GERMANY. Gebr Heinemann today announced an 11.4% year-on-year increase in revenue for 2018 (i.e. preliminary controlled group turnover of the company and affiliates) to €4.6 billion.

Pictured left to right at today’s annual Heinemann press conference are Raoul Spanger, Gunnar Heinemann, Max Heinemann, Claus Heinemann and Kay Spanger.

What the company described as “solid and healthy” growth was driven by Heinemann’s retail business which posted a 14.5% rise to €3.6 billion. The wholesale operations were flat (+0.2%) at €0.9 billion.

“What matters most now is our direction in shaping the next generation – fit for the future and fit for shaping duty free and travel retail. In the future, as today, Gebr. Heinemann will stand for proximity to its customers. This value is being passed on from the fourth generation to the fifth generation. We will continue to be defined by our personal relationship to our partners – this will continue to distinguish us in future.” – Claus Heinemann.

The figures were announced during today’s annual Heinemann press conference in Hamburg [we’ll bring you more details and pictures later, with analysis in coming days].

“What matters most now is our direction in shaping the next generation – fit for the future and fit for shaping duty free and travel retail,” said co-owner Claus Heinemann.

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How generations four and five are flourishing at Heinemann
The fifth generation will no doubt serve Heinemann proud. Meanwhile, the fourth is not only going strong but, I am delighted to say, getting stronger.

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“In the future, as today, Gebr. Heinemann will stand for proximity to its customers. This value is being passed on from the fourth generation to the fifth generation,” he added in introducing new CEO Max Heinemann. “We will continue to be defined by our personal relationship to our partners;  this will continue to distinguish us in future.” Max Heinemann has been based in Hamburg since September, and takes over as Speaker of the Executive Board.

Newly appointed CEO Max Heinemann – representing the fifth generation of the family firm – spoke at length about a series of major structural changes across the organisation that commenced at the start of the year with his appointment. Max Heinemann’s father, Gunnar, and uncle, Claus Heinemann, continue to form the Advisory Board of the family business [Max Heinemann is the first CEO in the company’s near 140-year history].

“It is a privilege to have the fourth and fifth generations working together to define the future strategy of our company,” said Claus Heinemann.

The new structure focuses on “global growth, sensible synergies and sustainability”, Max Heinemann said, as well as shaping the ‘next generation’ to be “fit for the future and in turn, fit to shape duty free and travel retail”.

“We change with a growth mindset and, based on our history, with a strong foundation for rethinking and changing – and we act out of strength,” he commented.

“One thing is clear: we have shown throughout our history that we have the guts to continue to be pioneers in the field of travel retail. We want to co-shape travel retail in the future and not react to what’s coming.” – Max Heinemann

Max Heinemann told journalists, “In my role as CEO, one of the things that I want to concentrate on first is to look again at our USP in the market as a family business – because being able to move into the fifth generation of a 140 year-old company is largely unheard of and in this industry it’s unique. We all firmly believe – and have built our company culture on this fact – that being a family business comes with advantages that should be used along the way.”

The restructure is designed to build global growth, create “sensible” synergies and embrace sustainability. Underpinning this was the creation of a central sales area with the former distribution and retail arms now integrated under the Chief Operations Officer (Raoul Spanger), with four major geographical divisions established, all headed by a Vice President.

Such changes are designed to increase agility, and foster the company’s growth globally, Max Heinemann said. “Change in general is something that we are not afraid of…. I think that throughout the company there is more excitement rather than any form of fear over what is to come.

“We are literally changing across the entire company structure from left to right… it’s something that has to be managed carefully but we are very confident that we are moving in the right direction and you will see the results in the next weeks and months.

“One thing is clear: we have shown throughout our history that we have the guts to continue to be pioneers in the field of travel retail. As my uncle (Claus) said. ‘We want to co-shape travel retail in the future and not react to what’s coming.”

(Left to right) Executive board members Claus Heinemann, Raoul Spanger, Max Heinemann, Stephan Ernst, Gunnar Heinemann and Kay Spanger.

The company described 2018 as “a very challenging business year”, noting that business in the core markets is being heavily influenced by global macroeconomic and political developments.

Collectively, liquor, tobacco, confectionery & fine foods accounted for 56% of sales, followed by perfume & cosmetics at 34%.

‘Writing travel retail history of tomorrow – since 1879.’ The cover line of the press brochure summed up the fusion of heritage and forward-thinking neatly. Below, the latest annual report, unveiled at the media day.

Retail highlights

The new centralised, regionally structured sales area (combining distribution and retail divisions) under COO Raoul Spanger saw “a positive trend” in 2018, in Gebr. Heinemann’s top retail locations. Distribution will continue to be an important pillar., noted the company

Highlights of the past year included the first full year of partnership with James Richardson Group at Tel Aviv Ben Gurion Airport. It is already Heinemann’s third biggest retail location with sales of US$429 million, just behind Istanbul and Oslo.

At New Istanbul Airport, Heinemann has opened around 80% of its 53,000sq m of retail, and is running the operation through a centre management model, blending direct retail and leasing.

The operation started with a soft opening on 29 October 2018, followed by the opening of five further shops on 15 January. All flights at Atatürk Airport finally switched to Istanbul Airport on 6 April and all duty free stores run by Heinemann and partner Unifree are now up and running. Rental agreements have been signed with over 70 partners for stores there, among them Louis Vuitton, Dior, Hugo Boss and Prada. The company hailed the strong mix of Turkish and international brands. At Atatürk Airport, sales slipped by -5.5% in the year due to weaker arrivals sales, which were hit by lower consumer spending due to inflation and currency devaluation.

Claus Heinemann said: “I’m looking forward to the launch of the complete operation in coming months at the world’s biggest airport. The official opening was last year but for us it was really when Turkish Airlines moved across on 6 April. We were 19 years with Unifree and ATÜ Duty Free at Atatürk and now have a 25-year contract to look forward to at the new location.”

In other highlights, following an early contract extension to 2023 with Copenhagen Airport, Heinemann officially opened its refurbished and expanded (by over 200sq m) main shop in July 2018.

Heinemann also hailed the growth of its Sydney business, which hit A$428 million in sales, up by 10.2% year-on-year. “This is like-for-like growth after all of our openings so it is a significant increase,” said COO Raoul Spanger.

The joint venture between DFZ Capital and Heinemann Asia Pacific had a good 2018, achieving “satisfactory growth of both the border shop and airport business, in spite of the challenging economic climate in Malaysia”.

Partner Plaza Bali opened the first arrival shop at Jakarta International Airport in January 2019; the Indonesian duty free, retail and F&B company is Heinemann Asia Pacific’s second-largest distribution customer. 2018 also saw the launch of Heinemann Asia Pacific as a retailer onboard the Carnival Spirit cruise ship. Heinemann pinpointed cruise an area for expansion in coming years.

Further to this, Heinemann Americas and Heinemann Asia Pacific won the tender for three Royal Caribbean cruise ships due to sail in 2020. In Europe, Heinemann will also add further vessels to the retail portfolio in 2019.

In Russia, sales at the company’s Moscow Sheremetyevo Airport business (Imperial Duty Free) leapt by 25% in the year, following major refurbishments and openings in Terminal E and Terminal B (domestic). The business in Kiev climbed by 20.5%.

Corporate responsibility to the fore

Today’s press conference was notable for the emphasis Heinemann placed on its corporate responsibility strategy. In future, the company said, it wants to look even closer at the economic, social and ecological impacts of the business. As a company which has a presence in many destinations around the globe, it needs to be mindful of both actions and their consequences, Heinemann noted.

Pilot project with OceanCare expanded: Gebr. Heinemann has built on a collaboration with the marine conservation organisation OceanCare that it began in 2017. The aim is to work together to reduce the amount of plastic waste in the oceans. Heinemann currently charges a 30 cent fee on all single-use plastic, paper and zip bags at its 14 duty free locations in Germany and Austria. This measure is designed to encourage a drastic reduction in single-use bags. All proceeds generated by this policy go to fund the projects of OceanCare. Bratislava and Ljubljana joined the scheme in 2018, with further locations around the world set to follow. As an alternative to plastic bags, customers can purchase multi-use bags made from 50 per cent recycled materials, or an exclusive Heinemann design LOQI bag.

As a result, Heinemann has become active in several projects as part of a commitment to protecting the environment. In August 2018, Gebr. Heinemann joined the United Nations Global Compact (UNGC), the world’s biggest and most important initiative for responsible business practices. It was also officially certified as an “Ecoprofit Company”, in recognition of its environmental achievements by the Environment Authority of Hamburg.

The company also revealed a new Corporate Affairs division and a new employer brand dubbed ‘Gebr. Heinemann & You’ (pictured below, more details to follow in our full report).

Category performance analysis

Talking about products, Heinemann said that perfume & cosmetics remains a growth-driving category despite “price-aggressive online and domestic competition”. It noted: “The market has become much more dynamic and traveller needs are more complex – from price-sensitive or luxury-oriented shoppers to those looking for sustainable, certified organic products.”

More customers are looking for their ultimate, unique ‘signature fragrance’, prompting Heinemann to expand the range and its associated presentation of niche fragrances.

Differentiation from domestic markets is increasingly key in liquor, tobacco, confectionery & fine foods, the company said. As a result, Heinemann is focusing more on unique products, craftsmanship, tailor-made labels and exclusive promotions. Gin continues to be “a massive trend” and the trend of Japanese whiskies also persists. Fine Food is now developing into a core category for Heinemann with retail sales last year rising by 15% to over €40 million and the distribution business ahead by 20%.

Gin Sul, the local gin that has become an extraordinary success story at Hamburg Airport where it is Gebr Heinemann’s single biggest-selling liquor item.

Fashion & accessories and watches & jewellery remain a high priority, as there is a clear worldwide trend towards such items in travel retail, Heinemann noted.

2019 outlook “positive”

 Gebr. Heinemann said that it is again expecting “positive, strong sales growth” groupwide for the 2019 financial year and to build upon its solid basis of regions and channels. “In addition to the very robust wholesale business, the company’s numerous long-term contracts provide great stability and Heinemann will continue the approach of long-lasting partnerships and long-term investments,” the company said.

The Gebr. Heinemann board addresses questions from industry media in Hamburg; below, board members with media representatives. From left, Dermot Davitt, Raoul Spanger, Max Heinemann, Martin Moodie, Gunnar Heinemann, Peter Marshall, Claus Heinemann, Kapila Ireland, Kay Spanger, Joe Bates and Luke Barras-Hill.

Claus Heinemann said: “Our many long-term contracts provide our company with great stability. We are a global company and that strategic approach means that all our activities to over 1,000 customers are aligned to this global commitment. In a consolidating market and competitive business environment, geopolitical developments demand our attention. The changing global environment makes our business less predictable, as do currency fluctuations, political challenges and regulation changes. But the global economy is robust and aviation is growing.

“Our focus is to shape the industry in future. We will stand for proximity to our customers, and in the fifth generation will continue to be defined by our personal relationships with our partners.”