Beam Suntory starts to ‘take leadership’ in GTR

Eighteen months on from the formation of Beam Suntory Global Travel Retail and managing director David Wilson is still smiling despite the difficult backdrop.

David Wilson, managing director of Beam Suntory’s recently formed global travel retail unit

*This feature was first published in the October 2015 issue of The Spirits Business magazine

What a difference a year makes – an axiom that rings particularly true for Beam Suntory. Just before the 2014 TFWA World Exhibition the company announced the cessation of its Maxxium Travel Retail joint venture with Edrington. The distribution partnership had acted as a successful brand building vehicle in the businesses’ major travel retail markets; its termination a direct result of Suntory’s US$16 billion (£10.5bn) acquisition of Illinois-based Beam, which promptly formed the third largest spirits company in the world.

From those embryonic days, Beam Suntory Global Travel Retail (GTR) is now a fully developed – and fully integrated – entity within the wider business. Although headquartered in Madrid, the GTR operation is now split into three regional hubs: Miami, Singapore/Sydney and London.

Consumer led focus

This approach, says an unwaveringly upbeat David Wilson, managing director global travel retail, reflects the ethos of the new model: “Be more customer focused and customer led.”

“Overall, it’s been a very positive year,” he says, reflecting on the first 12 months as a stand-alone global TR operation post-Maxxium. “We’re increasingly sharp at point-of-purchase being able to look at our core: Bourbon, single malt and Cognac.”

By identifying and focusing on these key categories, Wilson is confident that Beam Suntory can “start to take greater leadership” – a term he uses throughout the interview.

Perhaps unsurprisingly given the firm’s heritage, Bourbon has been front and centre over the past few months. Bourbon Legends, a global campaign which shines a spotlight on the company’s past and present products, kicked off in GTR in August with a major activation at Frankfurt in partnership with Heinemann. “It builds an authenticity of Bourbon,” he affirms. “Global travel retail is a fantastic place to showcase brands and create consumer impact.”

Beam Suntory believes travel retail is a “fantastic place” to showcase its Bourbon brands

Geopolitical instability

Europe travel retail was an interesting choice as a launch location to kick off a global campaign, given the travel retail sector’s recent poor health. The most sluggish TR region on the planet, sales grew by just 1.2% year-on-year in 2014, Generation Research figures reveal. The on-going geopolitical instability surrounding Russia and Ukraine, the subsequent impact of Western sanctions on the rouble and the seemingly never-ending financial circus in Greece have all taken their respective toll. Yet Wilson remains steadfastly positive.

“Europe is the right place to be, and the right place to grow,” he insists. He ranks Europe first in terms of regional sales, with Asia second and the Americas third. The answer to the market challenges, he reckons, is to continue to be “very proactive” in terms of “how we look at the offering and activity, the activity on Bourbon, single malt and Cognac”.

The channels that have perhaps suffered the most in European TR are the cruise/ferry markets and airlines, which posted sales declines of -1.5% and -1.8% respectively (Generation). Wilson confirms Beam Suntory is “not heavily exposed” in the channels, and as such has not been impacted by the contractions.

The right opportunities

“We do see potential growth there,” he counters. “However, our focus so far has been on forming our new business structure and growing our existing business base. We will look for the right opportunities and the right operators in due course.”

Any international business will be aware – perhaps painfully – of the climate of volatility plaguing currency markets around the world. With the US dollar soaring, the Chinese yuan dithering and the real and rouble in the doldrums, it is no surprise that travel retail stakeholders are feeling the pinch, with cross-border and often cross-currency trade inherent.

It’s only on the topic of exchange rates that Wilson’s sanguine demeanour slips. “Currency has had an impact this year, [especially] in markets closely aligned with the US. The requirement is to be more focused.” Yet amid all the uncertainty he finds a reason to be upbeat. “Currencies do change, and currencies come back. Our partners remain very committed, and the channel will regain competitiveness.” After all, “there are always bumps on the road”.

One of those bumps occurred in March when Switzerland-based Dufry snapped up rival World Duty Free in a €1.3bn (£860m) transaction that instantly created the world’s largest travel retailer with a 24% market share in airport retail.

Beam Suntory has experienced a “very positive year” in travel retail despite numerous difficulties across the market

M&A activity 

A flurry of transactions followed: Germany’s Gebr. Heinemann joined the acquisition race accruing a 60% share in Schiphol Airport Retail, and Lagardère Travel Retail procured US firm Paradies, to name just two. What supplier wouldn’t feel unnerved at a time of such seismic shifts among travel retailers?

Wilson takes a relaxed view. “The world is a global stage with something always bubbling up, so we need to remain agile in our approach, but it doesn’t prevent us giving consumers great experiences.”

For a further shift in the great TR landscape, just look to China. Most liquor players have had a notoriously difficult time of late, with sales impacted by changes in consumption patterns, the knock-on effect of the government’s anti-austerity measures and, more recently, market volatility and hampered consumer confidence.

“The Chinese shopper is definitely shopping differently, so we continue to adjust our approach. The market patterns have prompted slightly less reliance on the super premium end of the market, which has actually increased accessibility to many consumers,” Wilson counters. “We remain flexible. [The market] definitely has changed, but we do believe there is still strong growth in terms of future passengers.” While the changes are challenging, he is convinced that the long-term prospects for TR in China mean the company can remain confident.

Fledgling business

It’s easy to forget Beam Suntory GTR is, in its current format, just a year old. Wilson and his team managed to hit the ground running at a time of great industry turbulence – and despite the challenges, remain upbeat.

“We’re very positive about the future, although there’s certainly no room for complacency,” he sums up. “We see Bourbon [performing] very strongly going forward, single malts continue to grow and we’re seeing Cognac slowly bubble back. Our outlook for global travel retail remains positive. We believe with the new business we have more focus, more category leadership.”

But the need to be flexible is real; he expects to see change in share by region but remains content that the overall trajectory is positive, if slightly less dynamic.

“By its very nature travel retail will grow, with investment, airport expansion and passenger numbers – although there will continue to be challenges, the channel will continue to grow in the long term.”