Flying High

Scotch whisky is hugely invested in travel retail and is reaping the rewards as passengers continue to trade up, especially at the top end. As a cold wind blows through the High Street, Tom Bruce-Gardyne wonders if airports will be premiumisation's last stand …

The glamour of airport duty free is not always obvious, particularly on short flights. Having finally cleared security, many simply crave a straight path to the gate before it closes. Instead, they are herded through an Ikea-like maze of bright lights and gleaming bottles in a cloying haze of perfume.

Expand the space and time for the long haul, add in those leisurely flight connections in big airport hubs, and global travel retail (GTR) starts to come into its own. It is a key channel for Scotch whisky which has long been its top-selling spirit, and it's typically a top five market for leading brands.

GTR is also, arguably, one of the last great bastions of premiumisation. According to the IWSR, duty-free is now the biggest market for so-called 'status spirits' (US$100 and above) whose sales soared by 48% last year. It went on to claim this subcategory where Scotch recently seized the lead from Cognac and Armagnac, declined in big markets like France, China and the UK, though grew by 'low single digits' in the US in 2023.

A year on, and US$100+ Scotch is almost certainly shrinking in America, and liable to tip into free-fall if president-elect Trump gets to impose what he calls "the most beautiful word in the dictionary." If tariffs of 10-20% are levied on all imports including blends and single malts, travel retail will become even more important for the drink.

There's something about the channel that sets it apart from the transactional world of domestic retail as Janice McIntosh, Whyte & Mackay's marketing director UK, Europe and GTR, explains: "I know travelling can be quite stressful, but we find, especially in airports, people are in a different headspace, and therefore more open to enjoy a more leisured branding experience."

From research, she claims that buying in duty-free is perceived as a personal treat rather than an everyday purchase. Not that the channel is cocooned from those economic headwinds buffeting the High Street. "I think travel retail is feeling them as well in terms of that reduction in confidence at the top-end," she says.

Perhaps the IWSR was being optimistic when it predicted 'status spirits' will grow 115% by value from 2022-27? "It's really hard to say," Janice replies. "We're still working with 2023 (IWSR) data, but we've obviously got, more-or-less, a full year of real sales, real customer feedback and a real understanding of the pressure consumers are under. So, it does seem optimistic, but then I think we'd all like a bit of optimism right now."

Like all markets in times of uncertainty, GTR suffers from "that middle squeeze," she says. "At the very top-end, the ultra-high net worths are still able to buy and invest in rare malt whisky." Below that, people are "probably making more informed choices." While down among mainstream blends, the traditional money-saving lure of duty-free has grown in the UK. You can currently pick up a litre of pre-ordered Whyte & Mackay for £9.98 at Edinburgh airport. The same bottle costs £26 in town thanks to minimum unit pricing.

The Macallan, the channel's most valuable single malt according to the IWSR, sits at a more rarefied level. At its parent company – Edrington, Jeremy Spiers, regional MD for GTR says: "Passenger numbers have recovered pretty much fully to pre-pandemic levels and there is clearly an appetite to purchase," and that since Covid "one of the most notable shifts has been the rise of premiumisation."

Then, using an expression even uglier than the P-word, he talks of how "the channel has embraced the concept of 'retailtainment'." As he says: "Brands are increasingly incorporating digital activations, such as interactive displays and augmented reality, to attract attention and create memorable shopping moments." It is all about giving punters an experience, perhaps transporting them from Singapore's Changi airport to a distillery in deepest Speyside for a whizz round the stillroom and warehouse via the magic of a VR headset.

Large sums are splashed on airport activations – pop-up events usually for a month that can be quite theatrical. "Internally, we consider them an advertisement in Vogue magazine," says Janice's colleague, Clarisse Daniels who runs GTR marketing in Europe, Middle East, India & Americas. This summer a campaign for Whyte & Mackay's Dalmore, Jura, Fettercairn and Tamnavulin in Dubai airport caused a 37% jump in net sales on June 2023.

Having something different to offer is considered crucial, and this has led to an endless torrent of 'travel retail exclusives'. Quite how different they really are beneath the label is debatable, but sometimes they can be genuinely exclusive like Fettercairn in Dubai airport. Not being available domestically is one reason its sales exploded by 218% in June.

Until recently, most of these 'exclusives' came without a number, but this is changing. "The Macallan Colour Collection, our new travel exclusive core range has seen a return to age statements – a move which has clearly resonated with shoppers," says Jeremy Spiers. Maybe it was mistake to remove them in the first place?

With the grizzly prospect of US tariffs next year, Scotch brands will be seeking to engage American consumers in airports and on cruise ships as never before. Meanwhile, one country the Scotch industry is pinning its hopes on is India, and here duty-free sales are booming especially for single malts. According to Clarisse Daniels, such whiskies represent the most valuable duty-free category bar none in the country's two biggest airports for liquor sales – Delhi and Mumbai.