India finally gets hearts racing

18 April, 2016

China has dominated the thoughts of the travel retail industry’s decision makers for much of the century.


It’s worth noting that, for many of the years I’ve been reporting on travel retail, India was dismissed as the industry’s ‘sleeping giant’. It was obvious the country was an enormous market with huge potential, but it was held back by multiple challenges – dilapidated airport infrastructure, bureaucratic red tape, a crumbling, state-run duty free monopoly (India Tourism Development Corporation), and a customer base who preferred to shop abroad.

That old and outdated view of the Indian travel retail market is changing fast. Let’s not forget that India’s economy has overtaken China’s to become the world’s fastest growing this year. The country currently boasts the ninth largest aviation market in the world, but India is forecast to climb up the rankings to third by 2020 with international traffic set to grow by an average of 8% over the next five years.

Privatisation programmes and ambitious expansion projects have transformed some of India’s largest airports. For instance, Indira Gandhi International, with its enormous Terminal 3 – the 24th largest building in the world – was voted one of the best airports in the world by Airports Council International in 2014. Similarly, Mumbai-serving Chhatrapati Shivaji airport’s new four-storey international Terminal 2 features stunning architecture, a world-class shopping offer, and has the capacity to handle 40m passengers.

The size of the Indian duty free market is estimated to reach Rs5bn (£52m) this year but, given the country’s size and growing wealth, it’s clear the business is still underperforming. The aviation market also has a way to go to reach its potential – just 3% of the population takes a flight each year compared to 10% of Brazilians and 8% of Chinese.

Nonetheless, the introduction of international duty free retailers such as DFS (Mumbai), ARI (Delhi) and Nuance/Dufry (Bengalaru) working in partnership with local operators has helped to raise duty free retail standards.

There has also been a big shift in customer buying behaviour. The Indian duty free liquor business used to be dominated by budget scotch whisky, bought by returning ex-pat workers. This remains an important sector, but there is also a growing group of affluent middle-class millennials who are eager to distance themselves from the masses through aspirational luxury purchases.

Pernod Ricard certainly doesn’t need convincing of India’s potential: the French international opened a 550sq ft Luxe Boutique at Mumbai Duty Free’s Chhatrapati Shivaji International Airport Terminal 2 store in late February.

Forget Chivas Regal 12 Year Old or Ballantine’s Finest, this new outlet with its interactive, touch-screen displays and luxury display cabinets, boasts upmarket luxury spirits such as the $3,500 Chivas Regal The Icon, Royal Salute 62 Gun Salute, The Glenlivet 25 Year Old, Martell XO and Ballantine’s 30 Year Old.

Of course, in opening the new Luxe Boutique Pernod Ricard is only following in the footsteps of Diageo, which opened its first Johnnie Walker House in India at Chhatrapati Shivaji T2 in 2014. Where Diageo and Pernod have ventured, I suspect others will follow. After many false dawns, I believe 2016 could be the year Indian travel retail finally starts to live up to its undoubted promise.

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