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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.  

Alcohol Market Insights Report 2022 and Future Growth Analysis by 2026

The number of alcohol consumers in India continues to rise on the account of rising urban population. Consuming alcoholic beverages has become a customary tradition for a majority of people residing in India’s urban cities. Changing lifestyles and increasing incomes are compelling them to consume alcohol on a frequent basis.

Future Market Insights recently published its study on India’s alcohol market, which estimated that more than `2.5 trillion worth of alcohol was consumed in 2016. The study further projected that consumption of alcohol in India is less likely to decline in the years to come. By the end of 2026, more than 14 billion litres of alcohol will be sold across India.

According to the report, revenues amassed from sales of alcohol in India will soar vigorously at 7.4% CAGR, and reach `5.1 trillion value by the end of 2026. In terms of volume, India’s alcohol consumption in 2016 has been estimated to have surpassed 8 billion litres and will grow at 5.5% CAGR in the due course of forecast period. An in-depth analysis on India’s alcohol distribution indicated that just above three-fourth of alcohol consumed in the country is government controlled. In 2016, alcohol distributed in India through open market sales made revenues worth over `400 billion. Meanwhile, about 550 million litres of alcohol was auctioned in India by the end of 2016.

The wine market in India is set to grow by USD 274.00 million from 2021 to 2026 as per the latest market report by Technavio. The report projects the market to decelerate at a CAGR of 19.78%. Also, the market to record a 29.30% Y-O-Y growth rate in 2022.

The wine market share in India is expected to increase by USD 274.00 million from 2021 to 2026, and the market’s growth momentum will decelerate at a CAGR of 19.78%.

The wine market share growth in India by the domestic segment will be significant for revenue generation. The demand for premium wine brands is increasing among consumers in India. Rising consumer preferences for smooth, rare, and innovative flavours of wine have increased, which has fostered the domestic production of wine. The rising demand for premium wine in recent years has led to an increase in the launch of innovative products.

India’s Alcohol Market: Report Highlights

  • Nearly two-third of India’s alcohol revenues will be accounted by sales of Indian-made foreign liquor (IMFL)
  • In 2016, more than 1,800 million litres of strong beer was consumed in India
  • By the end of 2026, white wine sales in India will have brought in an estimated `16.8 billion in revenues
  • Revenues amassed from sale of country liquor in India will have soared at 5.5% CAGR
  • Whisky will be the most-preferred type of alcohol in India, while sales of white spirits will grow at more than 11% CAGR
  • Key findings of the report, titled “Alcohol Market: India Industry Analysis and Opportunity Assessment, 2016-2026”, projected that Southern and Western states of India will continue to contribute to more than 80% of alcohol revenues through 2026. Bangalore’s SAB Miller India Ltd. and United Spirits Ltd., and Mumbai-based Tilaknagar Industries Ltd. and Allied Blenders & Distillers Pvt. Ltd. are key players partaking in the growth of India’s alcohol market.

Meanwhile, the consumption of alcohol will witness a considerable dip in India’s northern and eastern zone. Even still, a majority of alcohol manufacturers and suppliers in India are originating from New Delhi. Companies such as Carlsberg India Pvt. Ltd., SOM Distilleries & Breweries Group, Radico Khaitan Limited, Globus Spirits, and Jagatjit Industries Ltd. are based in and around the country’s capital. Shimla’s Mohan Meakin Ltd. and Daman’s Khemani Group are also recognised as some of the leading alcohol manufacturer in India.

Among every ten alcohol consumers in India, nine of them will most probably be men; leaving a slight chance that the tenth one is a woman. With more than 90% stake in India’s alcohol revenues, the country’s men will be offering over `4.7 trillion for consuming alcohol by the end of 2026. Likewise, Indian women are also likely to increase their contribution to the Indian alcohol market. During the forecast period, revenues accounted by sales of alcohol to Indian women will have soared at the fastest pace, registering a stellar CAGR of 8.6%.

The availability of online stores and online specialty retailers provides a wide range of choices to consumers in addition to online shopping conveniences.

The increasing use of online channels for purchasing products is likely to drive the growth of the wine market in India. The presence of strong online distribution channels and platform providers is expected to boost the growth of online sales.

The increase in the use of online sales channels is expected to create new opportunities for vendors where they can target customers without geographical boundaries, improve operational efficiencies, and provide customised products to consumers. Thus, the growing adoption of online sales channels will increase the profit margins of wine vendors, which, in turn, will drive the growth of the wine market in India.

The growing incidence of alcohol abuse and alcohol-related accidents, especially among the younger population, has led to many regulatory and social organisations launching campaigns against alcohol consumption and players to prevent this.

The increasing preference for non-alcoholic beverages, such as health drinks, is also affecting the growth of the market in the country.

The stringent advertising restrictions on alcoholic beverages, along with increasing campaigns against alcohol consumption in India, can hamper the growth of the wine market in India.

Consumption of alcohol containing molasses as key ingredients will remain higher in India. Grains will also serve to be a preferred raw ingredient used for producing alcohol in India. Although, production of alcohol through agricultural produce such as fruits and vegetable will remain negligent till the end of 2026. The report also anticipates that consumers will be more inclined towards buying Indian-made liquor – regardless of it being a foreign or Indian brand. Consumption of foreign liquor bottled in India is also likely to grow, but showcasing a marginal degree of increment.

Wine Market in India: Key Drivers and Trends

The increasing use of online sales channels is notably driving the wine market growth in India, although factors such as campaigns against alcohol consumption may impede the market growth. The research analysts have studied the historical data and deduced the key market drivers and the Covid-19 pandemic impact on the wine industry in India. The holistic analysis of the drivers will help in deducing end goals and refining marketing strategies to gain a competitive edge.

Key Wine Market Driver in India

The availability of online stores and online specialty retailers provides a wide range of choices to consumers in addition to online shopping conveniences. The increasing use of online channels for purchasing products is likely to drive the growth of the wine market in India. The presence of strong online distribution channels and platform providers is expected to boost the growth of online sales. The increase in the use of online sales channels is expected to create new opportunities for vendors where they can target customers without geographical boundaries, improve operational efficiencies, and provide customised products to consumers. Thus, the growing adoption of online sales channels will increase the profit margins of wine vendors, which, in turn, will drive the growth of the wine market in India

Key Wine Market Challenge in India

The growing incidence of alcohol abuse and alcohol-related accidents, especially among the younger population, has led to many regulatory and social organisations launching campaigns against alcohol consumption and players to prevent this. The increasing preference for non-alcoholic beverages, such as health drinks, is also affecting the growth of the market in the country. The stringent advertising restrictions on alcoholic beverages, along with increasing campaigns against alcohol consumption in India, can hamper the growth of the wine market in India.

This wine market analysis report of India also provides detailed information on other upcoming trends and challenges that will have a far-reaching effect on the market growth. The actionable insights on the trends and challenges will help companies evaluate and develop growth strategies for 2022-2026.

This statistical study of the wine market in India encompasses successful business strategies deployed by the key vendors. The wine market in India is fragmented and the vendors are deploying various organic and inorganic growth strategies to compete in the market.

To make the most of the opportunities and recover from post Covid-19 impact, market vendors should focus more on the growth prospects in the fast-growing segments, while maintaining their positions in the slow-growing segments.

The wine market in India forecast report offers in-depth insights into key vendor profiles. The profiles include information on the production, sustainability, and prospects of the leading companies.

The wine market share growth in India by the domestic segment will be significant during the forecast period. The demand for premium wine brands is increasing among consumers in India. Rising consumer preferences for smooth, rare, and innovative flavors of wine have increased, which has fostered the domestic production of wine. The rising demand for premium wine in recent years has led to an increase in the launch of innovative products.