Travel Retail | An interview with Bryn Lucas, Category Manager and Purchasing, Heinemann, Australia

Bryn Lucas

Category Manager and Purchasing, Heinemann, Australia

BRYN LUCAS IS AN IMPORTANT PERSON TO HAVE ON SPEED DIAL IF YOU ARE IN LIQUOR SALES AND YOU WANT YOUR PRODUCT DISPLAYED PROMINANTLY AT SYDNEY AIRPORT DUTY FREE. WE CALL IT HIGH PURCHASING POWER. HE CALLS IT THE MOST CRITICAL RETAILING SPACE FOR BUILDING GLOBAL BRANDS.

What are the category trends in Duty Free?

The most dominant trend we are seeing is people trading up. They are not buying as much from a volume perspective but they are buying better. Gin as a category, similar to what is happening in the domestic market, is seeing significant growth. Within the gin category itself consumers are becoming more experimental so they are looking for new styles and products from different countries made in different ways, using different methods and are moving outside of the brands traditionally popular such as Gordons, Tanqueray and Bombay Sapphire. The craft movement is a significant trend in this category and across other categories as well. Single Malts are growing strongly in the whisky category. We are seeing a move away from blends. Japanese whisky is also big. Within the wine category we are seeing a growth in cooler climate and more light to medium bodied red wine. Shiraz is still our dominant variety but Grenache and Pinot Noir and other lighter styles from cooler regions are seeing growth. This trend is amongst Australian travelers but we are also seeing it with some of the north-east Asian travelers as well. Tasmania as an example - anything with Tasmania on it across both reds and whites is in strong growth, and to a lesser degree we are seeing cool climate growth in other regions, places such as the Yarra Valley and some of the other Victorian regions as well.

How are people shopping the category, what are they looking for?

From a travel retail perspective people do shop differently than the way they do in the domestic market. For customers who are not engaged in some of the categories or who are buying as a gift they look for things like packaging which is a strong element to the purchasing decision. They also look for third party endorsement or they look for advice from store staff. They look for novelty. A lot of brands, particularly in the spirit space but increasingly in the wine category, have travel retail exclusive products or ranges. These products are only available in the travel retail context, which is a way of differentiating the assortment and not competing directly on price across some brands but also offering travel retail consumers a unique offering.

Are duty free trends driving domestic and or international buying trends or the other way around?

It’s a bit of both. We are both influenced and also to a lesser degree driving buying trends.

It is predominantly driven from the consumer side so we are reflecting international trends and domestic as well. There is an element of launching new products (in the travel retail channel) that will eventually drive those trends in domestic and international markets.

What are the key drivers for wine in travel retail over the next few years?

From an Australian wine perspective people are becoming more experimental and that is reflected in the way the brands work their offerings. More broadly there is the whole rose boom at the moment but also growth in emerging varieties such as the Italian varieties for example. People who were traditionally Sauvignon Blanc drinkers are moving to Pinot Gris and Pinot Grigio and then they are looking to move beyond that. For producers and retailers it is going to be about how we guide consumers along that journey so making available styles and varieties that sit within their desired taste profile but then also giving them the information so if they want to try something new then they can find something that suits their taste.

In travel retail this is particularly relevant because a lot of people are buying for gifting or for souvenirs and they might not be particularly familiar with the producer, the variety or the region, so it’s about being able to match the wine to the consumer and how we can do that best.

How are you addressing that?

The staffing for most duty free retailers is a combination of staff provided by the brands, in store brand ambassadors who are there to represent their brands and also the category more broadly. We are working with the brands to have more brand ambassadors

on the floor, but we are also working on training for our staff so they can guide customers through the store and through the category. We are also looking at developing relevant point of sale material and at how we lay out the store and the category so it flows logically and people can shop it without necessarily having a significant degree of familiarity with the brands and the products themselves.

What wine regions are the most popular?

The Barossa is still very much top of mind particularly for international consumers but also the cooler climate regions are definitely growing and Tasmania is at the forefront of that particularly amongst travelers from the PLC so People’s Republic of China. We have seen significant growth with our Chinese consumers, and this is also because of the amount of tourism that is happening throughout Tasmania but also the clean and green message associated with that. The Hunter Valley has seen some recent resurgence in demands on key Hunter producers, presumably the result of the number of strong vintages they have had there lately particularly the 2014 and the 2017.

What are the Chinese travelers buying into? Are their buying trends different?

The PRC travelers are our biggest international market. They traditionally have been brand and luxury brand driven. We are still seeing that. In terms of wine, Penfolds is still well in advance of everyone else when it comes to Australian wine brands. With spirits it is very much about Cognac and the big Cognac brands such as Hennessey, Martell, Remy Martin and Louis XIII. They are also buying a lot more Japanese whisky than they have in previous years so that category is in strong growth, however, somewhat limited by the availability of stock. They can’t seem to keep up with demand.

We are also seeing the Millennial Chinese traveler moving into the Champagne category particularly when it comes to prestige cuvées. So brands such as Dom Perignon and Krug are seeing significant growth with the Chinese consumers. The recently launched Penfolds Champagne is performing well and from what we have seen Millennial Chinese are buying it. What we are hearing is that the Millennial Chinese are looking to move away from what their parents drink into related but different brands, products and categories. So some of the more experimental products are appealing to this consumer group, the Penfolds Champagne and the Penfolds special bottling range, including the brandy, the one that is performing best is the spirited wine with Chinese Baijiu spirit, specifically designed with Chinese consumers in mind.

How important is gifting and a premium, higher end offering to the traveler?

Some of the brands will do a year round or a seasonal gifting presentation and format. For example De Bortoli Noble One has moved into doing a premium gold gifting tin likewise Penfolds Max’s Promise have created a Chinese Lunar Festival gifting tin. Some products previously available in the naked bottle have moved over to the gift box offering and we see a significant sales uplift off the back of that shift from naked to giftboxed. Also, some of the brands have successfully used the premium offering to create a halo effect across the brands. One example that comes to mind is Taylors Legacy, their new super premium offering. They have used that to upsell the whole portfolio. It is important to have that

premium aspirational product. Obviously the price point is not necessarily feasible for the full range of travelers but having that offering can help drive sales on other products across the brand. The point I’m making is the Legacy at $1000 per bottle helped to sell the Visionary and the Pioneer for Taylors at the $200 price point and also the St Andrews range at $65 per bottle by presenting the full range of price points and then using the higher end to sell the lower end. It also creates a bit of in-store excitement and means you can present the brand as a whole, and it shows the consumer they have a premium offering that would suggest they are a premium producer.

How important is this channel for building brands globally?

Travel retail brands use the channel as a test bed and a launch pad for new concepts, brands and products. This is particularly true in spirits but we are seeing it in wine as well. If successful they will role out to domestic markets. We have seen examples which are successful and others not. Some Australian brands have been very successful using travel retail as a way of building an international profile. One example that comes to mind is Four Pillars. They have been successful in the Australian Duty Free space that enabled them to build exposure overseas which then enabled expansion into overseas markets. When I was travelling through Hong Kong recently Four Pillars has a branded execution in Hong Kong airport. Another Australian spirits brands would be Mr Black. They also used travel retail successfully to build brand exposure and from what I am hearing they have launched quite successfully in the United States. You would assume the consumer awareness and demand built by exposure in the travel retail environment is enabling them to fuel that overseas growth.

Sydney international airport has more than 16.5 million international passengers each year so from a brand perspective it is a very effective way to ensure a brand is being presented to a very broad range of customers, but also a very significant number of customers from a diverse range of countries and backgrounds. Pernod Ricard Travel Retail Pacific has launched its Scotch Whisky Emporium in partnership with Heinemann Australia at Sydney International Airport.

Located in the departures tax and duty-free store, the Scotch Whisky Emporium is an immersive brand experience zone that highlights Pernod Ricard’s blended Scotch whiskies including Chivas Regal, Royal Salute and Ballantines’ new and high value aged products.

The multi-brand blended scotch whisky zone is the first of its kind in the global travel retail sector and will feature a tasting experience hosted by bilingual brand ambassadors as well as digital displays to educate on the whisky-making process.

“We’re excited to have partnered with Heinemann Australia on this world-class activation space as together we look to tap into the trend of high-value scotch whisky, which has been driving high single-digit growth over the last five years,” said Kate Maxwell, Marketing Manager, Pernod Ricard Travel Retail Pacific.

Richard Goodman, Managing Director Heinemann Australia, said, “Pernod Ricard is synonymous with some of the world’s most sophisticated whisky brands, and we’re thrilled to offer Heinemann tax and duty-free passengers not only a multitude of choice but a new and surprising shopping experience.”