‘Duty-free holds its own’
Despite the challenging business environment, the tobacco industry has reason for optimism, according to data unveiled during the 21st TFWA Asia Pacific Exhibition & Conference, which took place in Singapore last week.
TFWA president Erik Juul-Mortensen divulged new data from travel retail specialists Generation Research which showed that in 2015, for the first time since 2009, global duty free and travel retail sales fell. According to preliminary figures, sales in 2015 totaled $62 billion, which was 2.3 percent down on the previous year.
However, while sales had fallen in all categories except for fragrances and cosmetics, which grew by 2.3 percent, tobacco sales remained not far from level, declining by just 0.4 percent. This made it a relatively strong performer against other categories, such as confectionery and fine food, which saw a 4 percent downturn, and watches and jewelry which declined by an even more dramatic 13.2 percent.
However, the picture in Asia is much rosier. Here tobacco sales rose by an impressive 8.5 percent, making it the second fastest growing category behind fragrances and cosmetics which saw an 18.5 percent increase. All other categories saw a downturn in sales.
The burgeoning off-airport duty-free sector is an area where there could also be room for expansion. Duty free shopping away from the roar of the jet engine is a phenomenon that is growing at a spectacular rate, and, according to new data from specialist research organization m1nd-set, now accounts for an impressive 44.6 percent of duty free sales in Asia Pacific.
During one of the conference workshops, Peter Mohn of m1nd-set, who is author of a recent report on downtown duty free shoppers in Asia, stated that the appeal of this channel to shoppers was not what one might expect. The first benefits of shopping at downtown duty free compared to the airport was convenience alongside good use of time, which were both cited by 43 percent of those surveyed. The second and third reasons for choosing to shop downtown were the presence of leading brands and the wide choice, which appealed to 27 percent and 26 percent respectively. Attractive prices were however named as an advantage by only 25 percent, meaning that the quest for a bargain is not central to the proposition.
“The duty free and travel retail sector has undoubtedly come under pressure, but there are still plenty of opportunities to explore for the tobacco sector, particularly in Asia where sales continue on a strong trajectory of growth,” said Juul-Mortensen.