At the recent Tax Free World Association (TFWA) exhibition in Singapore, TFWA president, Erik Juul-Mortensen, warned attendees at the opening day conference that the retail channel faces a possible shut down of all tobacco products if the World Health Association is successful in clamping down on the buying and selling of tobacco products.
The WHO is due to have its third session on ‘Intergovernmental negotiating body on a protocol on illicit trade in tobacco products’ in Geneva between June 28 and July 5.
The organisation sees the purchasing of tobacco products, such as cigarettes, as a easy channel for people wanting to smuggle and trade tobacco.
For the travel retail/duty free industry losing cigarette sales, which along with spirits is the principal reason for passengers entering airport, ferry and border shops, would be a massive blow.
“This is a huge issue for our category, said Juul-Mortensen at the association’s exhibition opening day conference on May 11. He said people who initially go to buy tobacco in their stores go on to spend two and half times more on other products, such as cosmetics and perfumes.
There is also a suspicion in the global drinks industry that what happens to tobacco may happen to alcoholic beverages.
Juul-Mortensen had told delegates that the travel retail sector had been hit by a “triple whammy” of falling passenger numbers due to the economic crisis, de-stocking among wholesalers and retailers and fluctuating currency rates. He said the latter two had created “tensions” between suppliers and wholesalers.
He said another huge issue for the industry was the practice of low cost airlines charging passengers to take an extra bag onto their flights. With a picture of the Ryannair chief Michael O'Leary behind him, Juul-Mortensen said that the charging €30 or £30 at departure gate was: “moving the goalposts of the business model of duty free”. He urged Asia Pacific airport operators to scrutinise future contracts with low cost airline operators to ensure that they and their retail partners do not lose revenue by allowing such a practice to be enacted.
He called on the industry to “raise the bar” and pool knowledge about passengers and customers. “Although there are millions fewer traveling there are still millions who still are and only 30% of them buy in travel retail shops,” said Juul-Mortensen
“You can never know too much about our passengers. Pooled knowledge is a powerful tool. It is wasted if there is no commitment to use it.”
He urged industry not to cut back but to spend its way out of these tough economic times.
His five suggestions for survival were:
2/ Know your customers
3/ Play to your strengths
4/ Be vigilant
5/ Partnership - for the long term
Juul-Mortensen said: “History shows crisis breeds opportunity.” He called on industry leaders to have courage to act.