Pernod Ricard Managing Director, Finance and Operations Gilles Bogaert
Pernod Ricard remains upbeat about the importance and growth potential of travel retail despite experiencing a “challenging” few years in the channel.
The drinks company reported travel retail sales declines in Asia, the Americas and Europe in its full-year 2016 results last week.
Speaking at a round-table event in London this morning (6 September), Pernod Ricard Managing Director, Finance and Operations Gilles Bogaert said he was confident of a bright future for travel retail. But he cautioned that FY17 would be a “relatively tough” year for the company in the channel.
Bogaert said he expected recent organisational changes within the company, which saw the formation of Global Travel Retail (reporting directly to headquarters), to drive a stronger performance. No new management layers have been created, Bogaert said. “The objective is to be even more consistent in the way we manage travel retail, including the activation of the brands and the marketing platforms.”
Travel retail represents nearly 10% of company sales, he noted. “Travel retail is still a worthwhile channel with great growth potential,” said Bogaert. “Premiumisation is very much alive in the business.
Rise of e-commerce Sales through online retailer Amazon now make up 1% of the company’s total, but it is a figure that varies significantly by region. Pernod Ricard UK Managing Director Denis O’Flynn said the company would naturally use whatever route to market made sense, with e-commerce both cannabalising sales elsewhere but also driving incremental growth. |
“We need to be good at knowing our customers and in following them around the world; knowing where they are travelling to.”
Bogaert said travel retail was not only a more volatile business than any other, with foreign exchange rates having a particular impact, but was also highly competitive. This has led to price aggressiveness in the channel, but Bogaert maintained that Pernod Ricard would stick to its premium pricing strategy.
As well as more general challenges, he said the company was experiencing difficulties on a regional basis. In Europe, the devaluation of the Ruble has had a “definite negative effect”. In the Americas, currency fluctuations have been particularly pronounced in Latin America, leading to a “reduced ability to sell brands”. Brazilian duty free is currently very weak, he noted.
While there are more travellers in Asia, Bogaert said this growth was not translating into more purchases as consumers “are not being fully exposed to our brands”.
Chivas Brothers Chairman and CEO Laurent Lacassagne described travel retail as a “strategy channel”, which gave the company the opportunity to “talk to consumers and to showcase our brands”.
Message on a bottle Pernod Ricard will look to use smart technology on its bottles in the future following a recent trial with its Malibu brand. Consumers could scan a QR code to unlock five digital experiences through their mobile browser, with no app needed. As well as linking to practical information such as cocktail recipes or serving suggestions, Pernod Ricard Managing Director, Finance and Operations Gilles Bogaert hinted at the possibility of creating an experience around a brand in the future, with music mentioned as one avenue of exploration. |
“We can also stimulate their appetite for limited editions,” he said. “It is a channel that is impacted by tourism and currency but it remains a very important channel for our brands.”
Chivas Brothers’ most important brand, Chivas Regal, experienced a “challenging year” in travel retail, according to Lacassagne. Currency movements and challenges associated with the devaluation of the Ruble in key market Russia were central to the weaker performance of the range of Scotch whiskies.
Across the entire company, Chivas Regal was down -4% by value and -5% by volume, while most other brands experienced growth.
Among the other brands, Royal Salute sales were up +34% in North American travel retail and +10% in Asian travel retail. Aberlour sales grew +84% in Americas travel retail from a small base.
