High flyers - single malts in travel retail

Single malt is growing in travel retail with increased premiumisation and demand for exclusivity. It tells us a lot about the category’s burgeoning fortunes around the globe. Joe Bates reports

If you want some insights into some of the key trends affecting the single malt scotch whisky market today, look no further than travel retail. No other single malt whisky market better illustrates the global sector’s surge in popularity over the past few years.

According to IWSR research, the travel retail single malt category’s CAGR of 8% between 2007 and 2012 was the fastest of any of the top 10 single malt markets.

Indeed, travel retail is now the second biggest market for malt after the US. Nearly one in five bottles was bought there in 2012, making it a sizeable 1.1 million-case business. So how exactly did this diverse channel of airport stores, border outlets, onboard ferry shops and in-flight sales become such an important sales channel for malt while for other spirit categories it accounts for a tiny proportion of total sales?

Gifting is a crucial factor. Many travellers are searching for gifts for loved ones back home or work colleagues. What fits the bill better for a Father’s Day present or a gift for the boss than a single malt whisky beautifully packaged in a fancy crystal decanter?

Economics has also played its part in single malt’s rise to travel retail prominence. Airport retailers have to pay sky-high rents to their airport authority landlords and are looking for high-margin products. With their ladder of age statements, increasingly expensive vintage expressions and luxury packaging, single malt whisky is the perfect shelf filler.

Upward trend

The global trend towards older and therefore pricier single malts is particularly apparent in travel retail. The number of rare and collectible malts being launched at key international airports continues to grow.

For instance, in April this year Bacardi decided to unveil its oldest ever single malt whisky with DFS Group at Singapore Changi airport. Limited to just 100 70cl bottles, The Royal Brackla 35 Year Old, with its orb-shaped crystal decanter and luxury presentation case, carries a hefty $15,000 (£8,934) price tag.

These high-end launches aren’t confined to Asia Pacific either. In February Diageo launched its oldest single malt exclusively with the World of Whiskies UK airport shop chain in the shape of Brora 40 Year Old. Distilled in 1972 and originating from a long-closed distillery, this highly peated £6,995 whisky is limited to 160 decanters, which are housed in a handcrafted wooden case made by a royal warrant-holding Scottish cabinet maker.

Exclusives have been the main growth driver of the single malt sector in travel retail over the past decade. They have advantages for all stakeholders in the business: travel retailer, customers and suppliers.

Predominantly (but not always) non age-statement (NAS) malt whiskies, these travel retail exclusives are unavailable domestically and so immediately attractive to operators. As well as giving travellers an extra reason to purchase, suppliers don’t have to be bound by domestic pricing levels when negotiating margins with retailers.