Duty calls gin

After years of stagnating sales gin is flying in travel retail as brands big and small, old and new look to exploit the potential this niche retail channel offers. Joe Bates reports.

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IT WAS ONLY A MATTER OF TIME. Airports have opened breweries and even an on-site winery so perhaps it should come as no surprise – given the drink’s current darling status – that the world’s first airport gin distillery opened at London Gatwick earlier this year. Located in the airport’s North Terminal and serving classic gin cocktails and gastro-pub fare, The Nicholas Culpeper produces a daily 12-litre batch of gin. It even boasts its own master of gin.

Little more than a decade ago such a bar opening at a major UK airport would have been unthinkable. Gin was about as fashionable as Kim Jong-un’s haircut. Young, trendy metropolitan types flying out of the country wouldn’t have been seen dead drinking a G&T.

Standard gins such as Gordon’s and Beefeater dominated the duty free sales rankings and the range of brands offered by retailers was very narrow.

How times have changed. The gin craze that has swept the UK, the US and Europe has arrived in the travel retail sector too.

For instance, gin for World Duty Free Group, which operates travel retail stores at most of the UK’s largest airports, is its second fastest-growing spirit sub-category after single-malt scotch.

Travellers are spending more on gin too – premium gins now account for 40% of Gatwick’s gin sales, up from just 10% five years ago.

World Duty Free’s broad gin assortment now not only offers big brands such as Bombay Sapphire, Gordon’s and Tanqueray, but many of the new-wave craft gins that have come to the market in the past decade or so, such as London-based Sipsmith, Bulldog, Chase Distillery’s Williams Extra Dry Great British Gin, Islay-produced the Botanist and the Spanish Gin Mare.

Cruise lines have also been keen to exploit the gin renaissance. When P&O Cruises launched its new cruise ship Britannia in March last year, the company was keen to boast of the ship’s Crow’s Nest cocktail bar with its Great British Gin Menu comprising 20 gin brands.

The line-up included household names such as Bombay Sapphire and Tanqueray, but also artisan brands such as Tarquin Dry gin from Cornwall, Silent Pool gin from Surrey, Mason’s Yorkshire gin and Ely Dark Chocolate gin.

FAST GROWING

The rise of gin in travel retail is not just a UK phenomenon. According to the most recent year of statistics available from IWSR (2014), gin was the fastest growing spirit sub-category in travel retail, growing at 4% and outperforming traditional duty free stalwarts such as scotch whisky and cognac.

Now it has to be said the category in travel retail is still fairly narrow: a quintet of brands – Hendrick’s, Bombay Sapphire, Gordon’s, Tanqueray and Beefeater – generate the lion’s share of sales volumes. Yet many new craft-distilled gin brands are now gaining listings, adding breadth and depth to a category that’s now on a steep growth curve.

William Grant & Sons-owned Hendrick’s has been the star performer in travel retail in recent years, investing heavily in quirky promotions that use the brand’s eccentric Monty Pythonesque marketing. The British gin grew by nearly a third in travel retail in 2014 and it followed up this bravura performance in 2015 by being one of one of only nine spirit brands to be given its own shop-in-shop within DFS Group’s new Duplex store at Singapore Changi airport’s Terminal 3. It’s arguably the most high profile travel retail location anywhere in Asia.

STATESIDE SPLASH

Gin is making a splash stateside too. Jon Bonchick, director of buying and merchandising at Duty Free Americas, the largest duty free operator in the US, with stores at many hub airports such as New York JFK, Atlanta Hartsfield and Miami international, as well as outlets on both the northern and southern US borders, says gin is one of the company’s fastest growing spirit categories.

“Hendrick’s deserves a lot of the credit. It came along with a new approach not only in terms of taste, but packaging. It’s brought a younger consumer into the fold. We’ve also had requests [for other gins] and are now doing well with brands such as Bulldog, G’Vine and Citadelle. We’ve even had a request for Monkey 47, which was recently acquired by Pernod Ricard.

“I think gin is coming back to the younger folks, which is a good thing,” he adds. “I might not try a new gin in all our stores, but I’ll pick some key stores to test it in. If it does well, we’ll look to expand it slowly, but surely.”

Martin Miller’s gin, produced by the Reformed Spirits Co and launched in 1999 when it was vodka making the headlines, has been active in the travel retail sector for many years. CEO Jacob Ehrenkrona is a big fan of this specialised retail sector although he is also aware of its frustrations.

“Travel retail is quite an unusual way of selling,” he says. “For people not familiar with it you have to explain it a little – how it works and what its advantages are. I have been very pleased with our performance since we started working in duty free in an organised way.

“Obviously to an outsider volumes are very small compared to what you sell in other outlets and channels. It costs a fortune and is very complicated, but the thing I am particularly pleased with is you get the opportunity to display the brand and talk to your customers in a way that is otherwise very difficult for a start-up company.”

Ehrenkrona also says that gaining high-profile listings has helped Martin Miller’s gain credibility as an international brand. “Once we were in duty free [shops] it was much easier to talk to buyers at big retailers and other distributors around the world,” he says.

Despite Martin Miller’s progress in travel retail, Ehrenkrona says he is keen to fill in some important gaps in the brand’s distribution in the channel in key duty free markets such as the US, which he says is very hard to crack.

“Even in Spain, where we are the leading independent gin and have overtaken Hendrick’s, I am not fully happy with our duty free presence. We are present in every major duty free outlet, but it might be our positioning and whether we are in every terminal. It’s an endless battle.”

Ultimately, Ehrenkrona says growing distribution and maintaining shelf presence in GTR takes significant investment and manpower – something smaller brands find it hard to achieve over the long term. Nonetheless, he remains committed to the sector and believes a new aged line extension called Nine Months, due to be launched by Martin Miller’s in May, will be a good fit for travel retail.

If travel retail affords smaller brands the time and space to talk to customers, it also gives bigger, more established gins the chance to fight back, staging elaborate and multi-level promotional activations targeted at tech-savvy millennial travellers.

A case in point was Pernod Ricard Travel Retail Europe’s recent Spirit of London promotion, which was created to promote the launch of the Beefeater Spirit of London 2014 Limited Edition bottle, and which won a Frontier Award at last year’s TFWA World Exhibition.

GIN JOURNEY

The activation ran at London Gatwick airport in partnership with World Duty Free (WDF) and promised to give travellers passing through duty free a “gin journey”. The centrepiece of the activation was a Union Jack-painted British Mini car placed in the store next to a pop-up bar serving complimentary Beefeater cocktails. Passengers also had the opportunity to take selfies on their phones, upload them to Instagram, and then display the shots on the store’s video wall.

The snaps could also be printed on to a Polaroid and given to travellers as a gift along with a cocktail book and a guide to the Beefeater distillery.

Says Caroline MacIntosh, digital marketing manager Pernod Ricard Travel Retail Europe: “If we win with millennials now, like we have done with the award-winning Beefeater Gin Spirit of London digital campaign, we can learn how to keep our brands at the forefront of their minds as they get older and start to seek new brands and products in line with their developing tastes.”

For as long as gin remains a hot category among millennial travellers travel retail is likely to be a growth market both for the leading players and newer, start-up craft brands.

The challenge for the latter is to expand their often regional, often city-based following, and to find the resources to maintain their presence on shelf long term in what is a very high-cost retail environment.