Duty free eyes turn to India

As the duty free business gathers for this month’s TFWA Asia Pacific Exhibition & Conference in Singapore, Joe Bates senses a shift in industry focus towards India.

All travel retail eyes will be turning to Asia this month as the annual Tax Free World Association (TFWA) Asia Pacific Exhibition & Conference returns to its traditional venue of the Marina Bay Sands Resort in Singapore (12-16 May). For the first time since pre-Covid 2019, the show will offer visitors and exhibitors a full format of social events and parties, as well as its usual line-up of the conference, additional workshops and the four-day exhibition.

Whether attendees will be in any mood to let their hair down and party is another matter, however, as China’s much-anticipated rebound after removing Covid-related travel restrictions at the start of 2023 has been less than spectacular. High ticket prices, visa problems, a lack of flight capacity, the depreciating Chinese renminbi and the country’s slowing economy saw Chinese international passenger traffic finish last year at only 39% of its pre-Covid level.

“The Chinese government looks likely to introduce further stimulus measures to counter inflationary pressures, high youth unemployment, the property slump and declining birth rate, but any such measures to date have had limited effect,” concedes Sunil Tuli, president of the Asia Pacific Travel Retail Association (APTRA) and group chief executive of one of Asia’s largest travel retailers, King Power (Hong Kong).

As a result of these headwinds, Chinese international travel will not return to pre-Covid levels until 2025, according to The Economist magazine forecasts. For the moment, the mainland Chinese are opting not to venture too far from home. Overseas trips to nearby Macau, Taiwan and Hong Kong reaching over 75% of 2019 levels last year, compared with trips to other destinations only totalling 36.3%.

Recovery undermined

The recovery in outbound Chinese tourism is also being undermined by China’s rapidly developing domestic tourism offer, which Chinese people see as offering better value for money and increasingly a more patriotic choice. Around 489 million domestic tourism trips were made last year, according to China’s National Bureau of Statistics, with spending per person exceeding pre-pandemic levels. The domestic duty free island of Hainan was a clear beneficiary of this stay-at-home trend, with record sales growing over 25% last year to total over $6bn.

At this month’s TFWA Asia Pacific Exhibition & Conference, a special workshop will be held on Tuesday 14 May which will take a deep dive into this fast-changing Chinese travel retail market, exploring the latest consumption behaviour by Chinese travellers and current digital trends.

Speakers will include Ma Yan, general manager at Chongqing Airport, China’s sixth busiest airport, and Matt Liao, senior vice president marketing, branding and PR, at China Duty Free Group, the world’s largest travel retailer.

Nearly 80 wine and spirits companies will be exhibiting at this year’s show. Among their number will be 24 new or returning exhibitors, including the Italian company Amaro del Capo, producer of the popular Italian liqueur Vecchio Amaro del Capo; award-winning Languedoc-Roussillon winery Gérard Bertrand; and northern India’s Rampur Distillery, best known for making Rampur Indian single malt whisky.

With the golden years of Chinese tourism perhaps over for good, attention is turning to the next big travel retail opportunity – India. According to data by Swiss travel retail research firm M1nd-set and aviation body IATA, Indian international traffic last year exceeded pre-Covid 2019 by over 2 million, with almost 69 million Indians travelling overseas in 2023. This year’s total is forecast to break the 75 million mark.

For travel retailers, India is increasingly the new China, with a younger population, a booming economy, rapidly modernising airport infrastructure and a rising middle class eager to travel overseas. Unlike many Chinese, however, Indians are already familiar with international spirit categories and just need to be persuaded to trade up to more premium variants – a process already well underway in the domestic market.

Industry-specific events are already beginning to reflect this pivot from China to India. In April, for instance, APTRA held its first conference dedicated to the Indian duty free market in Delhi, while this month’s TFWA Asia Pacific Conference will feature a specific session by Indian business and marketing expert Dr Nirmalya Kumar dedicated to the blossoming potential of the Indian travel retail market.

A clear sign of India’s growing prominence within the wider duty free industry was Mumbai Travel Retail’s decision in March this year to rebrand itself as Ospree Duty Free. Mumbai Travel Retail (MTRPL), part-owned by powerful listed Indian infrastructure group Adani, already has duty free concessions at seven airports, including Mumbai, Thiruvananthapuram and Jaipur, and the renamed Ospree Duty Free now has global expansion plans.

These ambitions are already bearing fruit, with MTRPL recently winning a contract to operate the duty free business at Eurotunnel’s French terminal in Coquelles, near Calais. Operating under the name Le Marché Duty Free, the retailer will operate a new 800sq m store at the main Coquelles departures terminal and a smaller 75sq m store for HGV drivers in the separate freight terminal.

As China’s influence wanes, Indian travellers and Indian travel retailers are set to become a much more powerful force within the wider duty free industry over the next few years - a trend that industry decision-makers would do well to take notice of.