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Vodka faces turbulence in travel retail
The appeal of vodka to younger travellers is a bright spot in a mixed post-pandemic performance.
*This feature was originally published in the June 2024 issue of The Spirits Business magazine.
The vodka sector remains the second-largest after whisky in global travel retail (GTR) but its patchy post-pandemic performance reveals a lot about its likely future trajectory. In 2022, the year much of the world resumed travelling globally after Covid-19 lockdowns, vodka sales volumes in travel retail rebounded by 68%, according to IWSR Drinks Market Analysis. While this is impressive, the category lagged behind the wider spirits sector, which grew by 74% over the same period.
The picture was markedly brighter for vodkas positioned in the premium-plus price tiers, according to the IWSR data. Higher-priced vodkas grew by 98% in 2022 in volume terms and, more significantly, they are set to post a healthy compound annual growth rate of 11% over the next three years, ahead of both standard-priced vodkas at 5% and overall spirits at 8%, respectively.
“GTR [vodka] is expected to continue to premiumise with an increased focus on luxury and a shift in focus for GTR as a marketing channel to create a halo effect for larger brands in domestic duty-paid,” says Emily Neill, chief operations officer of research and operations at IWSR, confirming the category’s drive upmarket.
Diageo Global Travel, the owner of the standard Smirnoff and the super-premium Cîroc and Ketel One vodkas, remains bullish about vodka’s prospects in travel retail. “Post-Covid, we have seen a strong recovery in vodka,” says Nicolas Wyckaert, Diageo Global Travel head of marketing, Tequila & ‘Premium Core’. “This is not just due to travel returning, but its relevance in the 18- to 24-year-old group who are back in travel strongly. “The growth of Smirnoff Blue has been noticeable as a winner,” he adds. “For those looking for something versatile and easy to use, Smirnoff and, indeed, Cîroc resonate. We know that vodka purchasers skew younger. In GTR, 36% of vodka purchasers are Millennials and younger, versus 27% for whisky.”
Focus on sustainability
Pernod Ricard-owned Absolut also sees Millennial and Gen Z travellers as key to its fortunes in travel retail, with a recent activation at Stockholm Arlanda airport highlighting the brand’s strong track record of supporting environmental, social and governance (ESG) causes such as sustainability and the LGBTQIA+ community, two issues that are close to the hearts of many younger consumers.
“The activation incorporated cutting-edge technology, featuring a prominent bottle-silhouette LCD screen that delivered an interactive brand journey, incorporating details on Absolut’s roadmap to carbon neutrality, the brand’s sustainable wheat journey and much more,” says Liya Zhang, Pernod Ricard Global Travel Retail’s vice-president of marketing. “It also highlighted the brand’s important work to support numerous communities, such as the Absolut Ally initiative, and the implementation of a Safe Spaces programme, collaborating with bars to create welcoming environments for the LGBTQIA+ community.”
Tito’s cruises in-house
Another vodka producer with a glass-half-full view about travel retail’s potential is US brand Tito’s, which in recent years has been aggressively expanding its presence in the channel.
“We’ve seen strong double-digit growth for Tito’s Handmade Vodka in duty free so far this year,” reveals John McDonnell, managing director, international. “Business has been particularly strong in European markets such as Ireland, Croatia, and Montenegro, to name but a few.”
With 35.7 million people expected to take a cruise this year, a 6% increase on pre-Covid 2019, McDonnell also highlights the cruise sector’s increasing significance for Tito’s. “The cruise channel is very important to us, so much that we recently made the decision to bring our cruise business in-house (rather than using a broker), and have hired Curran Zinn to join the Tito’s team to lead that effort.
“On many cruise ships, especially in North America, Tito’s is poured onboard and has become a successful part of those cruise lines’ bar programmes,” he adds. “So, that definitely helps our onboard duty free sales as well.”
Similarly, Canada’s super-premium Crystal Head Vodka, created in 2008 by actor Dan Aykroyd and artist John Alexander Aykroyd, also highlights the cruise sector’s growing potential. “I think cruise will continue to grow,” argues managing partner Jonathan Hemi. “They are doing all the right things. They are constantly reinvesting in their businesses, innovating and continually adding value to the consumer’s experiences. I am a big fan of their approach.”
He adds: “Like all significant sales channels, it is very competitive to win listings. For us, the key to approaching the cruise channel is to have a strategy that aligns with that particular cruise line. It isn’t a one-size-fits-all approach with cruise. It simply can’t be. You need to really get to understand each cruise customer and what their customers look for and appreciate. From there, you can build a plan for it.”
Innovation
While vodka remains a core category for travel retailers based in Europe and the Americas, its role in Asia Pacific and the Middle East – two regions expected to fuel growth for the overall duty free industry in the next decade – is much smaller. At Dubai Duty Free, for instance, where Indian expat workers are a key part of the business, vodka only accounted for 7% of liquor sales last year – ahead of categories such as Tequila (1%) and gin (3%) but way behind Scotch whisky at 42%.
According to Sharon Beecham, senior vice- president purchasing at Dubai Duty Free, Indians, Sri Lankans and Russians are the retailer’s best vodka purchasers, while the top-three-selling vodkas are Grey Goose, Belvedere, and Absolut, respectively. “The last addition that has performed well in the vodka category was Absolut Wild Berri, which sold 2,800 pieces for a sales value of AED 266,000 (US$72,422),” she reveals.
Overall, however, Beecham is disappointed by the level of innovation on display in the vodka category. “Compared with whisky and Tequila, where there are a lot of innovations taking place, vodka doesn’t have many,” she argues. “Apart from flavoured vodkas, there isn’t much innovation coming out of vodka brands that excites customers.”
Beecham’s views may not be shared by all duty free buyers but there is a growing sense that Tequila, albeit with a much smaller market share, has the greater momentum. Yet vodka’s appeal to younger legal-drinking-age travellers, its key role in so many classic cocktails, and ongoing premiumisation mean this mature category will remain a must-stock for many years ahead.
Au Vodka finds golden touch in travel retail
Since launching into travel retail onboard EasyJet in April 2023, Welsh super-premium vodka Au, instantly recognisable for its gold bottles and huge social media following, has expanded its presence in the channel rapidly, gaining listings at key UK airports, as well as onboard cross-channel ferry lines DFDS, P&O Ferries, and Irish Ferries.
Further afield, Au Vodka has won business with the German travel retailer Gebr Heinemann, cruise retailer Harding+, and Bahrain Duty Free. The brand’s distributor, GMAX Travel Retail, is confident travel retail listings will soon follow in Asia Pacific.
“We are initially targeting regions where there are large numbers of UK travellers, as well as major ‘party’ holiday destinations catering for many nationalities,” says GMAX founder and director Garry Maxwell, who reveals a one-litre bottle has already been created for travel retail. “UK passengers are key for instant growth. However, we are finding all nationalities love the brand.”
Founded by friends Charlie Morgan and Jackson Quinn in 2015, Au Vodka claims to be the fastest-selling super-premium vodka in the UK, with domestic distribution in more than 40 countries.
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