The travel retail drinks market is experiencing mixed fortunes as the last quarter of 2024 draws near. The faltering global economy and rising geopolitical tensions threaten to take the gloss off what has broadly been a continued recovery from the disastrous effects of the Covid-19 pandemic. Offsetting these headwinds are the increasing importance of Indian travellers and the resilient growth of premium-plus-priced products.
The latest figures from the IWSR Drinks Market Analysis reveal that total alcoholic beverage sales in travel retail have overtaken pre-pandemic levels in value terms. Revenues rose 21% last year and the category posted a more modest but still positive 3% CAGR between 2018 and 2023. Volume growth was shallower, however, rising only 5% in 2023, and remaining 18% down on pre-pandemic 2019.
The IWSR predicts that GTR will continue to outshine the global wine and spirits market in the years ahead, but the drinks research firm warns that travel retail volumes will continue to come under pressure, with growth falling slightly below the anticipated increase in airport passenger numbers.
With inflation soaring and prices increasing in many markets, a drop in travelling consumer confidence is already hitting sales of standard and premium-priced products in travel retail. This type of product is often hard for travel retailers to offer a price advantage compared to the domestic market. In short, brands and retailers are having to work harder to part travellers with their money.
“It has been challenging in some markets with economic volatility influencing consumers’ discretionary spending on luxury items, including wines and spirits,” says Eamon Prunty, GTR director at UK-based Halewood Artisanal Spirits, the owner of brands such as Whitley Neill gin and Dead Man’s Fingers rum.
“We are seeing a return to the need for a true value proposition against the high street,” he continues. “This is particularly true within regional airports where a large percentage of travel is low-cost airline, holiday traffic. It’s one of the reasons why our JJ Whitley Artisanal vodka – frequently offered at £9.99 for a litre (or two litres for £19) – flies off the shelves where listed.”
Charlotte Reid, IWSR GTR senior insights manager, adds: “The [travel retail] industry is adapting to lower business footfall and consumers who are more attuned to browsing and buying online. The industry is adapting to lower business footfall and consumers who are more attuned to browsing and buying online.”
Premium-plus products grow market share
At the other end of the price spectrum, the super-premium and ultra-premium price band levels are in robust health, according to the IWSR’s figures. These tiers have been boosted both by continuing consumer demand and promotional activity on the part of suppliers and retailers aimed at persuading travellers to trade up. The IWSR predicts this trend will continue with premium-plus products’ share of the travel retail spirits pie set to grow to 50% by 2028, up from 48% in 2023.
The continued strength of the luxury spirits market in travel retail was underlined this August by the $140,000 (£106,160) blockbuster sale of the seven-decanter Royal Salute Platinum Jubilee Collection at Dubai Duty Free. The sale of the luxury blended Scotch whisky was the single largest liquor purchase in the airport retailer’s 41-year history.
India’s star rises
For over two decades, Chinese travellers have been the linchpin of the travel retail drinks business, bombarded with red-and-gold Chinese New Year special editions every year and their purchasing behaviour scrutinised in forensic detail. In 2024, however, the industry’s focus has begun to shift towards another potentially lucrative nationality of travelling shoppers, the Indians.
India’s economic rise has lifted millions out of poverty but it has also acted as a catalyst for international travel among the country’s growing middle classes. According to The Economist magazine, overseas spending by Indian travellers tripled between 2010 and 2023, to $33bn (£25bn) and one forecast suggests it will jump to $45bn (£34.1bn) by 2025.
With travel retail liquor sales in India growing 43% in value last year, this is one developing market generating a considerable amount of attention and investment, especially among Scotch whisky distillers such as Whyte & Mackay, the owner of The Dalmore and Isle of Jura malt brands.
“Single malt Scotch whisky is driving the continued growth of the spirits category in global travel retail and is the preferred choice of Indian consumers,” says Louis Easton, the company’s channel marketing controller GTR.
“According to [research firm] Pi Insight, whisky is the preferred spirit of 60% of all Indian alcohol buyers in travel retail, with the figure rising year on year,” Easton adds. “Single malt is both the third biggest category in the retail spirits market and the number one duty free category in some locations, including Delhi and Mumbai.”
Easton maintains that the Indian market offers the Whyte & Mackay portfolio the opportunity to recruit new consumers, noting that both Millennials and Gen Z often make single malt Scotch their first foray into whisky. She adds that with India having a larger Gen Z population than the US and China combined, there is a huge opportunity for consumers to discover the company’s brands in the global travel retail channel.
Mumbai's Chhatrapati Shivaji Maharaj international airport, serviced by the expanding duty free operator Ospree Duty Free, has witnessed a surge in liquor sales this year. In the first half of 2024, the retailer’s duty free liquor sales increased by 40%, while the average purchase value rose by 30%. Liquor still accounts for 56% of Ospree Duty Free’s total sales, well ahead of the category’s typical share in other parts of the world.
While Scotch whisky remains the dominant category at Ospree Duty Free, chief executive Avishek Bambii Das notes that the retailer’s customers are becoming more adventurous in their tastes. For instance, he notes that tequila is up by 900% following last year’s launch of the ultra-premium Don Julio brand by Diageo Global Travel.
“We are also experiencing growth of over 50% in the wine category, particularly with French and Australian wines, which are growing month on month by an average of 7-8%,” he adds. “Champagne, red wines, and white wines such as Bordeaux, Moët & Chandon, and Dom Pérignon are showing the most growth,” he reveals.
Asia rebounds but China lags behind
In Asia, the widespread recovery of international travel last year saw travel retail sales jump 46% in value terms and 34 % in volume with Taiwan, Thailand, Singapore and Australia returning to pre-pandemic levels, according to the IWSR’s data. The key Chinese market also grew 28% in value, but the pace of the recovery still disappointed many in the travel retail sector with visa backlogs, a lack of flight capacity, high ticket prices and China’s faltering economy all proving stumbling blocks.
According to the Chinese Tourism Academy, there were 87 million outbound trips from China last year, well down on the 155 million recorded in pre-pandemic in 2019. The academy expects numbers to recover to 130 million this year but Chinese travel market experts warn that the post-pandemic Chinese passenger mix has shift ed in a direction unfavourable to high levels of spending on premium-plus spirits and wines.
Older Chinese consumers travelling on group package tours, traditionally a very strong group of duty free shoppers, still prefer to stay at home following the pandemic. In their place are so-called free, independent travellers (FIT), who tend to be younger, more cost-conscious and educated, and are often more interested in experiences than shopping. Women are leading this new FIT wave with one recent travel survey claiming they now account for 62% of outbound Chinese travellers.
The once lucrative Chinese travel retail drinks market has traditionally focused on Chinese male business travellers with the spotlight firmly on luxury Chinese baijiu, XO and Extra cognacs, Scotch whisky and high-end Bordeaux and Burgundy wines. A rapidly changing Chinese passenger mix with more eclectic tastes will necessitate a rethink by both travel retailers and suppliers.
Cruises line sector steams ahead
No state-of-the-market analysis of the travel retail drinks business would be complete without touching on the growing cruise line sector, one of the industry’s brightest, fastest-growing markets. Around 31.7 million people took a cruise holiday last year, according to the Cruise Line International Association (CLIA), a healthy increase of 7% versus 2022. Over the next four years, 36 new cruise ships are scheduled to come into service.
Increasingly upscale onboard bars and luxury department-store-style retail outlets offer drinks brands both marketing and commercial opportunities. A clear indication of the rising quality of the cruise line on-premise market was on display earlier this year when MSC Cruises, the world's third-largest cruise line with a 22-ship fleet, launched a new beverage programme called World's Greatest Bars, which saw it partner with two award-winning Barcelona-based bars, Sips and Paradiso.
Senior teams from both Paradiso and Sips trained MSC Cruises bar staff on the two ships chosen for the six-month pop-up bars, MSC World Europa with Paradiso, and MSC Euribia with Sips, so that they could serve guests a menu of cocktails from each bar. The six-month programme ended at the end of September and MSC Cruises already has plans to plans to collaborate with eight other award-winning bars on similar activations, two each in the US and Latin America, one in Europe and one in Asia.
As the year progresses, the travel retail drinks market remains a dynamic landscape, influenced by both global challenges and emerging opportunities. While economic uncertainties and geopolitical tensions cast a shadow over the industry, the growing importance of Indian travellers and the enduring appeal of premium-plus products offer reasons for optimism.
