Canada goes small for growth

on 11 March, 2016

You need deep pockets to make a buck in travel retail these days. 

Any brand owner wanting precious duty free shelf space has to hold their nose and accept paper-thin margins. There is often only the flimsiest of business cases for a listing – it’s all about the lift in brand profile a high profile listing brings.

The situation is not much better for travel retailers either. The industry’s crazy tender system encourages overbidding. Airports are forever pushing up retail rents so they can keep airline landing fees low. High labour costs and tightened security rules all contribute to keeping profits low.

As a result, the travel retail industry has consolidated massively over the past decade. Dufry, the biggest of all duty free operators, now has a huge 25% slice of the airport retail market, for instance, having swallowed up rivals The Nuance Group and World Duty Free.

However, in North America it’s a little different. Many airports are still publicly controlled and programmes exist to encourage bids from small and disadvantaged retailers.

Consider Canada’s Halifax Stansfield international airport, for instance, located in the wilds of Nova Scotia. Last month the airport announced it was planning to open a new liquor store called Liquid Assets.

It’s to be run by local microdistillery Ironworks, which, when it opens next month, will sell spirits, wines, beers and ciders sourced from small Nova Scotia producers.

“We heard about the interest of the HIAA in having a locally produced wine, spirits and beer store and we were intrigued,” says Ironworks co-founder Pierre Guevremont.

“We attended a couple of briefings, and we assumed that one of the food organiszations would jump in and choose to run the store and they might sell some of our products.

“When that didn’t seem to be happening, we jumped in, realising that this store had the potential of being very important to the entire wine, spirits and beer industry in Nova Scotia.

“We chose the name Liquid Assets because we want to reinforce to the travelling public what an incredible resource, and a valuable resource, the wine, spirits and beer industry is becoming for the province,” adds Guevremont.

“More than 300 jobs have been created by this developing industry in the province in the past 15 years, and the products of our wineries, distilleries and breweries are winning awards around the world with regularity.”

As well as Ironworks’ own Bluenose Black Rum, Ironworks Vodka and Lynne’s Gin, the Liquid Assets store will also stock wines from Nova Scotia wineries such as Avondale Sky, Pinnacle Hill and Tidal Bay, as well as beers from Boxing Rock Brewing Co and Butcher Block Red, and Canadian whisky from Glenora Distilling and Caldera Distilling.

“We do not have huge plans for expansion,” says Guevremont when asked about the company’s plans for travel retail in the future. The fun is in the actual making of the products and in dealing with real customers.”

At a time when the shopping offer at many airports worldwide is increasingly dominated by the same handful of liquor brands, a few more retailers such as Ironworks dedicated to promoting regional wines and spirits might not be a bad idea.

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