Where’s wine headed in duty-free?

on 25 November, 2016

I was never top of the class at maths at school. The teacher only had to mention the dreaded ‘m’ word and start writing numbers on the board and my eyes would glaze over. 

I’d like to think my numeracy skills have improved a good deal since, but some statistics that end up in my inbox can still seem puzzling.

Take the curious case of the travel retail wine business. Now, with the notable exception of champagne, wine has always been something of a bolt-on to the traditional spirits-based duty free liquor offer. It’s undoubtedly harder to handle as a product, trickier to merchandise and arguably requires a greater deal of product knowledge to buy and sell. And, unless we’re talking fine wine, the category also generates smaller profit margins than spirits – a crucial consideration for any retail business, but especially in the space-constricted, high-rent world of airport retail.

Nonetheless wine has pushed its way further forward into the duty free mix over the past decade. It’s been driven in large part by Chinese travellers’ interest in top Bordeaux, Burgundy and New World wines and a more general acceptance by both suppliers and retailers that the business was missing an opportunity by not treating wine more seriously. Ranges have expanded, upper price points extended and investment has gone into merchandising, promotions and staff training.

To see quite how far wine has come in duty free take a look at Travel Retail Norway’s giant new 4,000sq m arrivals shop at Oslo airport, which opened this summer. With prices typically around 20% lower than in the domestic market and a generous six-bottle personal allowance for every adult Norwegian traveller, the new outlet stocks more than 200 varieties of wine, ranging from an easy-drinking Rioja at NOK55 (£5.40) to a NOK3,749 (£368) bottle of Opus One Napa Valley.

Trying to get a fix on the current health of the wine category is a little tricky, however. The latest stats from the IWSR suggest it has not been immune from the general macroeconomic trends of currency fluctuations and economic downturns that have afflicted the overall liquor business in recent times. In fact, sales were down 2.9% in 2015 to stand at 7.9m cases, a performance broadly in line with spirits (-3.3%).

That’s not the end of the story, however. Recent research released by Treasury Wine Estates based on the shopping habits of 6,000 travellers at 15 international airports indicate that the number purchasing wine has actually grown from 2% to 3% over the past two years. Average spend on wine was also up, from $56 to $68, as was the conversion rate (the number of people who visited the wine section and went on to buy), up from 21% to 26%.

 “Every key metric for wine and champagne is on the up, which is testament to our retail partners’ willingness and commitment to invest in the category,” says Tom King, TWE global travel retail manager. “Passengers are clearly responding to this investment and enjoying an easier, more engaging wine shopping experience.”  

So it would seem that, while wine volumes in duty free may have dipped, customer engagement and average sales baskets are up, which is encouraging news. The big challenge is building on this momentum, ensuring each travel retail location offers the right mix of wines, price points, enticing promotions and expert staff guidance.

That’s a tall order in some cases. It’s worth remembering that wine as a business in travel retail is still tiny compared to spirits (7.9m cases versus 21.8m), but if TWE’s findings are correct, it would at least appear the category is finally moving in the right direction.

ABOUT

Your window into the world of a drinks journalist - from cocktails competitions to financial results, we've got a view and we're not afraid to share it.

NEWSFEED

RSS
Click the RSS icon to grab our feed and follow the DIgestif blog via your news reader.

Digital Edition

Drinks International digital edition is available ahead of the printed magazine. Don’t miss out, make sure you subscribe today to access the digital edition and all archived editions of Drinks International as part of your subscription.

Instagram

Facebook