Will Covid-19 disrupt premiumisation trends in the Global Travel Retail channel?

IWSR investigates the changes shaping the channel, the challenges drinks brands face on the road to recovery and how they may need to pivot post-Covid-19


The pandemic has had a dramatic immediate impact on global travel retail (GTR), which IWSR estimates will see volume consumption down -68% in 2020 vs 2019. IWSR investigates the changes shaping the channel, the challenges drinks brands face on the road to recovery and how they may need to pivot post-Covid-19.

The Covid-19 pandemic has hurt global travel in recent months as borders closed, quarantine requirements were introduced and consumer confidence plummeted amid mounting health concerns. According to the UN World Tourism Organization (UNWTO), global tourist arrivals fell by 65% in the first half of 2020 compared to the same period in 2019, with even steeper declines for Southern Europe and Asia Pacific.

Retailers and brands that operate in the channel have faced unprecedented hardships, and recovery is expected to be slow – most regions are not likely to return to 2019 beverage alcohol volumes before 2023, with varying pace across different regions. Land border, ferry crossing and free zone business is expected to return to strength earlier than air travel or cruise business. Meanwhile, a growing preference for intra-regional travel could have a significant impact on long-haul hubs.

There does seem to be pent-up demand for leisure travel, particularly from China. Recovery of business travel, however, will likely be more volatile due to the widespread adoption of video conferencing and other operational changes during lockdown. If companies permanently change their business travel policies, with travel frequency reduced in favour of more remote communication, this could change the GTR beverage alcohol landscape. Since business travellers are often high-frequency, high-net-worth travellers, their loss of custom would hit higher-end products particularly hard.

New shopping habits

For those consumers who do resume travel, research conducted by IWSR partner, m1nd-set, shows that the majority of wine and spirits shoppers will change their behaviour in airports in the future. Brands and retailers will therefore need to reassess how they sell their products.

As a result of the pandemic, shoppers have moved to online shopping in greater swathes than before, and may expect more digital options when they return to GTR. Several travel retail operators, including Delhi Duty Free and Abu Dhabi Duty Free, introduced new online retail services facilitating home delivery of travel-retail exclusive and duty-absorbed products. Although it is unclear how long these services will be offered for, it will likely help consumers ease into GTR shopping once again.

New hygiene and social-distancing norms within travel hubs will inevitably change the way GTR sales representatives are able to work. In particular, travellers remain cautious about sampling products and being in close proximity to sales staff. Therefore, as the GTR environment becomes more transactional and less browsing-centred in the short to medium term, digital solutions may prove to be a valuable way of both safeguarding and streamlining the shopper’s journey.

“Travel retailers have faced mounting competition from ecommerce in recent years and there have long been calls for a digital evolution within the channel,” says Thorsten Hartmann, director at IWSR. “Now more than ever, increasing engagement with customers in advance of travel through online channels is a strategy that merits further exploration.”

Will premiumisation continue?

The pandemic is also having a direct impact on price trends in GTR. Principally, the crisis mentality of anxious and cash-strapped travellers has encouraged a pivot to standard-priced favourites. As such, in the short term, some ranges have been rationalised and promotions offered to clear excess stock. Standard-priced products are also likely to be driven by more promotional offers.

Higher-end products could also lose out to ‘tried and tested’ mainstream brands at border crossings, ferries and free zones, which are expected to be the first areas to bounce back in GTR, since these channels favour bulk purchases and standard-priced offerings.

IWSR’s Hartmann notes that while there will be a “scissoring effect” in GTR “for some time”, the “premiumisation mantra should return to relevance over the recovery period”. He adds: “Airport GTR will remain a place to showcase new luxury product launches, if presence and investment can be maintained. There will likely be a push towards offering differentiated prestige or prestige-plus products exclusively via the GTR channel. In the meantime though, the balance between GTR and domestic markets may shift slightly as brands divert resources.”

“The key focus going forward will be to restore and maintain the presence of premium-and-above brands in GTR, and to refresh and re-expand the product offering.”


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