Premiumisation, e-commerce lockdown sales and digital retail solutions have all helped the alcohol industry during the Covid-19 pandemic.
Early on in the Covid-19 lockdown, shoppers shifted to e-commerce for their alcohol consumption. This trend was illustrated by the sharp rise in spirits sales – especially in the US – where according to market research firm Nielsen, online sales of alcohol rose almost five-fold in March through April 2020 compared to the same period last year, as consumers who were used to drinking in bars and restaurants were confined to stay-at-home drinking and some took to honing their own mixology skills.
According to a Covid-19 impact report by the IWSR earlier this year, the US has seen the strongest upswing in retail alcohol sales (including e-commerce), which is the best performing global market in its top 10 countries analysis.
All 10 markets included in the IWSR assessment saw a temporary element of panic buying and out-of-stock situations in retail. “While this is subsiding in most markets, the e-commerce channel has helped most businesses maintain growth potential,” notes Mark Meek, CEO IWSR Drinks Market Analysis.
“While many value brands have reversed declines during Covid-19, it’s not at the expense of premium,” notes Brandy Rand, COO of the Americas at IWSR. “All categories show a continued premiumisation trend as consumers transition some of their on-premise spending to at-home consumption.” Ecommerce sales continue to be significant due to stay-at-home orders and physical distancing efforts and it’s likely this will continue while the pandemic restrictions continue, states IWSR.
By comparison in the UK, off-trade is up by 20% and e-commerce is up by 50%. The growth potential of e-commerce in the UK, however, is constrained by capacity issues and catering to the surge in demand, says the IWSR. Ecommerce is increasingly joined by new arrivals to D2C in the UK, including craft producers looking to compensate for the closure of showrooms and visitor centres.
The UK’s first lockdown period saw the country’s largest wine retailer, Majestic Wines grow its online sales by 300% and increase its market share from 4.5% to 5.3% during the first six months of 2020.
Volatile travel retail liquor sales
Alcohol companies operating in the travel retrial sector have not benefitted from lockdown – quite the opposite with the pandemic affecting the channel hard. The impact is expected to last for several years until global passenger numbers return to normal volumes.
Diageo’s net sales plummeted by 46% as declines in the first half of its fiscal 2020 year were “further exacerbated by significant declines of travellers due to Covid‐19” and particularly in Asia Pacific and the Middle East, it said in August.
Ivan Menezes, Diageo’s Chief Executive, commented: “Fiscal 20 was a year of two halves: after good, consistent performance in the first half, the outbreak of Covid‐19 presented significant challenges for our business, impacting the full‐year performance.”
Pernod Ricard updated its 2020 outlook in July and said it expected a 15% decline in operating profit instead of the 20% stated previously. For its global travel retail business, the group said it expected an 80% drop for the period February to end of June, which is a huge contrast to the picture for 2019, which saw the group post 6% full year growth for the channel.
“This unprecedented crisis has been a challenge and will have a long‐term impact on our industry and consumer behaviour,” Craig Johnson, Vice President of Marketing for Pernod Ricard Global Travel Retail commented. “However, we have taken this as an opportunity to collectively reimagine the future of retail. We expect to see strong growth in e‐commerce, with click-and-collect being a key driver, and we’re excited to continue expanding this channel.”
Key stakeholders from alcohol brands operating in the travel retail sector agree that digital strategies are paramount in order to see growth during the continued pandemic.
Pernod Ricard’s Johnson also says the company will be taking learnings from its domestic retail business and implementing them into travel retail.
“We will be launching new digitalised retail experiences in the coming months, which will offer new experiences for our partners and consumers,” he says, adding the activity will focus on exclusive products and limited edition liquids that are due to be released in line with consumer travel picking up.
Irish whiskey brand Teeling is also ramping up its digital activity in order to target consumers as they return to travelling. Travel retail was the brand’s third largest channel before the pandemic, following the US in first place and Ireland in second.
Teeling’s near-future strategy will be about connecting to consumers before they have even arrived at an airport, says Stephen Teeling, Sales and Marketing Director, according to a report by The Spirits Business.
“The speed at which people have become comfortable ordering online during the crisis has been incredible,” he notes. “People might not have the freedom to browse as much once they’re at the airport, so I think the time before they go to an airport will be more important than when they’re there.”
Teeling is working with Aer Rianta to upgrade the information about some of its travel retail‐exclusive products so consumers can browse what’s available before they travel. QR codes and other means of technology will play a crucial role in communicating brand information and messages to consumers.
“It’s a way to potentially plant the seed before they travel,” adds Teeling. “The challenge is people are nervous about engaging with someone they don’t know, so how do you tell the brand story without engaging directly with people? We’re going to have to try to get consumers into the shop, but also find ways in which they’re comfortable to engage. It’s an innovative retail channel; we’ve been here before with e‐commerce and other challenges. Buying before you go or click‐and‐collect will probably become a bigger part of the industry.”
Digital disruption is front of mind for several major wines and spirits brands recently canvassed by DFNI for its latest category report.
Simon Carter, General Manager Global Travel Retail at Treasury Wine Estates (TWE) highlights the wine producer’s focus on taking advantage of the growth in e-commerce since the pandemic hit and ramping up its brand presence on social media. “Across many markets, we have collab- orated to maximize availability of TWE brands in airport ‘Click & Collect’ programmes including duty-free and duty-paid products in arrivals terminals and downtown duty-free retail and on-shore tax-free initiatives in China.”
Quintessential Brands Global Travel Retail Manager Oliver Storrie says the Nordics’ focus on pre-travel digital should be an important business model to follow for the travel retail industry. The region’s pre-order market accounts for a high percentage of travel-retail liquor sales. He also highlights the importance of using digital technology to target travellers at different touchpoints in their journey, from booking their ticket, to browsing in the store, the flight and their onward journey to the final destination.
Phygital creative retail solutions are becoming increasingly popular for travel retail brands looking to ramp up their online to offline marketing activities.
Retail agency Jordan Design has launched a digital store design solution that has already been adopted by Whyte & Mackay’s The Dalmore whisky brand, which is using the digital showcase to convert clicks into footfall for its new travel retail exclusive Ensemble Collection in 2021.
Ben Jordan, Jordan Design, Managing Director says: “With this new initiative, our design and creative output can now be modified to convey a virtual rather than physical end-deliverable.
“Our dedicated digital strategy team is now able to complement physical GTR creations with a design that conveys brands’ DNA digitally to a similar level of impact.”
According to Jordan, the function of travel retail specific brand design is to attract people’s attention while they are in a duty-free store. He adds: “Now that the core dynamic of GTR has changed and there are far fewer people passing through the shop, brands need to make people aware of what is in the shop before they travel, essentially relocating the shop window.
“We are developing strategies [for clients] that reach out to consumers before they travel, engaging them through social media and other platforms in the domestic market to drive them into the airport shop. We do this in three stages: Connect, Educate and Experience.”
Pernod Ricard is taking a digital approach to transform its traditional physical environments. For the upcoming holiday shopping period, it will introduce new travel retail specific retail environments that engage the shopper via low or no-touch campaign activations and tap into the group’s seasonal promotional campaign programme by location.
Mohit Lal, Chairman and CEO, Pernod Ricard Global Travel Retail tells TRBusiness: “Our insights show that once shoppers are back in duty free, they will expect an elevated shopping experience, which takes into account safety concerns around physical touch-points.” The latest launch is an automated robot bartender, that was designed with an elevated experience in mind and embodies what Pernod Ricard has planned to future-proof its duty-free retail activities.
Additionally, Pernod Ricard has revealed the Martell Perfect Door, a digital merchandising wall bay for the premium cognac brand. “Designed in a GTR-specific retail feature format, the Perfect Door is equipped with motion sensor screens that activate brand content within the world of Martell. It allows consumers to learn more about products without physical touch,” Lal explains. The launch of the Martell Perfect Door digital travel retail campaign will launch in key locations in time for the Holiday period Martell Cordon Bleu limited edition bottle, which is exclusive to travel retail.
Beam Suntory staged an innovative virtual tasting of its new travel retail exclusive Suntory World Whisky Ao in October. The online event, intended to mirror the in-store tasting experience, profiled the product’s five distinct country blends, contributed from the company’s distilleries in Japan, Ireland, Scotland, Canada and the US.
Beam Suntory Global Head of Marketing Travel Retail Ed Stening says the whisky is already on shelf in a few selected travel-retail markets, including Dublin airport. “We’ve aligned it with our House of Suntory wall-bays which are around the world. Any airport that has a House of Suntory wall-bay we will be incorporating Ao into it first in the roll out,” he notes.
DFNI Liquor Editor Joe Bates says: “The launch of Ao is a major statement by Beam Suntory of its continued faith in travel retail as it battles to recover from the effects of the pandemic. The innovative nature of this ‘world’ whisky’ is also likely to appeal to curious whisky loving travellers who might be tiring of increasingly identikit GTR whisky exclusives.”
Premiumisation gives agency to increased digital marketing.
Premium-and-above spirits are forecasted to increase their global volume market share to 13% by 2024 as consumers continue to search for “authenticity and status”, according to the IWSR.
The category’s growth will come from consumers looking for quality over quantity, including a focus on cocktails and high-end sipping spirits, according to the firm’s Global Trends Report 2020 that examines some of the far reaching impact on alcohol consumption further to the Covid-19 pandemic.
By value, China is the world’s largest premium-and-above market for wine and spirits, although, by volume, the US trails it closely. In both countries, premium-and-above brands are forecast to increase their volume market share by approx. 1% between 2019 and 2024, as the premiumisation trend continues to influence market developments, despite Covid-19 restrictions on travel or going out.
The IWSR expects niche spirits such as tequila (which has grown 15% year-on-year between 2015-2019) and spirit aperitifs, which it expects to recover well post-pandemic.
Rum is considered the ‘most under-premiumised’ category in travel retail and could be worth $400m in retail sales, according to the IWSR. Bacardi is the leading rum brand in the world based on sales value and the group’s Global Travel Retail Managing Director, Vinay Golikeri tells The Moodie Davitt Report that rum segmentation will be a growth driver in future years. “Bacardi boasts the position of number one rum brand in travel retail, where we have a premium portfolio, supported by 4, 8, 10 and 16-year old age statements to drive category premiumisation. We are exploring new digital ideas with travel retailers, including digital masterclasses and virtual tastings to engage consumers with the versatility of our rums.”
According to new consumer research data conducted by m1nd-set for the industry specific Travel Retail Awards, 33% of travellers in the duty-free shopping channel mention value for money as the purchase driver. Clara Susset, Travel Retail Research Director, m1nd-set says this year’s research showed that value for money perception has grown year-on-year over the awards’ three-year history, adding: “value for money and uniqueness have the strongest positive impact on the general appeal of the products.”
Rachel Hawes, Marketing Director, Global Travel Retail, Distell agrees understanding consumer drivers for purchase are key for brands planning in a post-Covid travel retail environment. “We are data rich, we know our consumers, especially in the domestic channel. But in travel retail, insights are never more valuable than right now. To understand more deeply the passenger mindset within the GTR environment allows Distell to join the dots between our products and our consumers. We know within our brand portfolio how our consumers behave in our domestic market vs in the duty-free channel and increasingly their digital journey to the airport store.”
Premium brand activations at airports have been in short supply, but are now slowly returning to take up evolving phygital promotional retail space. One of the first liquor brands to make a statement with a new localised brand concept is Mast-Jägermeister that partnered with Gebr. Heinemann for a new shop-in-shop to mark the opening of Berlin Brandenburg Airport.
The 23sqm store “merges the soul of Berlin with the spirit of Jägermeister”, according to the brand.
One of the most important social-commerce brand initiatives recently has been Pernod Ricard’s 2019 partnership with Chinese price comparison app, Jessica’s Secret.
The ongoing digital collaboration means Pernod Ricard can amplify its global travel retail product listings across the duty-free price comparison app direct to Chinese travellers.
As part of the partnership, Pernod Ricard has unveiled a revamped wine and spirits section on the Jessica’s Secret platform with up-to-date product and price information.
It will also include a dedicated section driving awareness of travel retail promotional offers; and a calendar of media partnerships to deliver Pernod Ricard brand news and promotions to a captive audience via home page takeovers, voucher ad and IP-targeted push notifications, as well as extension offers via Alipay International allowing an even greater audience of consumers to benefit from the partnership.
Leveraging its expertise in travel trail, Pernod Ricard will also launch a pre-ordering service on Jessica’s Secret for Chinese travellers. The partnership will provide travellers with a one-stop travel retail e-commerce shop, from price comparison, ordering and paying online to airport pick-up.
Pernod Ricard Global Travel Retail Digital Manager APAC Janice Chan says: “We are always looking at ways to explore innovative technologies that enhance consumer journeys. The partnership enables us not only to leverage the reach of the app, but also to connect with Chinese travellers, in a meaningful way by tapping into an existing consumer behaviour and offering them content and offers to match.”