A sense of gloom hangs over much of the travel retail industry as 2025 gets underway. While total international airline traffic did increase by 1% vs pre-Covid 2019 last year, according to travel research firm Forward Keys, the key Asia Pacific region, traditionally driven by the mainland Chinese, remained 10% below 2019. Compounding these challenges are geopolitical tensions, escalating costs and shrinking disposable incomes in many markets, leaving the industry with fewer reasons to celebrate this January.
For a snapshot of a market in turmoil, South Korea stands out. Once a regional travel retail powerhouse, it has been grappling with setbacks. According to the Korea Duty Free Association, travel retail sales across the country dropped nearly 7% in October last year, marking a continuation of troubling trends. A dramatic shift in customer demographics is a primary factor: bulk-buying groups of Chinese travellers have largely been replaced by individual tourists prioritising experiences over shopping.
Trendy restaurants, cultural landmarks and live events have become the new focal points for travellers, overshadowing shopping malls, group tours and luxury boutiques. Additionally, many older Chinese consumers who once flocked to South Korea for shopping now favour domestic destinations like Hainan, drawn by safety concerns and patriotic appeals from Chinese authorities encouraging local spending.
Lotte Duty Free, South Korea’s largest travel retailer, is facing a particularly challenging time. Faced with heavy overseas losses, reduced Chinese tourist spending, diminished activity by ‘daigou’ Chinese shuttle traders and burdensome operating costs, including steep airport rents, Lotte has announced it is adopting an aggressive strategy of optimising store operations, cutting fixed costs and revising sales approaches to stabilise profitability.
Political unrest has further complicated the situation. December’s brief martial law declaration by President Yoon Suk Yeol deterred tourists, as many countries issued travel advisories. The lingering effects of this turmoil could lead to trip cancellations, further impacting the country’s recovery.
Switching to the supply side of the business, it’s hard to escape the conclusion that 2024 is going to have been a tougher year for many drinks suppliers than 2023 once the data drops, with more value-aware Chinese travellers and cost of living-squeezed consumers in other markets likely to reduce average basket sizes.
As for 2024, I can see the premium and super-premium categories taking a hit, forcing suppliers to discount, but the prestige-plus tiers will remain buoyant. History suggests wealthy consumers continue to spend during economic downturns, and this trend is expected to hold true this year.
Scotch, the engine room of travel retail spirits, remains interesting. Blends are losing ground, dropping 3% in 2023, with long-term market leader Johnnie Walker losing its position as the bestselling spirit in travel retail to Jack Daniel’s, according to IWSR Drinks Market Analysis. This trend likely persisted in 2024, with single malt Scotches and non-Scotch whiskies capturing more market share.
One single malt brand to watch closely in GTR is the Islay malt Bowmore, owned by Suntory Global Spirits– it’s a whisky the multinational has big plans for. In October 2024, the company unveiled the Bowmore Appellations Collection, a travel retail exclusive four-whisky range finished in different styles of ex-wine casks, and in December, the brand opened its first airport boutique at London Heathrow Terminal 5.
Operated by Avolta (previously Dufry), the Bowmore store’s design reflects the ‘morphic’ layered look of the whisky’s most recent packaging, while the range of whiskies offered features high-end drams such as Bowmore Timeless 33 Year Old, Bowmore Vaults 1971 and Bowmore Frank Quitely 23, 24 and 34 Year Olds.
Another Islay malt with a growing footprint in travel retail is B Corp-certified Bruichladdich, a Rémy Cointreau-owned brand which has successfully stood out in the crowded, competitive malt sector by focusing on sustainability, terroir and innovation. Last November, I flew up to Islay for a three-day field-to-glass tour of the Victorian-era distillery, which produces the unpeated Bruichladdich, the intensely peated Octomore, the heavily peated Port Charlotte and The Botanist, Islay’s first dry gin.
New expressions
The distillery recently expanded its travel retail collection with two new offerings last June. These were The Classic Laddie Sherry Cask Edition, a reinterpretation of the distillery’s signature expression, aged in oloroso sherry casks and bottled at 50% abv, and The Bruichladdich Twenty One, a single malt aged in a combination of bourbon and sherry casks, also with an abv of 50%. Both are presented in environmentally friendly packaging, featuring an outer wrap made from fully recyclable paper pulp.
Spending time on the remote Hebridean island, I gained an insight into the commercial challenges inherent in the sustainable path Bruichladdich has chosen to follow, whether it be its commitment to using locally sourced ingredients, working with the Scottish government to trial greener fuel options or hanging on to ageing machinery to preserve traditional production methods.
Chief executive Douglas Taylor was at pains to point out Bruichladdich’s strategy was striking a chord with travellers. “People buy into the product as well as the proposition,” he insisted. “They buy into the liquid and the story, and the way it’s manifested.”
The growth of niche categories such as Islay malts offers reason for cautious optimism for the travel retail business. By aligning with shifting consumer values and exploring new ways to engage travellers, the industry can hopefully navigate the turbulence ahead and lay the groundwork for a stronger recovery.
