Interview: The sky is the limit in Hainan says Diageo Global Travel Managing Director Eduardo Barp

The Diageo exhibition space at the Hainan Expo offers an immersive and engaging showcase of key brands and expressions in the portfolio

Diageo Global Travel has underlined the importance it places on the Hainan offshore duty free sector and the wider China market with an expansive and elegant presence at the inaugural China International Consumer Products Expo (Hainan Expo) taking place from 7 to 10 May.

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The UK drinks group is showcasing its rare and limited-edition Johnnie Walker Scotch whiskies, with a special focus on super-premium expression Johnnie Walker Blue Label. Other brands to be profiled include The Singleton single malt Scotch whisky, Baileys Irish Cream and Shui Jing Fan.

Diageo Brand Ambassadors are on site at the four-day event “to take customers and consumers on a journey of discovery” using storytelling, tastings, cocktail and Highball-making exhibitions, quizzes and interactive displays.

Diageo Global Travel Managing Director Eduardo Barp spoke to The Moodie Davitt Report Chairman Martin Moodie about the Hainan opportunity both as a sales channel and also as a window to Mainland China.

The Moodie Davitt Report: Eduardo could you sum up how you see the Hainan offshore duty free opportunity since wines & spirits were added to the category mix last July?

Eduardo Barp: We are incredibly excited by the potential in Hainan and the opportunity we have to reach both local residents and a high number of travellers visiting the island.

With the infrastructure continuously improving and steps being put in place to make the island duty free by 2025, we are confident that visitor numbers will continue to grow.

The potential has always been clear, but it has been fantastic to see how Chinese shoppers are increasingly embracing luxurious, international-style spirits – particularly Scotch whisky, which is proving especially popular with younger consumers.

We also continue to see robust performance in Baijiu though Shui Jing Fang and believe there is a huge amount of headroom for our business.

From Baileys to Baijiu, Diageo is confident that its diverse portfolio can cater to every occasion and consumer 

What initiatives has Diageo taken in the offshore duty free sector since July 2020?

To really make the most of our presence in Hainan, we have been working closely and collaboratively with our key partners and customers.

We are working at pace to build disruptive and engaging retail experiences and we’re incredibly excited by what has been produced so far. Over the next few months, we will continue to build our brands’ presence in Hainan with a focus on improving our brand awareness through targeted media campaigns and innovative activations.

What categories, brands and expressions are you focusing on? Does the increased value allowance introduced last July spell a big opportunity for your high-end lines?

We are focusing on our luxury offering, knowing there is an appetite for iconic and exclusive products. We believe the trends of premiumisation where consumers drink better, not more, will endure. And we are confident in our diverse portfolio being able to cater to every occasion and consumer – from Baijiu to Scotch.

Currently we are prioritising our luxury Scotch whisky portfolio with a focus on rapidly growing Johnnie Walker Blue Label and The Singleton.

Along with our luxury products, we will also be focusing on our Baileys offering, providing top-class immersive experiences, vibrant limited editions and exciting innovations.

Diageo has a very long-established China local market presence. What role does Hainan play in enhancing that?

Hainan offers a new opportunity to recruit and grow the whisky and spirits category. Shoppers will have more dwell time in Hainan versus a traditional airport meaning they can interact and engage with our brands on another level. We see this as a massive opportunity to really engage shoppers through disruptive brand experiences both online and offline.

Along with our new presence in Hainan, we are also expanding our presence in Greater China as a region. China is one of the most exciting markets in the world for spirits producers right now and remains a key priority for Diageo and Global Travel.

How are you approaching the shopper journey in terms of communicating with consumers from before they depart until the point they get back – and maybe after that as well?

We are determined to connect with and engage consumers at all stages of their journey – prior to their trip, while travelling, and after they have arrived at their destination.

In Greater China we will invest in media platforms that will drive penetration and international category awareness for our Scotch portfolio.

We want to focus not only on the products, but the service and experience we can offer our shoppers. Expectations of shopping experiences are evolving, with increasingly blurred boundaries between channels – this is especially true for younger consumers, who expect engagement, meaningfulness and convenience in their retail experiences, whether that’s on or offline.

The Singleton single malt whisky is a key priority for Diageo in Hainan

Do you work closely with the on-trade in Hainan and the hotel sector to reinforce your activations and your brand message in Hainan duty free?

Shui Jing Fang is performing well in China travel retail

Yes, our Diageo Global Travel team are working in partnership with our domestic business in China to ensure consumers are engaging with our brands during key consumption and purchasing occasions whether that’s on-trade, off-trade or online.

What do you see as the biggest challenge and opportunity in Hainan?

One immediate opportunity we have seen since the start of the COVID-19 pandemic is how Chinese shoppers have shifted their consumption from international markets and travel retail locations outside of China back to local areas and the likes of Hainan.

Chinese passengers represent one of the biggest and most important nationalities in global travel and we identify China as a key luxury market. We believe we understand the needs of Chinese consumers and have the right luxury-led portfolio to meet those needs.

New territories often come with challenges, but we are excited by the test and learn opportunity we have.

Taking great strides in China: Johnnie Walker continues to anchor Diageo’s local market and duty free strategy

We have seen several retail newcomers to the Hainan offshore duty free scene in recent months. What are your views on that proliferation?

In October we launched the first category strategy for alcohol in Global Travel. We believe the spirits category has the potential to double in size (vs pre-pandemic) by 2030 through converting more shoppers to purchase and through premiumisation.

The growth of retail outlets in Hainan is a key enabler to unlocking international spirits purchases by Chinese consumers, helping to increase shopper’s engagement with the brands and category overall.

Any exciting developments in the Hainan pipeline you can talk about?

We are continually working to unearth key consumer and shopper insights to ensure our brands are providing consumers with engaging and compelling offerings.

In the coming months we will be launching a new Johnnie Walker Blue Label Gifting studio where consumers will be able to engage with Johnnie Walker as a brand and easily access personalised gifting solutions.

To close, what’s your view of the long term for Hainan, especially in terms of the island being completely tax free in 2025?

The sky is the limit. We’re ready to grow our brands and engage with more and more consumers over the years.

We believe Hainan will remain relevant even after 2025 as our ambition is to retain a big part of luxury sales within China.

Footnote: Every fortnight The Moodie Davitt Report publishes Hainan Curated, in association with Foreo, a selection of all recent stories from the offshore duty free sector in Hainan province.

Click here to view all back issues. Please email Sinead@MoodieDavittReport.com to subscribe.

 

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