The rise of Scorpio Worldwide (formerly Scorpio Distributors) over the past two decades is a great travel retail story of family and entrepreneurialism, one in which a new chapter is now unfolding.
For Stuart McGuire, who started the business in 1995 (it became Scorpio in 1997), it has been a remarkable journey so far. Back then he was following in the footsteps of his father Bruce, who has been one of the industry’s best-known figures for over 40 years. From 1971 on, Bruce created a major success story with UK distribution company Clifford International, which was purchased by Ronson in the mid-1990s.
“My Dad is a born trader,” says Stuart McGuire from his office in Crawley close to Gatwick Airport. “He made his first sale on the day I was born, with an order of watches to UK charter airline Danair. He has always loved buying and selling. It’s in the blood.” In a bid to make his own mark on travel retail, Stuart began his trading career soon after he left university, and got his big break in 1995.
“I had very little experience of business, though I had worked in the warehouse and in accounts for Clifford over the years,” says McGuire. “I was on the look-out for a deal, and an opportunity arose to design and distribute a new line of watches in duty free.” That line was Beverly Hills Polo Club, a brand that will resonate with airline buyers the world over.
Things nearly didn’t work out though. “I was travelling to see Earl Jacobs who held the licence and I was stuck on the motorway for three hours,” says McGuire. “I nearly turned back, thinking ‘is this really worth it?’” That decision to continue, as it turned out, helped change his career and life.
McGuire presented the newly devised line to the world’s leading inflight concessionaire of the time, IDFS, then owned by Jean-Marcel Rouff. IDFS liked what it heard and listed the brand. From there, Beverly Hills Polo Club took off in travel retail, followed by many more products brought to the channel by the fledgling Scorpio operation.
“The goal was to continuously build our base of watches, jewellery, accessories and gifts but also once or twice a year to source a ‘hero’ brand that would succeed in our market, where these references could do really big volumes,” McGuire adds.
From turnover of £1 million in 1997, by 2007 the company had hit around £11 million, close to 90% of it from inflight and a further 10% from its Dubai operation, which began trading in 2006. Then came a move that dramatically transformed the Scorpio business in size and shape.
“At that stage the company was well established with a good reputation and a solid portfolio of brands,” says McGuire. “But we were looking for fresh opportunities too. Some of our customers said they were having problems getting product from some of the beauty houses, either directly or through their distributors and wholesalers, and some suggested there might be an opportunity for us. Initially I approached some of the brands but it was tough as they’d never heard of us or knew of our reputation in other categories.
“But I did know Gebr Heinemann well, having worked with them at Scorpio, and my Dad had a great relationship with them too. I sent them a letter, outlining the opportunity in the UK airline market for perfumes & cosmetics. With their superb access to the brands and the supply chain, and our route to market, I suggested we could work together.
“Claus Heinemann called me back and asked me to come over to Hamburg to talk, although even then it wasn’t clear how big the opportunity could be. I remember Claus asking [Gebr Heinemann Board Director] Kay Spanger how many brands he thought we might sign up with this new venture. Kay said: ‘I don’t know: it could be ten or it could be none!’ But what it also offered was an opportunity for Heinemann to enter a market that was previously a blank page.”
A few months later in November 2007, and after Gebr Heinemann did its due diligence on Scorpio, the partners agreed a deal, with the German family-owned travel retailer and distributor taking a 51% stake in Scorpio.
“In the first year we secured exclusive distribution rights on UK airlines for OAPLI (L’Oréal), Elizabeth Arden and Clarins,” says McGuire. “What we did differently was really try to add value. It wasn’t a question of taking over a contract and sitting in the middle taking our cut. We really analysed the market well. Alan Edwards, who is sadly no longer with us, was tireless in assessing what brands were sold, what the price points were and where the gaps were on every single airline. We would feed that information back to the brands, and work with them proactively to develop the market, in partnership with the airline. And success grew from there.”
In 2007 OAPLI had 21 product listings on seven UK airlines. Five years later this had grown this to 168 listings on 22 airlines. By 2010 Clarins was ranked the number one skincare brand for UK airline sales and today, Heinemann-Scorpio supplies over 50% of all P&C brands to the UK airline market.
From that figure of £11 million in 2007, the combined Heinemann-Scorpio business grew over +300%, a remarkable surge in business from which both parties have benefited.
“It’s been a huge success,” notes McGuire. “Our partnership has been open, honest and a lot of fun too. It has been based on long-term planning and mutual respect, not least because we are two family companies, which sets us apart from much of the competition. Naturally we differ now and again but that’s healthy in any relationship.”
Significantly, the Scorpio relationship has catapulted Heinemann into a position of prominence and influence in UK travel retail (not only with airlines), where its supply and wholesale business is now worth multiple millions. It has exclusive supply contracts with Flemingo-owned cruise concessionaire Harding Brothers for liquor & tobacco and fragrances & cosmetics.
That is in addition to its vast airline portfolio. It holds exclusive supply contracts with many airlines in the UK, supplying around 80% of beauty and gift items to Alpha clients Monarch, Thomas Cook and Thomson. It is exclusive supplier to Ryanair, while other major concessionaires such as Tourvest are key customers too.
“If you consider that Heinemann had no relationship with these companies in the UK, and that they are now seen as a trusted partner now and for the future, we’ve done our job well together,” says McGuire. “We’ve done that by not over-promising, but by delivering a great service at a good price. We helped people to understand that Heinemann is a business that is very strategic and that values long-term partnerships and growth.”
Three years ago a new stage of evolution began, for Scorpio and for Heinemann in the UK too. Heinemann took over full supply of the main brand distribution for P&C and liquor & tobacco to Scorpio’s UK clients where the company had exclusive supply contracts.
The transition of this business to Heinemann being completed, McGuire and Heinemann remain the sole shareholders, and are gearing up for the next growth opportunity. Scorpio is again focusing on its core strengths as a major distributor of branded watches, fashion accessories and niche perfumes & cosmetics to the global inflight market, as well as growing the agency business into ground and marine retail. Both parties are also keeping a close eye on developments and opportunities post-Brexit.
McGuire notes: “We share the ownership, but the Scorpio management are very autonomous and independent in our business planning and operation, obviously benefiting from the backing of such a prestigious and well respected global partner.
“We doubled our accessories business at same time as we grew in P&C with Heinemann,” he says. “Handing over the direct relationship with our UK customers in P&C to Heinemann gave us the opportunity to concentrate much more on our core. In the last three years we have greatly strengthened our accessories portfolio, introducing new brands like Just Cavalli, Ted Baker, Victoria’s Secret and many more.
“We have some great opportunities. We have a great range of products, from Aviator watches to Pierre Cardin jewellery – the best-selling and undoubtedly longest surviving jewellery brand in inflight.”
The business has also changed radically, McGuire adds. “In the UK alone there were 20 airlines in 2007, with British Airways still the main carrier. Today half of these have gone, through merger or bankruptcy, and the whole picture has changed through low cost airline development. On top of this many more airlines are using concessionaire partners, rather than buying direct, and there has been a lot of vertical and horizontal integration. Like the rest of travel retail, the rise of online shopping has added further competition, as has the ever increasing footprint of the ground stores themselves.”
The financial demands have also increased. McGuire adds: “Some airlines have broadened the amount of products they carry substantially. This is often a result of charging listing fees and advertising that are fixed fee rather than linked to sales. This may make financial sense to the operator or airline, but makes life much more difficult for suppliers whose sales are diluted, while costs remain the same.”
Some brands openly question their returns from the channel, but McGuire remains convinced of its value. “We need to make sure that the airline channel remains robust in the face of the increased competition. It is a unique place to have your brand, as the passenger is in an enclosed environment, where external media is less easy to access. At this time the airline pretty much owns the client, and it’s a unique chance for brands to get their message across to enormous numbers of people, very quickly.
“However, if we are to remain a serious player on the global duty free market, we must remember this is a retail business first and foremost, not just about advertising. At Scorpio we will continue to search the globe for the latest brands, products and innovations to bring to this market, backed up by 20 years of know-how and support, with excellent customer service.”
Scorpio key partner brands Watches/Jewellery and Electronics: Aviator, Just Cavalli, Timberland, Cath Kidston, Pierre Cardin, Superdry, Edward East, Daisy Dixon, Beverly Hills Polo Club, Montine, Dyrberg Kern, Thumbs Up, Trackimo, Sony, Disney, Skross Beauty: Revlon, Rodial, Victoria’s Secret, Lipsmackers, Mo Bros, Scentered. |
Beyond inflight, Scorpio is also the exclusive agent for Revlon to Middle East duty free stores, and this will be a growth target in coming years.
“We have a successful partnership with Revlon as an inflight distributor, and work with them as sales agent in the Middle East. This means we represent the brand to the clients, manage the Brand Ambassadors, sales locations, promotional activity etc. We are in the final negotiations with watch, jewellery and accessory brands to add to this business model later this year.”
The business may change, but the values with which McGuire began his journey remain features of the Scorpio story today, he says.
“One of the most important reasons behind my Dad’s success, which I hope I have kept alive, is an understanding and appreciation of how you need to build relationships,” he says.
“Of course business is business, but we try to build a partnership and long term understanding with our suppliers and customers, from small to large, so that we can address the challenges and opportunities together.
“That’s a principle we’ve built our business upon, and are very proud of. Of course we live in a more disrupted world now, with new challenges and a more cut-throat approach as profit gets squeezed between airline, concessionaire, media producer and brand. It’s important to have open and clear relationships to address these issues for the future, rather than trying to ‘flog a dead cat’.
“The new challenges of airport stores, the Internet, home delivery, buy-on-board food, crew engagement and flash trends are the pertinent issues in inflight, rather than what we often hear in the airline conferences about the trolley being old fashioned. This ever-mocked ‘trolley’ has done a pretty damn good job in sales these last 50 years. It may not be the most efficient but it works.”
The values that have sustained Scorpio for two decades are alive too in the people that represent the company, says McGuire.
“I’m very lucky with the people I have around me,” says McGuire. “We have a lot of long-term staff, totally dedicated to the inflight and travel retail channel, while also keeping a close eye on developments in domestic trends and operations. Ian Cowie, our Managing Director, brings experience from World Duty Free and TUI, Richard Kennedy has been a leading salesman for many years, and Head of Buying Steve Barnes has brought in real innovation the last two years. We are a small team, but are totally dedicated to making the process and customer service as smooth as possible. Our Sales Support team is renowned as the best in the business.
“Our values also extend to the people in our office and warehouse. There is a camaraderie that I think makes us special. We work hard, but we don’t take ourselves too seriously. And we try to make our clients and our suppliers smile along the way, by being great partners and exceeding their expectations. And if anything goes wrong, we aim to put it right quickly.
“Whatever we do and wherever we go, I will always ensure that unique spirit of Scorpio flows through the company. And we will continue to remember our core values – to be friendly, authentic, thorough and pioneering.”
