Following the Inniskillin case last week, I was curious about
the Duty-Free channel as a distribution strategy. Although it proved very
successful for Inniskillin, I wondered how effective and how large it is as a
channel for wine sales. On a global scale, wine purchases through Duty-Free
stores on aggregate remain relatively small (estimates range at ~$3bn - $12bn
for the wine and spirits sector). However, I was surprised at the dispersion of
popularity of this channel across the world as well as the historical and
projected growth rate.
In the U.S., Duty-Free represents a small channel through
which consumers buy wine, roughly the thirteenth most popular distribution channel, according to a survey by Wine Intelligence. Yet, the U.S. ranked last
compared to other countries, particularly those in the APAC region where Duty-Free
serves as a top five channel (see below).
Additionally, the Duty-Free wine and spirits category has
exhibited meaningful growth in the last few years, growing high-single digits
(~7% in 2018). However, as expected, this growth has largely skewed towards the
Asia region. The drivers of this growth are primarily due to increased air flight
volume and higher disposable income. Given the relatively stable and predictable
nature of these trends, the Duty-Free segment is projected to see continued
high-single digit growth going forward.
Based on the above, Duty-Free represents an attractive
channel for wine makers looking to experience above market growth and those wanting
to establish their brand in the APAC region. The mature U.S. and Europe markets
do not appear to represent particularly compelling opportunities.
Sources:
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