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Pent up demand in Global Duty Free markets, but there is caution

The global duty free retail market size was valued at USD 35.87 billion in 2021. The market is projected to grow to 72.23 billion by 2029, exhibiting a CAGR of 9.17% during the forecast period. The global Covid -19 pandemic saw the Duty Free Retail experiencing lower-than-anticipated demand across all regions compared to pre-pandemic market exhibited a decline of 42.38% in 2020 as compared to 2019.

This market generates significant revenue for airports, airlines, tourism, and other travel-related industries worldwide. Total income from duty free and travel retailing. Duty free goods’ sales typically happen within international zones, and these goods can also be sold on ships or onboard aircraft with shoppers/travelers in transit.

The duty free retailing market is majorly driven by increasing growth of travel and tourism industry coupled with rising penetration of low cost airlines. Increasing sales alcohol and confectionery is a major factor driving the growth of the global market.

Travel retail revenues make a functionally important influence to the overall financing of airports, the maritime companies as well as their infrastructure. All in all, these physiognomies of duty free retailing pose distinctive offerings for the travelers by meeting their needs, generating revenues and in turn supporting the maritime and aviation transport infrastructure and their services. Duty free retailing has emerged in parallel with the expansion of sea and air travel.

Although, the use of perfumes and cosmetics has a long history, increasing demand for premium fragrances and cosmetic products has raised the growth of the global duty free retailing industry. Rising investments by the governments of several economies to set up duty free retailing centres to cater to international tourists is another key factor driving the global market. Perfumes and cosmetics as well as tobacco goods are expected to register the fastest growth over the forecast period owing to increased demand for international tobacco and cosmetic products. Travellers prefer tasting tobacco and other products of different countries and prefer purchasing them from duty free retailing shops. This is expected to drive the overall market growth.

According to the research, in 2021-22 lower prices vs the domestic market and value for money are consistently quoted across all segments, whether age groups, genders or travel purposes. Good value for money is a particularly significant purchase driver for seniors at 49% and millennials, 34%.

Convenience is also an important purchase driver for both seniors, 36%, Gen Z shoppers and leisure travellers (both at 23%). Another common purchase driver in travel retail in 2021-22 is loyalty to the brand, especially for seniors (30%) and females (26%).

Travel retail revenues make a functionally important influence to the overall financing of airports, the maritime companies as well as their infrastructure. All in all, these physiognomies of duty free retailing pose distinctive offerings for the travellers by meeting their needs, generating revenues and in turn supporting the maritime and aviation transport infrastructure and their services. Duty free retailing has emerged in parallel with the expansion of sea and air travel.

Although, the use of perfumes and cosmetics has a long history, increasing demand for premium fragrances and cosmetic products has raised the growth of the global duty free retailing industry. Rising investments by the governments of several economies to set up duty free retailing centres to cater to international tourists is another key factor driving the global market. Perfumes and cosmetics as well as tobacco goods are expected to register the fastest growth over the forecast period owing to increased demand for international tobacco and cosmetic products. Travellers prefer tasting tobacco and other products of different countries and prefer purchasing them from duty free retailing shops. This is expected to drive the overall market growth.

The research also analyses the importance of sales staff in influencing shopper behaviour. Sales associates have a significant impact on the decision to purchase and this varies quite considerably by customer segment as well as by region. The research reveals that the impact of the interaction has increased considerably in the wake of the pandemic as travellers set to the skies again.

Recent years have witnessed considerable demand for duty free alcohol across countries, notably in Asia. The diversifying consumer buying habits, rapidly increasing international tourist arrivals, and rising spending among the rising demand for premium liquor is creating heightened consumer interest in duty free alcohol worldwide at a macro. The alcohol category has also witnessed significant developments, most notably product launches, in recent years.  At a macro level, the growing demand for retail will boost duty free alcohol sales and other product types during the forecast period. Furthermore, the alcohol category is likely to encourage market key players to offer luxury and premium products.

The proliferation and introduction of new international airports across countries are creating lucrative business opportunities, in February 2021, the Airport Authority of India (AAI), an Indian governmental body that operates 125 airports saw revenues of USD 135.07 million (`987 crore) for the first phase of an international airport named ‘Dholera’ in Gujarat. According to Civil Aviation Ministry’s ‘Indian Aviation’s Vision 2040 claims that by 2040, India will have 190-200 operational international airports, while the top 31 Indian cities will have two operating airports. The fleet of 622 airliners to more than double to 2,359 aircraft by March 2040.

Numerous airlines across countries are expanding their international networks and establishing new airports as post the Covid-19 crisis.

Duty free markets are sensitive to exchange rates among countries. Although they operate in several countries with currencies including Euros, Dollars, and Pound, which have specific exchange rates, they are subject to global market changes exchange rate of a particular day. The currency exchange fluctuations in the global market may positively or negatively including retail chains that offer luxury goods, depending on the fluctuating exchange rate.

Based on type, the global market is segmented into perfumes, cosmetics, alcohol, cigarettes, and others. Internationally reputed distribution channels offer luxury perfumes worldwide. Affluent global travellers typically visit duty free retail chains that offer perfumes of internationally reputed Gucci, Giorgio Armani, Al Haramain Dazzle Intense, Belle, Signature Rose, Signature Silver, and Khulasat Al Oud. Perfume types, including Perfume or De Perfume, Eau De Perfume (EDP), Eau De Toilette (EDT), and Eau De Cologne.

Based on sales channel, airports, onboard aircraft, seaports, train stations, and others constitute the market segment worldwide. The mushrooming number of domestic and international airports across countries is favouring products. Various developments within the ‘airports’ category highlight the increasing number of duty free stores across airports in 2022, Flemingo, a Dubai-based global travel retail operator, and Adani Group, an Indian integrated business establish a duty free shop at the Thiruvananthapuram International Airport by mid-May 2022. This strategic move intensifying competition in the Indian market.

As the duty free & travel retail industry had hoped, 2022 has so far brought real signs of hope that the recovery in international travel is under way. The pent-up demand for travel, so often alluded to during the darkest days of the pandemic, is evident in all markets. But that demand is putting severe pressure on airport and airline capacity. And the reopening of some countries, notably in Asia, is only taking place at a gradual, even glacial, pace.

The duty free and travel retail market was hit hard in 2020 due to the sudden fall in tourism amid the Covid-19 pandemic. The tourism sector has already felt the negative impact of the pandemic on its performance much earlier. Globally, travel restrictions and measures started as early as January 2020. Domestic and international tourists limited their travel due to fear of contracting Covid-19, which reduced the number of domestic and international customers for this retail channel.

Duty-free and travel retail comprises a category in a growing list of ancillary offerings by airlines. For some low-cost and ultra-low-cost carriers, the growth in the scope and magnitude of ancillary revenues has become key to their operations, allowing them to offer lower ticket prices and stimulate the overall demand for air travel as a result. Furthermore, when compared to airport duty-free and travel retail, the duty free and travel retail sales generated by airlines are substantially smaller, both in magnitude and relative to the financial performance of the respective recipient.  

Top Bar Trends for 2021

The top bar trends for the new year include creative ways bar owners are adapting to save their businesses and preserve bar culture.

Off-Premise Alcohol Sales

For bars and restaurants that serve alcohol, off-premise sales will be an essential bar industry trend in 2021. Many businesses have already dipped their toe into alcohol takeout options, but the new year will see a surge of off-premise alcohol sales. The pandemic gave this already growing segment a boost and we expect breweries, distilleries, and beer distributors to get in on the action. Off-premise sales can take several forms:

Cocktail Kits – These drink kits are popping up on takeout menus everywhere. The perfect kit contains all the ingredients, and sometimes the tools, needed to create signature cocktails at home.

Growler Pours – Regulations on growler fills vary by state, but where allowed, growlers provide a safe option for beer enthusiasts to enjoy craft beer from their favourite brewery.

Adult Slushies – These boozy slushies are the adult version of your favourite childhood treat. States like Pennsylvania allow the sale of these frozen cocktails for takeout. To-go cocktail containers and supplies make it easy to send customers home with adult slushies or mixed drinks.

Whole Bottle Sales – Liquidation of liquor inventory was a knee-jerk reaction when the pandemic hit, but whole bottle sales by bars and restaurants are predicted to continue in the new year.

Alcohol Delivery

The intricate laws governing alcohol delivery were loosened in the last year, giving bars and restaurants in some states the opportunity to offer alcohol options on their delivery menu.

The demand for alcohol delivery will only continue to grow in 2021 as the expectation for convenience climbs ever higher. To take advantage of this trend, bars and restaurants may have to jump through a few hoops to make sure they are abiding by state and local regulations.

Curated Subscription Services

If the theme of 2021 is “drinking at home” then curated subscription services are another bar trend that helps to connect bar owners with their customer base, beyond just basic alcohol delivery. Some bars have kept their bartenders employed by putting them to work on cocktail subscriptions that channel their mixology talents into a slightly different medium.

Breweries are partnering with subscription services like Tavour, an app-based business that notifies subscribers immediately when new, highly rated craft beers become available for shipping. For wine bars, a hand-selected bottle with a handwritten note from the in-house sommelier makes a special monthly subscription box for wine lovers. These types of services will continue to become more creative and more sought after in the new year.

Digital Shops and Merchandise

Branded merchandise is nothing new for bars, but you can expect a more sophisticated digital shopping experience in 2021. For many bar websites, the merchandise page used to be an afterthought with a limited product offering. Standard merch might include a branded t-shirt, a shot glass, and maybe a beer glass or two.

Bars will be upping the ante and making improvements to their merchandise selection to include branded growlers, bar tools, and high-quality apparel. If customers can’t visit their favourite watering hole, they can show their support by bringing a little piece of the bar into their home.

Craft Canned Cocktails

The canned beverage trend was already quite popular when the pandemic gave it an even bigger boost. Now canned hard seltzer and canned rose wine aren’t the only stars of the show. Ready-to-drink cocktails in a can are an appealing bar trend for a few different reasons.

For one, the quality of canned cocktails has vastly improved and you can expect a perfectly blended drink that rivals a made-from-scratch cocktail. Also consider the safety benefits of offering your customers a pre-packaged beverage verses a hand-mixed cocktail. To top it off, a canned cocktail is a convenient option for imbibing in the comfort of your own home.

Premium Products

Quality over quantity is another common theme for 2021. All the time spent in quarantine has resulted in many drinkers becoming quite educated about mixing their own cocktails. This has a far-reaching impact on the industry because educated consumers expect the best and they’re willing to pay for premium spirits and ingredients.

Bars can take advantage of this shift by offering a smaller cocktail list that features local, sustainable, or top-shelf spirits. Use illustrative drink descriptions on your menu and don’t neglect the mixers. Premium bar ingredients like homemade bitters and infused simple syrups can elevate the cocktail experience even more.

Outdoor Drinking Spaces

The past year has shown that outdoor activities are safer than indoor activities, which has left many bars looking for ways to create outdoor drinking spaces. The question becomes, how do you provide an outdoor drinking space when you have no available space? For bars located in certain parts of the country, the outside temperature alone is a huge obstacle to overcome.

In 2021, bars will become more creative with their approach to outdoor drinking. Alleys, parking lots, and sidewalks will be transformed into temporary drinking spaces and remodels to balconies and rooftops will increase. To battle the cold temps and create an outdoor winter destination, bar culture will start to include a different type of BYOB in the form of bring your own blanket.

Advanced Online Ordering

Online ordering is a big part of the pivotal shift to reduce contact in the hospitality industry and allow consumers to perform most functions digitally. As the platforms designed for online ordering become more advanced, we will see enhanced options for bar service.

Instead of ordering drinks directly from a bartender, online ordering and digital payment can be performed by mobile phone to reduce person-to-person contact. In the past, online ordering was commonly used prior to arriving at the destination. In 2021, we’ll see online ordering being used as a method of ordering drinks and food onsite.

Social Media Presence

Social media is the gathering place where many go to feel like they are connected. With the present challenges imposed by the pandemic, an increased social media presence provides a way bar owners can connect with their customer base in spite of an onsite closure. But in 2021, maintaining a social media presence goes beyond just making regular Instagram updates.

Weekly video tutorials that put the mixologist front and center help to keep customers loyal to their favourite bar. Videos can be posted for free or offered as a subscription service to increase revenue. Many bars will start offering digital gatherings like wine or whiskey tastings in conjunction with an alcohol purchase so customers can follow along virtually.

For bar owners in 2021, the stakes are much higher than they’ve ever been. The bar industry trends that will shape the future bar scene are being adopted out of necessity rather than a need to keep up with changing fads. Diversifying revenue streams and providing safe, convenient methods of serving will continue to dominate bar culture for the unforeseeable future.

France’s buoyant US Spirits Business Tops 200 Million Bottles

France has been known for its luxury spirits brands and the US is one of the biggest markets in the world for premium spirits. Naturally French exports are directed to this market.

French spirits exports to the US have doubled in ten years and now account for more than 200 million bottles a year, says Christophe Macra MW, spirits expert and one of France’s Masters of Wine.

He said that interest in spirits was growing worldwide due to better distillation quality, innovation and new spirit-producing regions entering the market. Spirits consumption would continue to grow in both economically prosperous and developing regions.

At a spirits Master Class and review of market trends at Vinexpo 2019, Macra traced four trends in spirits development. He also predicted which five spirits categories would dominate global spirits in five years time. M Macra illustrated his review of international trends with a tasting of Calvados Armagnac, Gin and a Gentian aperitif and cocktail ingredient from France, Vodka from Ireland, Mezcal from Mexico, Whiskies from Sweden and Taiwan. The diversity of spirits and their origins showed that “The world wants spirits and people want to drink them”. A growing spirits distribution sector worldwide – especially in France where there were now between 20 and 30 national distributors compared with three or so 29 years ago – was further evidence of trade and consumer demand. Trends pushing spirits expansion are: revivals of traditional spirits such as Calvados and Armagnac where there was growing interest in Asia; rediscovery of locally-produced spirits, eg Irish Whisky, Gin and Vodka; global interest in little-known spirits such as Mezcal; new exotic spirits such as agricultural rum from Tahiti, “where no spirits at all were made 10 years ago”.

Similarly, in Sweden 12 whisky distillers operate using locally grown malt and wood casks. Taiwanese whisky was now a huge market characterised by accelerated maturation in a warm climate and excellent cask selection. M. Macra was asked to forecast the five spirits likely to dominate world growth in the next three to five years. He nominated: World Whisky – “still very strong and growing”; Rum – “mostly spirit made from molasses, but a growing contribution from rhum agricole; Brandy – “high quality brandies of all kinds”; Tequila and Mezcal – “growing interest worldwide” and Local craft spirits – “small distillers of high quality –hence the trend to ‘drink local’”