Heinemann hails ‘solid’ year with sales up 5.6%

Travel retailer Gebr. Heinemann saw its group turnover climb 5.6% to US$4 billion in 2016, a “satisfying” result in a year of “unexpected events”, the owners said.

(L-R), Raoul Spanger, Kay Spanger, Gunnar Heinemann, Claus Heinemann, Peter Irion

Speaking at a press conference held in Hamburg yesterday, attended by The Spirits Business, fourth generation owner Claus Heinemann said challenges including currencies, terrorism, Brexit and the US election all impacted business operations over the year.

The Heinemann business at a glance

Despite the backdrop, the Heinemann retail business saw sales increase 4% to US$3.08bn, driven by gains across Asia Pacific, including strong 18% gains at Sydney Airport, where the company operates the “biggest” airport department store in the world.

Retail sales however fell in Turkey, Norway and Frankfurt, with declines attributed to falling passenger numbers, currencies and a drop in Chinese passenger traffic respectively.

“Chinese travellers are happier to come to Sydney where we have achieved volume,” said Raoul Spanger, executive director of retail and HR. “We are very happy about this development.”

Liquor accounted for 26.1% of total sales, the second-largest category behind perfume and cosmetics, which holds a 31% share.

The distribution side of the Heinemann business posted 13% sales gains, largely driven by a 33% rebound in turnover in the Russia and CIS markets as the rouble stabilised.

“After two years of declines we were able to turn around our business,” confirmed executive director of distribution, Peter Irion. “We have a long-term perspective on Russia and the CIS markets.”

He added: “Despite difficult circumstances we are very positive,” noting that the stable rouble will help maintain the recent uptick in passenger spend.

Irion said he hopes the distribution business, which currently accounts for 24% of the Heinemann business, will grow by more than 10% in 2017 to surpass €1bn (US$1.06bn),

Pricing a ‘challenge’

Heinemann director of purchasing and logistics, Kay Spanger, said one of the biggest challenges he is facing is pricing.

“The more transparent the market is becoming, the more transparent our pricing becomes. This brings up the challenge of what is the right price for each consumer.

“We hear recently of brands in Asia reducing local market prices as they know people are comparing duty free unfavourably. That’s an issue when your product is a global brand, known in all regions, and people are familiar with the pricing.”

He also highlighted the need for more innovative products to be listed in the channel.

“The market is saturated – all the brands are in the market. We need to be more innovative.”

JV a ‘preferred model’

Heinemann has entered into a number of joint venture agreements with retail partners in recent years, including the recent partnership with Fraport at Frankfurt Airport. Other operations include with Schiphol Airport in Amsterdam and ATÜ Duty Free with TAV Airports and Unifree Duty Free in a number of locations including Tunisia and Turkey.

“Joint ventures are one of our preferred models but not the only one, and we must be flexible,” said Raoul Spanger on the Frankfurt JV. “We may operate like this in other places too. A JV is a good way to connect better with the airport and the consumer.”

Looking forward

Heinemann also pledged more than US$106 million in investment over the coming years, noting that it had no contract ending in the next few years.

Plans include “optimising” internal structures, but with a significant chunk going towards operations at New Istanbul Airport, which is due to open in 2018.

As part of Heinemann’s 25-year contract it will manage more than 50,000 sqm of retail space, an operation described by Spanger as “the biggest project we have undertaken”.

Other investment plans include bolstering the retailer’s digital footprint, and developing a Travel Retail Data Innovation Group.