Hearty Heinemann: German travel retailer posts “healthy, robust” €4.1 billion turnover in 2017; projects double-digit 2018 growth

GERMANY. Gebr Heinemann today unveiled what it described as “healthy, robust development” for 2017, combined with an upbeat outlook for 2018. Controlled group turnover rose +6.6% year-on-year to €4.1 billion. Retail turnover alone climbed by +10.4% to €3.2 billion [note: we are updating this story through coming hours]

The family-owned travel retailer was in confident mood as it outlined its results during a now traditional annual media conference in Hamburg (look out for our full report, analysis and comment in this week’s edition of The Moodie Davitt e-Zine).

“2017 was a really exciting year, full of political and economic challenges, currency fluctuations and so on,” said co-Owner Claus Heinemann. “But 2017 for us was a respectable year with healthy and robust development despite all the challenges. We were generally satisfied.

“For 2018 we expect a healthy double-digit sales growth and we want to achieve an even stronger growth in Asia and America. We will not forget Europe, which remains of course a strong market but the potential to grow is even stronger in Asia and America.

“In 2017 we were able to build on our strong position in Europe, especially in East Europe, with Russia, Ukraine and Georgia but also Scandinavia – Norway and Denmark. Our strongest market was Turkey, not only Istanbul but all the other airports we run in partnership with Unifree.

Claus Heinemann: “2017 for us was a respectable year with healthy and robust development despite all the challenges”

“Europe remains extremely important for us – over 80% of our business. Nevertheless we also grew in our daughter companies in Asia Pacific and the USA.”

The combined liquor, tobacco and confectionery sectors commanded the lion’s share of business, accounting for 57% of turnover, followed by perfume & cosmetics at 32% and fashion & accessories with 9%.

Claus Heinemann said the company will invest approximately €100 million this year, much of it focused on its hugely ambitious development at Istanbul New Airport (due to open in late 2018) plus digital development in “connected travel retail”. He noted: ” €100 million is a substantial amount for a family company but we believe that it is necessary for us to grow in the future.”

“In a competitive environment in which business in the core markets is being more heavily influenced by global political developments than ever before, Gebr. Heinemann has performed very well overall and acted flexibly to take advantage of the market conditions,” the company said.

Max Heinemann, a fifth-generation representative of the family, is to relocate from Singapore to company headquarters and become a board member, Claus Heinemann announced. Max Heinemann, son of co-Owner Gunnar, has been CEO of Heinemann Asia Pacific since January 2014.

Strong regional development

Gebr Heinemann said it was able to build on its traditionally strong position in European travel retail, particularly in Eastern European countries such as Russia, Ukraine, Georgia and Romania.

The company posted its highest sales growth in the Eastern Europe & Central Asia (formerly Russia/CIS) and Benelux & Africa regions. Growth in Eastern Europe & Central Asia was largely driven by  joint-venture activities at Moscow Sheremetyevo and Domodedovo airports. Russian passenger numbers are continuing to bounce back, which has contributed to double-digit sales growth, outstripping passenger increases, Gebr Heinemann said.

Co-owner Claus Heinemann (left) in upbeat mood with directors Raoul Spanger, Kay Spanger and Peter Irion at today’s press conference. Look out for our full report in this week’s Moodie Davitt e-Zine.

As previously reported, the Travel Retail Domodedovo partnership won a tender to become the exclusive duty free retailer in the new terminal at Moscow’s second-busiest airport and will therefore soon be responsible for the airport’s entire duty free business. At Moscow Sheremetyevo Airport, the company will double its retail space operated by Imperial Duty Free this year and next, and is gradually converting all of the shops to walk-through concepts.

The Gebr Heinemann subsidiary Travel Retail Vilnius was able to secure a six-year extension to its contract at Vilnius International Airport. The company said it was also very satisfied with the strong growth of its border shop business in the EECA region. It sees great potential in the arrivals  duty free business in the Eurasian Economic Union, a long-awaited development which is due to begin in October 2018 “at the latest”.

Hanseatic HQ: Gebr Heinemann’s magnificent headquarters in Hamburg

In Asia, the company continued to expand in Malaysia (where, as reported, the Heinemann Asia Pacific subsidiary has raised its stake in its joint venture with DFZ to 15%) and began its new chocolate and confectionery contract at Hong Kong International Airport (trading as Sweet Dreams).

Tender triumphs

Numerous tender successes and contract extensions were noted, including the company’s pioneering joint venture presence with James Richardson at Ben Gurion Airport in Tel Aviv. “We were very, very proud and honoured to work in Israel as a German company. This for us is something very special,” said Claus Heinemann. “We feel very welcome in Israel.” The 50/50 alliance with long-time incumbent James Richardson has been operating six shops with a total retail space of 4,000sq m since January. Tel Aviv is set to become Gebr. Heinemann’s third-strongest retail business after Istanbul and Oslo airports.

“The first quarter was very good and the target for this year is US$400 million,” said Director Raoul Spanger. “For the first quarter we are ahead of this target. Seventy percent of sales in Tel Aviv are made to local passengers, that’s very similar to Norway where local people dominate the business. And our highest average sales per passenger in our organisation is in Tel Aviv, so people are buying very intensively. They have a pick-up on arrivals system… which is one of the reasons for this high spend.”

[Click on map to enlarge the record of Gebr Heinemann’s key contract successes of 2017]

Going Gold in Australia

At Sydney Airport, Gebr. Heinemann’s acclaimed marketplace concept generated sales growth of around +10% in its first full year. The company will soon be adding a second location in Australia having won the tender for two shops at Gold Coast Airport.

2017 saw a positive trend in Gebr. Heinemann’s top retail locations. In Scandinavia, the company agreed an early extension to its contract at Copenhagen Airport to 2023. Sales growth in the pivotal Norwegian market reached +6.5% year-on-year. The refit and expansion of the shops operated under the Travel Retail Norway joint venture (a partnership between Gebr. Heinemann and Norse Trade) at Oslo, Bergen, Kristiansand, Stavanger and Trondheim airports is now complete. “A new generation of duty free shops now awaits passengers across a total of 16,740sq m of retail space,” the company said.

Norway is the company’s second-biggest collective business, Raoul Spanger said, with turnover at flagship airport Oslo climbing +6% to €410 million. That growth, however, was modest given the company’s €35 million investment in new shops within the extended terminal. Spanger explained that consumers take some time to get used to the changed layout of a new terminal and said sales growth this year has picked up to double digits.

Sales at Copenhagen Airport reached €140 million in 2017, up +2.5% year-on-year. “In conjunction with the new contract we have rebuilt our shop and opened it just before Easter. It’s a very Danish shop now – not Scandinavian but Danish design. It’s a very modern shop with digital in-store elements under the name LookLab,” said Spanger. “We have a lot of young consumers who are addressing in a very concrete approach for the first time.” [More to follow on this innovation Ed]

Travel retail sector media joined the Gebr Heinemann directors for the now eagerly anticipated annual press conference

Turkey “back on track”

Istanbul Atatürk Airport Turkey, Gebr. Heinemann’s most successful location in terms of retail sales, saw a marginal +1% sales increase to €472 million despite political and economic unrest. “Traffic at Atatürk Airport was going down for the last two years so it has not been so easy,” said Raoul Spanger. “Nevertheless we reached €472 million, which showed good development in departures but of course with the suffering of the Turkish Lira arrivals sales were affected. So, for tourists Turkey was interesting; for arrivals it was much more difficult than before.

Raoul Spanger: “We are looking forward to opening what will be the biggest (collective) store in Heinemann history”

“This year business in the first quarter is picking up very well so we can say that Turkey is back on track. This is very important for us as we had to replan our forecast for the new airport which will [likely] open at the end of October.

“Apart from duty free, which we will be operating with our partners in Unifree, there will be 102 concept shops. We are in a centre management situation and we will have big international brands; Unifree operating our own concept shops; and local Turkish operators. The whole shopping area is more than 53,000sq m overall. Because it’s so huge, it will be divided into different islands with luxury themes, local themes, sporting themes and toy themes.”

Construction has started and most of the space has been tenanted, Spanger said. “We have no problem in terms of demand in getting tenants. We are looking forward to opening what will be the biggest (collective) store in Heinemann history. This will be a business worth more than €800 million in the first full year.”

Experimental approach: The nicely named LookLab at Copenhagen Airport targets younger consumers with a range of new and on-trend products

Turnover in the first full year of the company’s joint venture with Frankfurt Airport reached €250 million, up around +1% on like-for-like former sales. “As we were a respected partner [i.e. concessionaire] previously, we were always involved early in the planning, but now we are involved before the planning, which makes a difference,” Raoul Spanger said of the current T3 development and the benefits of a formalised alliance with the airport operator. “This has developed very well and is one of the reasons why we have the joint venture. So, earlier and closer cooperation with the airport and… airport and retailer are now together collecting data, which makes a lot of sense. Our online efforts together are more successful than everyone working separately.”

In Amsterdam, sales from the company’s joint venture liquor, tobacco and confectionery shops were flat at €90 million. “Passenger numbers were not satisfying but also the airport is so demanding in terms of the different security and check-in issues that there are a lot of pressures on the operation. Duty free and travel retail are partly suffering from that,” Spanger said. However, a refurbishment of the shops at the end of 2017, should pay dividends this year, he noted. “We are looking forward to an improved development in 2018.”

Cruising to success

Gebr Heinemann singled out the cruise sector as a particular growth opportunity. The company was particularly buoyed by the joint success of its Heinemann Americas and Heinemann Asia Pacific subsidiaries and Hamburg headquarters in securing the contract to operate 1,220sq m of retail space onboard four Carnival Cruise Line ships.  “The investment we made in Miami is looking very encouraging,” said Claus Heinemann.

The business also set what it dubbed a successful benchmark with a cross-category shop design onboard TUI Cruises’ Mein Schiff 6.

“Both retail and distribution (wholesale) on cruise ships are important strategic growth markets for Gebr. Heinemann, and ones in which the company will continue to invest worldwide going forward,” the company said.

Inflight supply contract extensions

In the company’s Inflight & Catering division, existing supply contracts with Gate Retail and Ryanair were each extended by five years.

Distribution commitment, distribution excellence

For Gebr. Heinemann’s Distribution division, 2017 was notable for the launch of a new brand, ‘Supplying Success’ – intended as the name suggests to make a lasting contribution to the company’s customers’ success. The claim represents the brand’s commitment to consistently outstanding quality. “With this, the company is positioning itself more definitively against the international competition and stating clearly what Gebr. Heinemann stands for as a distributor.”

Turning brands and trends into experiences

Gebr Heinemann said that as a company operating in complex global markets, two of its greatest challenges remain global pricing and gaining commitment from globally-oriented suppliers to make long-term financial investments.

The purchasing division is increasingly focused on both quality and strategic elements, such as bringing trends into the range and special retail products (notably an enhanced role for travel retail exclusives). It is constantly searching for new ways of integrating brands and trends into the customer experience, the company said.

The vibrancy of the merchandising and promotions at Hamburg Airport illustrate the retailer’s commitment to enhancing the in-store experience

From K-Beauty to craft spirits

Noting that make-up is currently a global ‘super trend’ category, Gebr. Heinemann said it has worked hard to make this product group more attractive, colourful and “more of an experience” for travellers through new-presentation design concepts throughout 2017.

The strong ‘K-beauty’ (Korean Beauty) trend, led by the country’s skincare products has been introduced to the Gebr Heinemann range via AmorePacific brand Sulwhasoo. The company said it has also taken advantage of a powerful trend in the liquor category with an increasing focus on craft spirits. “These add an attractive flair to the shops and can be presented as exclusive categories,” it noted.

A prime example of the craft spirits focus was the successful global launch of Copper Dog blended Speyside malt whisky, the company said. Genuine travel retail exclusives that offer a real point of difference for the travelling consumer will be an increasing focus.

The Year of the (Copper) Dog: Craft spirits are a key growth opportunity, Gebr Heinemann said (Pictured: Copper Dog at Hamburg Airport)
A Hamburg gin with Portuguese roots: Remarkably, this local brand has become the best-selling gin SKU at Heinemann Duty Free’s Hamburg Airport store

[image_magnify src=”https://www.moodiedavittreport.com/wp-content/uploads/2018/04/image003_600.jpg” src_big=”https://www.moodiedavittreport.com/wp-content/uploads/2018/04/image003_1200.jpg” alt=”” /]

[Campari Cask Tales: An example of a genuine travel retail exclusive that offers travellers a real point of difference, key to the concept succeeding Gebr Heinemann believes]

Digital, data exchange and driverless transport

A year ago Gebr. Heinemann launched the Travel Retail Data Innovation Group (TRDIG), a key pan-industry initiative. To date, 30 suppliers and the biggest travel retailers in Europe have joined the initiative for digital, automated data exchange. “It is an important element of the globalisation of Gebr. Heinemann and the entire travel retail sector,” the company said.

In summer 2017, Gebr. Heinemann and its Norwegian partners put the world’s first driverless transport system (SAGV) at an airport into service in Oslo.

 Corporate Social Responsibility to the fore

Conscious of its responsibility for preserving the environment, Gebr. Heinemann joined forces with the marine conservation organisation OceanCare last year, in order to send a clear signal against the global increase in plastic waste.

Single-use plastic bags are now only provided at a cost of 30 cents at 14 Heinemann Duty Free locations in Germany and Austria, and from January 2018 in Bratislava (Slovakia) and Ljubljana (Slovenia). The proceeds generated by this policy go to fund the work of OceanCare.

“We want to take a closer look at the economic, social and vertical impacts of our business,” said Claus Heinemann. “Within just one year we have been able to reduce consumption of single-use plastic bags in the 14 participating German and Austrian airports by around -70% from around 8.8 million in 2016 to 2.5 million in 2017. This is a great result. Plastic carrier bags are a big disaster and we have to fight against their consumption.”

The donation made to OceanCare last year reached €142,000.

No plastic, thanks: Customers have largely embraced the company’s commitment to reusable, environmentally-friendly bags
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