Pernod GTR boss: Adaptability is key in travel retail
Despite its challenges, travel retail is in a “much stronger” position to generate value growth compared to domestic retail, the CEO of Pernod Ricard Global Travel Retail has said.
Speaking to The Spirits Business, Pernod Ricard Global Travel Retail (GTR) head Mohit Lal said GTR “performance has stayed strong” as traveller numbers continue to grow.
According to recent Generation Research figures, the GTR market increased sales by 9.3% in 2018 to US$75.7 billion. Wine and spirits GTR sales increased by 7.2% to US$12.2bn.
“The growth of the travel retail industry continues to be strong and travel retail grew [almost] double digit last year – that’s faster than domestic markets,” said Lal. “So there are challenges but those challenges exist in an environment that has had sustained strong momentum for many years.
“The challenges have increased, but so have the challenges in domestic markets in high street retail. Is high street retail significantly more challenged than it was five years back? Of course it is. The world is getting a lot more complex and a lot more volatile, so agility and adaptability are key.
“Given a choice between domestic market retail challenges and travel retail market challenges, relative to the opportunities, travel retail has a much stronger platform for growth in value.”
Lal also said the return of duty-free shopping between the UK and EU after Brexit would present a “very large opportunity” for the industry, which could move away from competing with high street prices.
The move would fundamentally change the way brands and retailers target shoppers between the UK and EU, according to the executive.
“The way offerings are designed today for intra-EU travellers between the UK and EU are designed differently because many times you are competing with high street prices,” he said.
“You’ll have much greater opportunities to design offerings for travellers between the UK and EU. You can look at the ‘travel trail’ route and see which nationalities you wish to target with what message.”
The UK and European travel retail industries are advocating an immediate return of duty-free shopping between the UK and EU immediately after Brexit, which is currently scheduled for 31 October.
In a statement issued last month, the UK government singled out alcohol and tobacco to go duty-free in the event of a no-deal Brexit.
The European Travel Retail Confederation (ETRC) recently said it had received assurances from Brussels that in the event of a hard Brexit (where the UK would leave the EU’s single market), duty- and tax-free sales to UK-bound passengers would be permissible from 1 November.
“We have not quantified the return, but we do know that if duty free returns between the UK and EU post-Brexit, that will present a very large opportunity,” added Lal.