Gebr. Heinemann Talking Points I
A diversified business
At the annual press gathering on 27 April, senior Heinemann executives highlighted how the broad mix of channels – not just retail and distribution but also trading across airports, maritime, borders, diplomatic and others sales outlets – helped the company emerge solidly from the pandemic.
At airports, locations such as Istanbul and Tel Aviv are already above 2019 sales levels with strong investment paying off in Sydney, with Duesseldorf (where Heinemann returns this year after a ten-year absence) among the new or upgraded locations set to open.
In cruise, new business last year onboard Royal Caribbean’s Wonder of the Seas will be complemented by Icon of the Seas to come in 2024.
And the border business, principally in Eastern Europe, has held up well, despite the clear impact from the Russia-Ukraine conflict. In Ukraine, ten of 13 border stores that operate under the Duty Free Trading name are still open.
Along the borders of Bulgaria, Romania, Poland and the Czech Republic, Gebr. Heinemann operates shops under the Travel FREE brand as joint ventures or subsidiaries, covering around 45 stores in all.
Director Sales Central & Southeast Europe Christoph Stump noted in the annual report: “The performance of the border shop business in the region is to some extent heterogeneous and varies according to the profiles of travellers at each border. The Travel FREE locations in Bulgaria and Romania have shown a particularly strong performance, with growth in sales of around +30%.”
Milestones in 2022 included the redesign of the Travel FREE shops in Varna and Burgas in Bulgaria and the opening of a new location in Ruse. In Poland, the Travel FREE shop in Lubieszyn was remodelled and enlarged, focusing on perfume, cosmetics, fashion, accessories and premium spirits. The original Travel FREE shop in Drobeta-Turnu Severin, Romania, was replaced by a new building with more than twice as much retail space.
New ship, new era: Icon of the Seas comes on stream in 2024
In 2023, a shop opening in Świnoujście (Poland) is planned for the third quarter, as well as the expansion of the Travel FREE shop by a further 400sq m in Constanta, Romania.
Heinemann noted that the border shops have departed from their original, more purpose-oriented image. Of the future, Stump said: “We want to offer a shopping experience with luxury products. In the assortment, we will create special incentives through travel exclusives, with product sizes that are not available in the domestic market and with items that are perfect for gifting.”
He termed this development ‘Border Shop 2.0’, with appealing environments designed by Travel FREE to include coffee shops, playgrounds, and service offers such as petrol stations and e-charging stations. “We can design something like this with attractive partner companies as subtenants, especially in places where our Travel FREE shops are located on our own sites,” Stump added.
“Shoppers have become more demanding. Whereas in the past they mainly bought cigarettes and spirits, today we are seeing an increased interest in premium brands for perfume, cosmetics, fashion & accessories. Premium and luxury spirits have also developed very well. Travelling consumers are always interested in trying something new. Of course, a competitive price remains an important criterion for the purchase decision.”
On a related note, Gebr. Heinemann is planning to take steps into the border shop business in Africa, together with local partners. It means it will supply the African market as a retailer rather than only as a distributor in future.
On diversity more broadly at Heinemann, Co-CEO Raoul Spanger said: “It’ is important that we renew our formula for each market. We are not only a global travel retailer, we are a global trading house. When we go into markets, we evaluate what is right for this market, from an airport concession to a joint venture, to working with a distribution customer, whether they buy 100% of the merchandise from us or only a category. Our approach is always adapted to the market needs. All of this helped us come back quicker.”
Asked how far Heinemann will diversify into new channels such as duty paid and F&B, Max Heinemann said: “First we are committed fully to travel retail, that is clear. We have spoken of course about how we diversify, and we know that some competitors are more diversified that we are in the airport space.
An upgraded border store in Varna, Bulgaria, was one of many regional investments last year
“We have also looked at and tested out different paths and models and partnerships. It is a question of how we want to diversify? Do we go via tender, which includes setting our ‘red lines’? We want to invest in profitable businesses because we need to do that.
“We know how tough some contracts are and it is a volume game at some stage. That also explains why there are no new players coming into this industry as you have to be established. But we do want to open some of these doors within the industry. And that might come through a GHARAGE investment or a core business investment into a certain diversified area. We are discussing F&B because it makes sense as a consolidation move. If you can consolidate new business in a marketplace, it starts to make more sense.
“But it also needs to be the right level and fit. If you take food, you have different levels at airports. We do things with a high quality level, we aim to be seen in a particular way and we have our own culture, so not every opportunity here is the right one for us.”
On how the company views its investment agenda, Raoul Spanger said: “We are investing hugely in our shops and will continue as retail is 80% of the business. But we are also aware that if you lose say three big contracts in three years, which can happen under the concession business model, then your business disappears.
“That means managing length of contracts, which is not entirely in your hands, and investing in channels which are more profitable than big concessions. And this may be other regions or other channels. And then there are new categories, of which F&B is one for us. There it doesn’t make any sense to start up because we are not food & beverage people. So that means you need the right opportunity, maybe to buy into a company, and this is an option for us.
“Nevertheless, it will be always double-sided. Some airports that are small or medium may want to have one package, retail and F&B. But others want to have the best food & beverage operator on one hand and the best retailer for travel value and duty free but don’t want the same company. But what we can confirm as a lesson from the pandemic is that diversification is on the agenda.”
Partner's message
The Moodie Davitt eZine
Issue 323 | 5 May 2023
The Moodie Davitt eZine is published 14 times per year by The Moodie Davitt Report (Moodie International Ltd). © All material is copyright and cannot be reproduced without the permission of the Publisher. To find out more visit www.moodiedavittreport.com and to subscribe, please e-mail kristyn@moodiedavittreport.com