ESTONIA. In an ambitious move to drive up revenues, Tallink Grupp’s executive board is examining commercial operations at harbours and airports to bolster its successful – but limiting – onboard travel retail business, The Moodie Davitt Report has learned. The company has also revealed that it is opening its first Asian office, in Singapore, with the goal to expand its activities in the region (see below). 

Tallink’s shops and restaurant sales segment (including onshore) already comprises more than half (55%) of the listed company’s total revenues of €950 million in 2018. However, those sales of €524.4 million are derived on routes between four countries across the Baltic Sea, a market constraint that has restricted scope for growth.

Guests gather to get an in-depth assessment of what the future holds for Tallink Grupp

Recently appointed Tallink Grupp Management Board Member Piret Mürk-Dubout spoke to us at a special event and dinner to mark Tallink’s 30th anniversary on Thursday evening. Responding to our question about bidding for airport contracts, she said: “When we talk about the travel experience there are possibilities on the vessels, at harbours and at airports. I am not excluding any of those.

“We are searching for opportunities to expand including airports and harbours. Our top management is looking to develop internationally. Otherwise our growth is dependent on our vessels alone.”

Steady growth yes, but the company is seeking ways to accelerate that growth which has begun to plateau (click to enlarge)

Growing our core business and core competence”

While Mürk-Dubout – the CEO and Chairman of Tallinn Airport Management Board between 2016 and 2019 – did not confirm that Tallink had tabled any airport bids, we reliably understand that the company did express early interest in the liquor & tobacco concession at Singapore Changi Airport, attending a Changi Airport Group briefing.

Piret Mürk-Dubout: “We are searching for opportunities to expand, including airports and harbours

The short cruise and ferry company, with its large and seasoned buying team and established logistics operation, has the expertise in place to diversify into airport retail. “We can grow using our core business and core competence,” said Mürk-Dubout.

Asked if Europe was the natural place to widen Tallink’s travel retail reach in the near term, Mürk-Dubout said: “Not necessarily. Airports offer concessions of five to ten years so there aren’t necessarily that many opportunities coming up. We will look at where those are, so it could be Europe, it could be Asia or the Middle East.”

Following the event, on Friday morning Tallink Grupp revealed that it is establishing its first Asian subsidiary in Singapore – Tallink Asia Pte Ltd. The division will be headed by Director of Development Operations Taavi Tiivel with the goal of expanding activities in the region.

“We have always been open about the fact that Tallink Grupp is continuously looking to develop our activities and expand into new markets,” said CEO Paavo Nõgene.

Tallink has focused heavily on developing services for Asian passengers in recent years and on promoting the company’s products and services in Asian markets. The company participates in Asian tourism fairs, cooperates with Asian tourism agencies and employs staff onboard its vessels who speak Asian languages. The company has also rolled out payment solutions to cater mainly to Chinese travellers.

“We have plans for Asia…”

“Tallink has a lot to offer not only here in our Nordic home markets, but globally, and there is a significant amount of interest out there in our products and services,” added Nõgene.

“Our colleagues have already done a great job promoting the products and services of Tallink and the wider Baltic Sea region in Asia, laying a good foundation to build on. We have plans for Asia, which we will shed more light on as [they] progress.”

At Thursday’s conference onboard the group’s biggest ship, Silja Europa, Mürk-Dubout explained that plenty of potential exists to develop the current onboard retail offer, especially in terms of adapting it to international, non-European Union travellers from Asia for example.

She told her audience of over 300 suppliers and other partners who had flown in from about 15 countries: “More than 14% of our passengers come from outside our home markets. We carry more than one million Asian passengers a year [out of 9.75 million passengers in 2018] with web sales in 17 languages.”

Premiumising while internationalising

In recent months, Tallink has been adding more luxury lines to its collections – particularly in beauty with brands such as La Mer and Tom Ford and Jo Malone in August. It has also extended space for brand such as Chanel and Dior thus tailoring the portfolio to high-spending Asian travellers.

Mürk-Dubout, whose areas of responsibility at Tallink Grupp include sales & marketing, Tallink Duty Free, onboard services and Corporate Social Responsibility, said: “We strive for the loyalty of our local and regional customers but we are also engaging more with Asian shoppers from Japan, China, South Korea and more recently India. We are looking at the premium market especially for the Asian customer.”

Expanded space for Chanel onboard Silja Serenade

This is especially important in the summer season when Asian passengers can number as many as 500-600 a day versus a total ship count of 2,500, according to Silja Serenade Shop Manager Niklas Lehtola. Actions to encourage Asian spending have included the introduction of payment methods such as WeChat Pay, Alipay and UnionPay. Tallink also became the first ferry company to offer Global Blue’s Fast Refund service earlier this year.

Diversifying the product portfolio

Elsewhere, Tallink has taken on franchises for several fashion brands in the domestic Estonian market including Jack & Jones and Vero Moda, while also lifting the fashion component on its ships.

Fashion, accessories and gifts together comprise 19% of sales, almost double the share of a decade ago (10% in 2008). The category has overtaken tobacco (16%) and is just behind beauty’s 20%. Wines and spirits is the key category at 33% while confectionery has a 12% share.

Jo Malone enjoys prime position at the entrance of the beauty area on Silja Serenade

The other main speaker at Tallink’s 30th anniversary celebration was Estonia’s eloquent and witty Director General for Mobility and Transport in the European Commission Henrik Hololei. He talked about general political and economic trends in Europe and globally.

The event kicked off with the nature film, The Wind Sculpted Land, by Estonian documentary film director, cinematographer and screenwriter Joosep Matjus who was also present to discuss the movie.

A more detailed report of this special event will appear in the Cannes print issue of The Moodie Davitt Report.