That's the Spirit!
Nushi Wijewardena looks into the promotional practices advocated by suppliers in the travel-retail channel and the role they have played in maintaining the category’s buoyancy
FOR the most part, the relationship between producers and retailers – suppliers and clients – is a match made in heaven. They both want the same result – to sell more products, preferably at a higher price-point – and they both want consumers to come back to them again and again. They both have to follow consumer demands and, if they want to survive, they have to meet them.
It all seems a bed of roses until the stickier subject of discounting and price promotions comes up. Suddenly what seemed like a perfect balancing act erupts into a tug of war, with the retailer adamant
that consumers need to feed their price promotion addictions and producers unwilling to budge on
their price.
“In an overall sense we are firmly of the view that price is a key determinant of brand image amongst our target consumer, and we wish to enhance the premium at which Jameson is sold. We have ample in-market evidence that Jameson can sustain this price premium and still grow at impressive levels. As a brand owner we are focused on building the equity of a leading premium spirit in Jameson and consequently we do not believe in a need to discount the brand in any channel,” says Donagh McHenry, international regional director of Irish Distillers, his tone revealing the company’s sentiments towards discounting.”
And his views are echoed throughout the industry. “Consumers buying within top-end luxury categories are less affected and motivated by price discounting, therefore I do not see great benefit in price promotion within this sector. In fact, calling yourself a ‘luxury’ brand and then price discounting seems like nothing more than a contradiction in terms. Does deep price cutting reinforce ‘luxury’ credentials in the consumers’ mind? Absolutely not,” asserts The Edrington Group’s Keith Bonnington.
“We’re in the premium whisky business,” agrees Chivas Brothers’ Robin Johnston. “We don’t like the
channel heading in the direction that many domestic retailers in countries like the UK have taken. When
discounting becomes rife, luxury products stop being luxury.”
In fact, they even add that discounting has even less of a place in travel-retail than in does in the domestic market. Outside the EU, travel-retail goes hand-in-hand with savings. Particularly in countries
like India and China, where import duties on wine and spirits are at their highest in the world, consumers turn to travel-retail to buy imported goods at an affordable price. “There is already an inherent saving in travel-retail versus the high street,” says Bonnington.
However, the producers are hasty to add that just because they do not support discounts, this does not
make them intolerant of promotions. Point-of-sales materials, gift packs and tastings are all part of what
the whisky world claims it does best. “Communication and education, either at the point of purchase or through skilled promoters, are key to driving trial and recruitment,” says Bonnington. “Consumers don’t want to feel like they are targeted,” Johnston agrees. “But they do want to feellike they are being educated, especially when they have time to kill, like in travel-retail.”
This is why tastings are so commonplace in the travel-retail sphere. “As soon as passengers clear through security, the holiday mood begins, so they are open to trying new things. If this happens to be in the airport lounges, that’s fine with them,” Johnston says. “Whiskies are often differentiated through flavour so sampling within this is very important,” claims Bonnington.
According to suppliers, the travel-retail sphere is also the ideal location in which to set the brand’s image in the consumer’s mind. Sponsorships carried out by brands of sporting, film or musical events are nowhere more boldly advertised in retail than in the TR channel. “Given Jameson’s long-standing association with international film sponsorships, including the Tribeca Film Festival in New York and Dublin International Film festival, we leverage film as a theme in a number of our promotions in travel-retail and these have been very well-received. We have previously run Jameson On-Location and Jameson Short Film promotions in key hub airports with impressive results,” says McHenry.
In fact, it is such promotions that both retailers and producers agree helped the channel over the hurdles it was presented with by the 2006 terror threats on airports and the tight liquid regulations that followed. Initiatives like the Chivas Life promotional Cocktail Bar, installed in London Heathrow Terminal 3 in October 2006, were created at a time when the market for liquids in travel-retail should have been at its lowest. Instead, the promotion – which saw Chivas Kiwi, Chivas Royale and Chivas Cooler cocktails served to passengers awaiting flights – famously increased sales of Chivas Regal 12YO by 210%. These were examples of the industry rolling up its sleeves and using promotions to lure consumers into making purchases when their instinct was to move on, afraid that purchases would get confiscated. Promotions were never more important.
And as the credit crunch bites down harder on consumers, the industry is readying itself to use its initiative again. As a luxury product, whisky is self-professedly vulnerable to market downturns, but it hopes it can keep afloat without resorting to deep discounting. “I hope the credit crunch doesn’t turn travel-retailers into serial discounters,” says Johnston. Bonnington is more confident. “I think we’ll see big brands looking at alternative ways of growing brand equity, and more and more moving away from discounting,” he says. The days of travel-retail mirroring domestic retail channels and their rampant price promotions appear to be staying at bay – so far.
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