TFWA World Exhibition in Cannes. Drambuie seeks to get the attention of a new generation with its eye-catching limited-edition bottle

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

Edgy meets tradition In 1751, a man arrived in Colombia from Spain, seeking to increase commerce between Spain and its colonies. That man was Severo Arango y Ferro. He made it his ambition to become the most important producer and trader of rum once he encountered and fell in love with the tropical elixir. This love passed down through the generations. Over a century and a half later, Don Julio Arango y Parra, a descendant of Severo, established Destileria Colombiana. Over the years the family researched everything they could about rum production, ultimately creating their masterpiece, which they named for their ancestor, whose strength and power had given him the nickname “Dictador.” The multiple-award-winning rum has now moved outside its South American borders and around the world in global travel retail. The company’s goal is that the rum be considered an aspirational lifestyle brand in keeping with its high quality. To this end its bottle is a sleek black Japanese design that gives the impression of modern and stylish luxury, and the marketing is sexy and fashionable.

Dictador is being presented as an aspirational lifestyle brand that is modern, luxurious, sexy and fashionable

Laura Klingeman, Business Development Manager Travel Retail and Duty Free for SEVA Group, the company’s collaborator for duty free and travel retail, commented: “The whole concept of Dictador is truly extraordinary. The quality is extremely high because of the careful distillation process, but in addition the bottle creates a perfect declaration of quality and innovation.” Klingeman suggests that the company’s marketing of the brand is bang-on. “Dictador is being marketed as a fashion brand; it’s creative, eye-catching and innovative.” Dictador has begun to make its mark in travel retail and will be standing out on more shelves soon.

ROCK OF AGES Last year Patrón released its first extra añejo tequila, Gran Patrón Piedra, which is made completely using the tahona process. This ancient method is very time consuming and labor intensive, but produces a superior product with flavor dimensions not available in tequila made using more modern techniques. While all Patrón tequila products contain tequila made using the tahona process, until now Gran Patrón Piedra was its only offering crafted exclusively using this method. This year, however, brings a new line to the Patrón family. Roca Patrón Silver, Reposado and Añejo are all created exclusively using this painstaking process that utilizes a giant two-ton stone wheel, hand-carved from volcanic rock. It is this stone that gives Roca Patrón its name – Roca means “rock” in Spanish. The stone wheel slowly crushes the cooked agave – for the Roca Patrón line only the highest-quality Weber blue agave is used – breaking the fibrous bonds and releasing the rich agave juice. The juice and fiber are fermented together and then distilled in small, handmade copper pot stills. Including the agave fibers in the fermentation process creates tequila with a sweeter, earthier aroma and flavor, with distinct notes of roasted agave, according to Francisco Alcaraz, Patrón’s Master Distiller. “What truly sets this process apart from other more automated methods of producing tequila,” he says, “is that in the tahona process we introduce the agave fibers – not just the agave juice – into fermentation and distillation. Patrón is one

of only a handful of distilleries in Mexico that still use this traditional tahona method. It’s very time consuming and expensive to create tequila in this way, but well worth the effort.” The aged Roca Patrón tequilas are matured in single-use bourbon barrels, the Reposado for about five months and the Añejo for about 14 months. The line was released domestically in the US this summer, and will be launched for travel retail at TFWA WE in Cannes. While all of Patrón’s liquid created using the tahona process, the Roca Patrón line is created exclusively by this technique

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J. Cortès

From left to right: Frederik Vandermarliere, CEO of J. Cortès; Gerry Murray, owner of Traveler’s Trove; Thomas Gryson, J. Cortès Export Manager and Travel Retail Coordinator; Peter Struber, J. Cortès Commercial Director

The J. Cortès gondola at Kuwait Duty Free has strong visibility

Strong focus, big expectations

Although the cigars of Belgian company J. Cortès are available in over 80 countries, its duty free business has lagged far behind domestic. That is about to change.

WENDY MORLEY

. Cortès is no stranger to global trade. The Belgian company has been producing cigars since 1926 and sells over 500 million of them each year in over 80 countries. While the company has had global reach, travel retail had never been a number one priority. Its domestic-focused regional export managers had a finger in the duty free pie by bringing cigars to smaller regional stores, but J. Cortès had never made a conscious decision to increase its share of the travel retail market. That changed last year when Thomas Gryson, who had been one of the company’s regional export managers, was handed the reins as Travel Retail Coordinator in order to centralize and coordinate that department. “Travel retail is currently a very small part of our business,” says Gryson. “We know there is a big potential in that market for cigars. Our goal is for it to make up 5% of our business over the next few years.” To that end, this year has been a time of laying foundations. Gryson has traveled extensively and attended every major travel retail event. J. Cortès also signed a two-year agreement with Traveler’s Trove, a distributor founded by long-time travel retail industry executive Gerry Murray. Murray’s role is to grow the brand in key markets across Europe, the Americas and Asia, building upon strengths in areas where J. Cortès already has a solid footprint, and growing the brand in others. “This is an exploration,” says Gryson, “for Travelers Trove and for us. We understandably are not seeing an immediate effect from our focus on travel retail. Our sales in this area have been stable in 2014 over 2013. But we do expect to see growth after Cannes, toward the end of this year and into next.”

and sales volumes are increasing for each store. The reordering combined with new POS confirms the company’s belief that China is an especially important region to focus on in duty free.

Travel retail line

During the company’s first year setting its travel retail foundation, it made its popular Neos line the focus. Neos flavors are especially popular in Asia, with flavor choices such as vanilla, cappuccino, cherry, chocolate and even mango on offer, whereas a traditional unflavored cigarillo is more popular in Europe. That being said, the company this year launched its first travel retail exclusive: a black box of 50 Neos unflavored cigarillos, and this product has done very well in Asia and elsewhere. Looking past Cannes, 2015 will bring a slightly different focus to J. Cortès’ travel retail offerings as it shifts toward its higher-end brand, called simply J. Cortes. But Gryson will give few details at this point, saying they will still be concentrating on the Neos line through Cannes and the early part of next year. 

Asia and the world

For many years J. Cortès has had a booth at the same location in Cannes. Gryson says he knows from experience the event is much more about public relations and exposure than about sales, but sales come after. During the show, he wants to see as many people from all over the world as he possibly can. J. Cortès recently launched a gift-with-purchase program in various locations throughout Asia; at World Duty Free in Colombo International Airport in Sri Lanka the company offered a branded sports bag to shoppers who purchased two J. Cortès duty free packs. Meanwhile China, where the company has seen steady growth, has been an especially good market this year in travel retail. The POS

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

Although Neos flavors tend to sell especially well in Asia, J. Cortès’ travel retail exclusive 50 pack of traditional cigarillos has sold very well in the region

PURE SPIRIT T R AV E L R E TA I L I N Q U I R I E S - P L E A S E C O N TA C T B R I A N @ C R Y S TA L H E A D V O D K A . C O M W W W. C R Y S TA L H E A D V O D K A . C O M © 2 0 1 4 C R Y S TA L H E A D A N D T H E C R Y S TA L H E A D B O T T L E D E S I G N A R E R E G I S T E R E D T R A D E M A R K S O F G L O B E F I L L I N C .

PRODUCT OF CANADA.

VODKA DISTILLED FROM GRAIN 40% ALC. / VOL.

Questionnaire

ALL ABOUT

Matthieu Mercier, CEO, LS travel retail Pacific

Q: Where were you born and raised? A: I was born and raised in Paris. Q: If you attended post-secondary school, what did you study? A: I attended business school in Rouen. I wasn’t quite sure what to do at the time and this seemed like a door opener. Q: Are you married? Do you have children? A: Married with three kids; my daughter is 15 and my twin boys are nine. Q: What is your favorite movie? A: Grand Départ—it’s a very personal preference, as it is written and directed by my brother Nicolas. Q: What is the last book you read? A: In Search of Lost Time by Marcel Proust. Started a few years back and I’m still not finished so I did lose a little time on the way! Q: What would you choose as your last meal? A: A taste of summer holiday at my grandparents’: peeled tomato salad with vinaigrette and frog legs à la provençale, finished with a lemon tart. Another option would be a heart-shaped waffle, filled with butter and sunk into a hot chocolate. Q: Your favourite drink? A: I assume and I hope we’re talking alcoholic drinks! In this order, depending on the time in the evening: Champagne; a Bordeaux red (Pessac-Leognan is my favorite) or a Burgundy white such as a Pouilly Fuisse; gin and tonic. Q: Do you have a passion in your life (or more than one)? What? A: Too many indeed, which sometimes puts me in trouble at home: Antiques,

ASIA DUTY FREE & TRAVEL RETAILING SEPTEMBER 2014

vintage watches, ’70s and ’80s sports cars, tennis and sports in general (playing more than watching), 19th century classic literature. Q: Do you have pets? If so, what type of animal and what is its name? A: No pets. I have made attempts with goldfish and turtles. I’m always very sad to see them die and so I will not make other attempts. Q: Do you prefer country or city? A: I really need both, at different times of year. But if I had to choose one for good that would be country for sure. Space, air, nature—no city can compete with that in my eyes. Q: What is your favourite place to vacation? A: Sounds cheesy but true: wherever I can spend my time with good friends is always my favourite holiday. Q: What’s the first thing you do in a new place? A: When moving to a new country I usually do the following: Learn the language, find a place to live, find a school for the kids and a tennis club, and have a big night out to get a feeling of the place and of the people when they let go. Q: If you could choose any place in the world to live, where would it be? A: I feel very privileged to live in Sydney and for now I cannot think of a better place. Next one would be a place I haven’t lived in: South America, Africa or Asia. Q: Which living person do you most admire? A: Honestly everyone who, maybe for very different reasons, has to fight hard to make it through the day and actually

makes it, day after day. Most of us are so privileged with health, education, jobs and a home to go to at night. Q: Which historical figure do you most admire? A: It is recent history but it would be L’Abbé Pierre for sure. A man who, born in a wealthy family, was a member of the resistance during World War II and a leader for decades in the fight against homelessness and so many righteous and important political fights. Q: Where and when were you happiest in your life? A: Every time I’ve managed to feel settled and home in a new country has felt amazing, a nice feeling of belonging to a new place while still rich with home culture. I was lucky enough that I got this feeling in the USA, in Spain, in Bulgaria and now in Australia. Every time I feel surrounded by friends and family, though that never occurs often enough! Q: What in the world would you most like to change? A: The condition of less fortunate children as a very broad choice, from health to education and of course homelessness. Q: What about yourself would you most like to change? A: My crappy forehand, which drives me totally crazy and to the edge of a nervous breakdown. Q: What is the most important piece of advice anyone ever gave you? A: Take risks. Q: What is something about you that most people would find surprising? A: I’m more terrified than a kid by any movie that’s a little scary. 