Juul-Mortensen: TR shows ‘encouraging signs’

Tax Free World Association president Erik Juul-Mortensen has opened the 2016 TFWA World Exhibition with an optimistic address, stating that despite significant challenges the industry shows “encouraging signs” of recovery.

Erik Juul-Mortensen opened the 2016 TFWA World Exhibition with an optimistic address

In his annual State of the Industry presentation, Juul-Mortensen started by offering his condolences to the city of Nice following the terrorist “atrocity on an almost unimaginable scale”on Bastille Day earlier this year in which 88 people lost their lives.

He also drew attention to a number of ongoing social and geopolitical crises, from the situation in Syria, economic and political uncertainty in Europe, the situation in eastern Ukraine, tensions in the South China Sea, and the Zika virus, all of which “have had and continue to have an impact on our industry”.

Intensifying regulatory pressures are not helping, he added.

Yet despite “one of the toughest environments in recent times”, Juul-Mortensen said optimism was justified by “encouraging signs, not only wishful thinking”.

Brexit, while not a reality for at least two years, could provide a boost to the sector. While it is impossible to know what any allowances between the UK and EU might be ahead of key negotiations, he “would expect” duty free shopping to return. However, he cautioned this is in no way guaranteed, and the risk of damage by protectionist policies is “very real”.

Moving on to data from Generation Research, Juul Mortensen confirmed that total travel retail sales in 2015 contracted by 2.7%, falling to US$62 billion for the year. This was the first decline since Lehman Brothers in 2009, and was exacerbated by shifts in key currencies, he added.

Many key markets posted steep year-on-year value losses, including Hong Kong (-23.5%), Egypt (-32.5% – with terrorism a “direct cause”), and Brazil (-36.8%), driven by political and economic challenges.

However, Juul-Mortensen noted the sector was “inching back to growth”, with global travel retail and duty free sales posting provisional value gains of 0.8% in the first quarter of 2016.

The wine and spirits category performed particularly well, posting year-on-year growth of 4% for the period, outpaced only by the beauty category.

These figures “allow us to be cautiously optimistic”, he stated, sharing IMF forecasts for “not spectacular but it is sustained” global economic growth of 3.4% in 2016 and 3.6% in 2017.

In addition, he noted that the ACI Global Traffic Forecast to 2035 shows that passenger numbers will run at a CAGR of 5% and are set to hit 19.1bn by the end of the forecast period.

Retailers and brands must continue to “reinvest, reinvent and diversify”, he stated.

Juul Mortensen drew his address to a close with a focus on regulatory challenges, noting that the travel retail and duty free sector is “under pressure on a number of fronts”.

In the EU, Provision of Information to Consumers legislation is either already enforced or under consideration, impacting the spirits sector alongside confectionery, and cosmetic sectors. The industry has yet to secure exemption, with the viability of travel retail-exclusive products under threat due to the extensive labelling requirements.