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Insight: American whiskey in TR

American whiskey is outperforming the broader travel retail spirits category, prompting brands to pump more energy into the sector.

The category has transformed into a beacon of hope

*This article was published in the July 2016 edition of The Spirits Business

As the full extent of 2015’s global travel retail sales losses becomes apparent, the American whiskey category has transformed from an under-invested sideline into a beacon of hope. Provisional Generation Research/TFWA figures show the entire industry contracted 2.3% in the last calendar year with the wine and spirits sector down 2.7%. Yet IWSR data reveals that American whiskey is growing ahead of the category, with five-year CAGR growth running at 3% compared to the wider 2%.

According to Beam Suntory, the gains come from a broad geographic base. While the “Bourbon explosion” in the mature US market has resulted in double-digit growth in the channel, it’s the emerging middle classes in India and China that look set to add incremental sales going forward.

“There are a number of factors that can be attributed to this progression, including the extension of US whiskey’s global footprint with new distribution gains and the premiumisation of the category with ‘small-batch’ and ‘craft’ Bourbons,” reckons Fernando de Vicente Meirás Sr., global marketing manager global travel retail, Beam Suntory. Brands from the company marketed in the channel include Jim Beam, Maker’s Mark and Knob Creek. For Meirás, it’s innovation in terms of flavour and offering which has buoyed the category.

Brown-Forman CEO Paul Varga agrees. The Jack Daniel’s and Woodford Reserve maker has “held up better than most” despite the wider spirits losses, with the company “benefiting” from its “concentration in American whiskey”.

With the recent strong performance, why does the category remain so small in terms of physical TR presence – and should retailers feel compelled to expand it?

“It is only in recent years that American whiskey brands have begun to think as a category instead of singular entities,” Meirás explains. Retailers have only recently started to recognise the importance of developing a broader whisk(e)y appeal in order to tap into incremental growth opportunities.

As Varga recalls: “If you go back 10 or 15 years or so, you’d be lucky to find a bottle of Jack Daniel’s on the lower shelf in some of these [travel retail] stores. And now we’re starting to see presence in some airports around the world. So it’s come a long way but it still has a long way to go, I think.”

Category development

In order for the sector to continue to flourish, strong partnerships between suppliers and retailers is surely key. Beam Suntory cites support from its GTR customers to ensure adequate availability, along with investment in a long-term strategy, as critical to further category development. Recently this has played out through two campaigns, Whiskies of the World, where American whiskies sat alongside Japanese expressions in the Beam Suntory portfolio, and Bourbon Legends, with both rolled out through major European activations in partnership with Gebr. Heinemann.

Brown-Forman too has leveraged its travel retail customers to implement a number of initiatives to mark the 150th anniversary of the Jack Daniel’s Distillery. DFS Group will hold a number of events across its geographic footprint throughout 2016 to mark the occasion, with special editions and events in the calendar. “Like anything, I think it’s a partnership,” Varga states. “[Retailers] generate a lot of interest in their stores because they have exclusives, and we consider it an important marketing vehicle.”

But do American whiskey suppliers – and there are few in the global channel – need to do more to petition retailers for a bigger share of high profile promotion space? “It’s such an interesting thing to brands inside [and outside] the category, but I like to look at the way that confectionery is sold,” notes Varga. Competition is fierce, and not just from the whisk(e)y, or even spirits, sector, even with the reported growth spurt. “I think we’re going to have to continue to be very imaginative with the offering and the merchandise we provide.”

Despite the gloomy backdrop, the outlook for American whiskey in travel retail is positive. “Although 2015 was not the strongest year for the market as a whole, sustained long-term consumer interest in Bourbon, as well as the […] commitment to investment, will deliver a strong future for GTR,” concludes Meirás.

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