Global travel retail outlook boosted by resilient premiumisation trend

Beverage alcohol sales in the global travel retail (GTR) channel have overtaken pre-pandemic levels in value terms – but volumes remain persistently soft due to shrinking basket sizes and fragile consumer confidence.

According to the latest market data from IWSR, total beverage alcohol volumes in GTR rose by +5% in 2023, but remain down in the longer term, having decreased at a CAGR of -4% between 2018 and 2023.

The value picture, however, is altogether brighter, with revenues up by +21% in 2023 alone, and rising at a CAGR of +3% between 2018 and 2023. Value has grown 14% over 2019, but volumes remain down, by 18%.

“Helped by price increases and a resilient premiumisation trend, the value of the global travel retail channel is now ahead of 2019 levels,” explains Charlotte Reid, GTR Senior Insights Manager, IWSR.

“Footfall is now pretty closely aligned with previous levels, but shrinking basket sizes highlight more cautious post-pandemic consumers, with confidence impacted by day-to-day inflationary pressures.”

There is an expectation that GTR will continue to outperform the global wine and spirits market in the years ahead – but volumes will continue to come under pressure, with growth falling slightly below the anticipated increase in passenger numbers.

Geopolitical pressures, most notably the conflicts in Ukraine and the Middle East, will also impact growth levels, along with the results of a number of elections in major markets, and the general health of the global economy.

As a result, IWSR forecasts expect that GTR volumes will rise at a CAGR of +5% between 2023 and 2028 – outstripped by anticipated value growth of +7% over the same timescale.

Key trends identified by IWSR for beverage alcohol in global travel retail also include:

Premiumisation intact

Consumers are continuing to trade up in GTR. Within spirits, there has been a rise in promotional activity in the super-premium and ultra-premium price band levels through price strategies and larger presence of twin packs and 70cl. This is driving sales and accounting for almost US$4 out of every US$10 spent on spirits in this channel. This trend is expected to continue, with the volume share of premium-plus products increasing from 48% in 2023 to 50% by 2028.

Premiumisation is also encouraged by the often shrinking price gap between domestic markets and travel retail, which leaves many suppliers with little option but to focus on brand building premium-and-above products in the GTR channel.

“The ongoing process of premiumisation in GTR is being driven by both consumers and suppliers,” says Reid. “Consumers are drinking ‘less but better’, while suppliers are choosing to use the channel to expose drinkers to the higher-end brands in their portfolios as they increase brand building in the channel.”

Momentum in APAC

Travel Retail sales in APAC have been vibrant, up 46% in value terms during 2023 and +34% in volume terms, with Taiwan, Thailand, Singapore and Australia returning to pre pandemic value levels. India drives the most incremental volume and value for the region.

Following value growth of +43% in 2023, India’s momentum is poised to continue, with whisky in prime contention to benefit. Rising levels of investment in the country’s increasingly sophisticated travel retail offer should boost sales further.

In China, the easing of the visa backlog and increased flight listings will enable further growth, following a +28% value increase in 2023.

Meanwhile, Europe remains the most established region in global GTR – but it is projected to see its share fall below 50% this year as its dominance is slowly eroded.

Champagne and agave buoyant

“Champagne and agave-based spirits helped to drive overall travel retail performance in 2023 with new activations that appealed to global travellers,” says Reid. “However, there was more subdued growth for whisky and rum – and falls for gin and vodka.”

Prime movers in GTR during 2023 included Champagne, agave-based spirits and Cognac, all of which saw double-digit volumes growth rates. Both agave spirits and Cognac are expected to grow strongly in the coming years, with tequila in particular building momentum beyond the US and Mexico, and in Europe and Asia especially

However, a decline for blended Scotch (-3% in volume, 2022-23) impacted overall whisky performance in all regions except for Asia Pacific. By contrast, single malt Scotch and US whiskey added volume to the category in GTR during 2023 (at +24% and +18% respectively).

The overall Scotch category is expected to regain momentum in travel retail in the years ahead, at volume CAGR of +6%, 2023-2028.

An evolving consumer

The GTR audience was already changing before the onset of Covid-19 in 2020, but the emergence of a younger and more female GTR consumer base has to an extent been shaped by the pandemic.

The increased prevalence of digital makes the channel more relevant to LDA Gen Z travellers, who are keen to use GTR to explore and research niche products.

“The industry is adapting to lower business footfall and consumers who are more attuned to browsing and buying online,” says Reid. “The deterioration of the economic climate has made for more cautious consumers who are expecting the channel to deliver good value at all price levels.”

Cruises bounce back

The cruise sector is now fully resurgent following the devastating impact of the Covid-19 pandemic.

“The rehabilitation of the cruise industry has been a quicker process than expected, with passenger numbers now comfortably above 2019 levels,” explains Reid. “It is predominantly an on-trade sector, with competition to get on the back-bar and cocktail menus intensifying.”