Just ahead of the annual TFWA World Exhibition & Conference for the Global Travel Retail (GTR)/ Duty Free channel taking place in Cannes in October this year, we have managed to grab some time from the TFWA President himself, Erik Juul-Mortensen.
I have met Erik many times over the years in the industry and he is a passionate and strong advocate and supporter for the GTR/ Duty Free channel – I cannot think of a better person for the TFWA to have as its president. From a personal perspective, I have had the opportunity to work in some of the same drinks industry companies as Erik, albeit never at the same time, such as Maxxium.
Erik was very kind to make himself available so we could ask some questions on the world of the TFWA and travel retail.
Inside the Cask: Hi Erik, can you tell us a bit about yourself, your career to date and how you managed to end up as TFWA President?
Danish by birth. My commercial career started around 1970 following education and two years in the Royal Danish Airforce, part of that as an instructor for new recruits and part as a sergeant in the Military Police. I joined Danisco, a Danish company responsible for all exports and duty free sales for Danish Distillers, the biggest spirits company in Denmark with market share of more than 60% of the total Danish market. After about 3.5 years in the shipping department I was named Regional Export Manager in charge of a number of European markets. In 1979 I was made Vice President with overall responsibility for all duty free and export sales. In 1990 all activities of Danisco were transferred to Danish Distillers where a new export division was established and I was made Vice President and Export Director in charge of all activities. This included the chairmanship of our German subsidiary headquartered in Berlin and with production facilities in Buxtehude just outside Hamburg.
In 1999 the company was acquired by the V&S Group in Stockholm and a major reorganisation followed. I took over the role as Senior Vice President and Commercial Director in a new division V&S International which combined all Danish Distillers and V&S brands – with the exception of Absolut Vodka. 2003 I was made President of V&S Absolut Global Travel Retail and Absolut Vodka was included in the assortment. Also from 2003 to 2005 I also had the direct day-to-day responsibility for our German subsidiary, V&S Deutschland, which provided two exiting and very busy years. In 2005 I transferred to Maxxium Worldwide in Amsterdam as President of Maxxium Global Travel Retail. Maxxium was owned 25% each by The V&S Group, The Edrington Group, Remy Cointreau and Beam Spirits & Wines. The assortment of brands was unbeatable, and the set-up was very successful. With the acquisition of V&S Group by Pernod Ricard in 2009/10 and it was decided to dismantle Maxxium Global and Maxxium Global Travel Retail.
My role with TFWA started around 1983 and 1984 where a small group of individuals in the industry got together with the desire to create a new not-for-profit association.
The association was established in 1984 by 7 individuals, including myself, but with many people helping behind the scene. I served as VP Marketing & Communication until 1997 where for a number of reasons I decided to step down although keeping my seat on the Management Committee. In August – September 1999 I was approached by the then board of TFWA enquiring whether I would accept to take on the responsibility as President until the AGM in late October same year. I accepted as I though two months could hardly be a problem. There were quite a number of issues in the Association which had to be dealt with and come October 1999 I accepted to stay on as president. The rest is history.
Inside the Cask: For those from outside of the industry, what is the TFWA and what does it do?
TFWA or Tax Free World Association was created in 1984 originally to provide the industry with an annual gathering where all sides and stake holders of the industry could come together to discuss business. Today TFWA is much more than that.
In addition to our two major events in Singapore in May and Cannes in October, respectively, both with exhibition, conference and workshops as well as our bi-annual conference in China, named China’s Century Conference, TFWA today provide in-depth market research which is made available for all members of TFWA. In addition TFWA works actively to provide the best possible platform for the industry to prosper, and plays a role in representing the interests of its members and the industry as a whole directly or through the different trade associations or the Duty Free World Council of which TFWA was one of the founders. In addition TFWA also has the privilege and pleasure of organising the annual MEADFA conference on behalf of MEADFA.
The membership of TFWA consists of more than 500 companies and all companies that supply the duty free and travel retail market with products and brands.. TFWA operates on a not for profit basis and the association motto, By the Trade, for the Trade, summarises TFWA’s commitment to the industry.
(If interested in becoming a TFWA member – please click here for more information).
Inside the Cask: I can confirm that the Loch Lomond Group has applied and hopefully will become one of the newest members of the TFWA in 2016. That aside, what is your favourite part about working as the TFWA President?
The duty free and travel retail is a very dynamic industry involving a lot of dynamic people. The industry encompasses so many different product categories as well as producers, suppliers, retailers and landlords and in my role you get to meet so many people from these different areas which I find fascinating. I enjoy working with the permanent team in Paris and with the elected board and Management Committee, and to see things we have worked long and hard with come to flourishing e.g. at the events in Cannes and Singapore. This gives a lot of satisfaction.
Board and Management Committee members are all professionals from member companies who give their time freely to support the Association and the industry on the top of a busy day job.
I see my job as safeguarding that the Association is always on the right track and together with my fellow board members to safeguard that the decisions of the Management Committee are being implemented in the way and spirit decided. Through my role at TFWA I also have the privilege to sit on the board of ETRC, MEADFA and APTRA (in addition to DFWC) and I also find this rewarding as you get to meet many interesting people and hopefully, help to smoothen the way for the industry’s continued development.
Inside the Cask: If you had the power to change an aspect of travel retail immediately, what would it be?
There are many, but if I have to choose one it would be the industry model. Ideally, I would like to see a model which give more consideration to the distribution of risk and reward between the industry stake holders.
(Note: Inside the Cask has written a blog on this topic in relation to the Trinity of operators, retailers and brand owners. Click here for a link to that article.)
Inside the Cask: what is your view on changing consumer dynamics and the perceived threat of digital such as Amazon, to travel retail? Is it an opportunity or a threat?
(Note: I was referring to DUFRY’s presentation on this topic: http://www.slideshare.net/mattwilleyuk/julian-diaz-dufry)
The digital development is here and whether we like it or not, it will continue to grow. Our industry needs to get its head around the digital world which I still do not believe it has fully. Unless that happens, it represents a clear threat as I see it.
However, there are also opportunities, but again these would require all stakeholders to take responsibility and do their bit. I still believe that if done correctly the threat can be turned into an opportunity.
In addition, in a travel environment with travellers in a specific mood there are clearly impulse buying, gifting and there are the still importing touch and feel before purchasing. However, as mentioned each stake holder has a clear role to play, and it will only succeed to become an opportunity if all are playing their role.
Inside the Cask: Given the increasing requirements for higher non-aeronautical revenues by airport operators, as well as travel retailer consolidation, is the channel sustainable for brand owners interested in delivering commercially as well as from a brand perspective?
I would like to think so. The business proposition must be satisfactory for all parties involved and, fortunately, there are many examples where retailer and brand work profitable and successfully together to create the best possible scenario for the traveller to enjoy great brands in a perfect environment and at a reasonable price. However, there is a concern from many brand owners. In my past career I have had to make on a number of occasions the sad decision to pull out our brands from certain retailers as there simply was insufficient margin left. This is not a decision you take gladly, but sometimes it is necessary and I think we will see more examples of this going forward.
Inside the Cask: There are many great brand owner companies operating in travel retail, however can smaller companies compete and enter the travel retail market also? How? What would be your advice?
I strongly believe there is also a place for smaller companies in the market and again, there are many examples out there that confirm this.
As a newcomer and as a smaller company I would give thorough consideration to where and when to enter the market. My choice of outlet would – to the extent possible – depend on the overall profile of the travellers to make sure that travellers through the chosen outlet(s) it match the profile of my product.
I would not spread myself thin on the ground by going after every retailer and across the globe, but start very targeted with one or a few sales points, making sure that these sales points get all the attention in terms of promotion activities and communication securing a sound base and then let the success spread from there. In this industry it is not easy to come back with the same product or brand proposition if you have already tried and not succeeded. I am sure it can be done, but it will be a bit uphill and time consuming. I would also be very careful with the price position. This has got to be right from the outset. Unless there is a guarantee that the price point will be the desired after a short introduction I would be reluctant to offer any introduction rebate. We can all reduce our prices, but bringing them up is way more complicated.
Inside the Cask: Just one final question Erik, where do you see global travel retail in 5-10 year’s time?
In that time scale I believe the market has grown considerably supported a.o. by the significant increase in international travel as forecast by the various institutions such as the WTO, UNWTO and others. Generation Research has predicted that global duty free and travel retail turnover could reach USD100 billion by 2023 from the USD 60.1 billion reached in 2015. Whether that will ring true is impossible to say today, but that we will see a significant increase in our global business seems clear. In the time span I also see a landscape much more influenced by new technology helping to convert the traveller into a retail customer.