China’s meteoric rise to travel retail hegemony and its post-Covid troubles have dominated coverage in the duty free trade press in recent years. This understandable China-centric bias has meant other significant markets have often been overlooked. A case in point is Latin America. It remains an important spirits market, especially for premium blended Scotch, which attracts significant numbers of tourists, but is often afflicted by economic downturns and currency volatility.

Last month’s ASUTIL Conference, a long-standing annual meet-up of Latin American travel retail executives, was then a welcome opportunity to shine a much-needed spotlight on this neglected market. Of course, this year’s event in Lima, Peru – a sell-out with 320 attendees – took place at a time of unprecedented geopolitical tensions, tit-for-tat tariff wars and economic uncertainty.

The consensus among the conference’s speakers was that the world’s alarming slide towards protectionism would lead to lower economic growth and less confidence among travellers. Yet there could be upsides for Latin America if the continent’s major players – Argentina, Brazil and Mexico – utilised their natural resources and manufacturing capabilities wisely. With wide-ranging domestic tariffs in place in the US, regional duty free prices would also be more attractive for visiting American travellers.

The outlook for international travel across the region is looking bright. Travel retail research firm Mind-set’s Peter Mohn revealed that Latin America will receive 257 million international trips this year, a 19% increase on pre-Covid 2019. He also stressed the rising importance of Gen Z travellers, their increased purchasing power and attachment to brands with authenticity and sustainability credentials.

Border stores continue to play an outsize role in the Latin American duty free set-up, thanks in part to the high domestic taxes on liquor in markets such as Brazil and Argentina and their very generous duty free allowances. A decision by the Brazilian government in 2019 to allow duty free border stores to open at 33 twin border cities gave the industry a further shot in the arm.

The channel continues to have considerable momentum. During last month’s ASUTIL Conference, for instance, Avolta Brazil announced it was opening a second Brazilian border shop. The 1,000sq m store will open within the next few weeks in Shopping Catuaí Palladium – a popular mall in Foz do Iguaçu, the border town adjacent to the Brazilian borders with Paraguay and Argentina, and close to the world-famous Iguaçu Falls.

This year’s ASUTIL event included a dedicated Beyond the Bottle panel workshop focused on duty free liquor, which featured leading regional executives from Pernod Ricard Global Travel Retail, Suntory Global Spirits, Diageo Brazil and Moët Hennessy all taking part in the discussion.

During the panel, Mohn revealed some interesting research, which showed that price as a travel retail purchase motivation had dropped from 26% to 17%. With many travel retail markets struggling to surpass pre-Covid sales levels, brands continue to target the growing $750m Indian duty free market intensively

“Don’t get me wrong, price will always be important, but we can see a clear trend in travel retail that the experience in the shop is clearly becoming more and more important, whereas the price is reducing,” Mohn told the audience.

Multiple headwinds

Away from Latin America, the wider travel retail spirits business continues to face multiple headwinds, most notably a cost of living crisis in many markets and a significant shift in post-Covid Chinese traveller behaviour away from shopping towards more experiential activities.

These travails were laid bare in Brown-Forman’s latest annual financial results, which showed a net 7% drop in travel retail sales.

The owner of Jack Daniel’s blamed the poor set of results on declining sales of its super-premium Jack Daniel’s expressions and the divestiture of Finlandia Vodka. In contrast, the company’s super-premium Venezuelan rum brand Diplomático performed well. 

With many travel retail markets struggling to surpass pre-Covid sales levels, brands continue to target the growing $750m Indian duty free market intensively. India is rapidly becoming a travel powerhouse. Better flight connectivity and the country’s growing urban middle class are expected to drive a 15-20% growth in international travel this year. Over 40,000 Indian passports are being issued daily.

To capture the attention of this new group of younger urban Indian consumers, brands are seeking out impactful collaborations with the country’s top entertainment stars and social media influencers. For instance, Bacardi Global Travel Retail teamed up with Punjabi music star Karan Aujla to support the launch of the ultra-premium Patrón El Alto tequila at Mumbai and Delhi airports during May and June.

The partnership kicked off with a launch event in Mumbai, which featured a live performance by Aujla and an immersive, drone-led product reveal. The collaboration also features digital footage of the singer travelling to Mexico to visit the Patrón Hacienda on a fact-finding mission, which will be used in a 12-month campaign across digital, social and PR platforms.

This innovative strategic alignment with a prominent regional celebrity could well create a powerful blueprint for other overseas brands to prosper in the Indian duty free market, especially for spirit categories with little resonance among local consumers, such as tequila. A deep understanding of local culture and consumer aspirations, rather than just product placement, will be the key to unlocking this market’s undoubted potential.