Lotte Duty Free has attributed a 28% rise (as of 20 November 2019) in wine and spirits sales across domestic and overseas markets combined in 2019 to the acquisition of JR Duty Free’s Australia and New Zealand business which was concluded on 31 December 2018.

As reported, the Korean powerhouse celebrated its launch into Oceania with a ceremony at one of its Brisbane Airport stores in March 2019.

The wine and spirits segment may not comprise a huge portion of total sales across Lotte’s Korean downtown duty free business, but the segment continues to grow in airports and overseas where it represents around 15% of total sales.

A Lotte spokesperson told TRBusiness: “The category will increase even more when we begin operating the liquor and tobacco concession at Singapore Changi Airport next June.”

The retailer is certainly relishing the start of operations in Singapore, where it will run the liquor and tobacco concession from 9 June 2020.

COMPETITIVE TENDER

Lotte overcame stiff competition from arch rival The Shilla Duty Free and German travel retailer Gebr. Heinemann to secure the six-year liquor and tobacco contract. The agreement covers all 18 liquor and tobacco stores across Changi’s four terminals, spanning more than 8,000sq m of retail space. Long-standing incumbent DFS Group has held the concession since 1980 so Lotte has big shoes to fill.

Soaking in the true significance of winning this key contract in October, Lotte is relishing the opportunity to demonstrate its retail knowledge and know-how on one of the biggest stages in DF&TR, particularly when it comes to wine and spirits. This which accounts for around 80% of total sales across the liquor and tobacco concession at SIN.

The spokesman said: “Changi Airport duty free stores require expertise and strategies in more diversified categories within the wine and spirits sector to target a broader spectrum of customers in terms of nationalities and purchase purposes. Many exclusive purchases, therefore, should be merchandised with more aggressive activations to meet the needs of even the niche customers.”

With wines and spirits considered by many as a ‘must-buy’ category in DF&TR, Lotte is relishing the prospect of expanding the business in other airports. “The wine and spirits segment is crucial,” the spokesperson emphasised.

Popular blended whiskies such as Ballantine’s, Royal Salute and Hennessy are Lotte’s most sought-after brands in the category. “Korean customers still purchase renowned blended whiskies for the purpose of gifting. The demand for prestigious Cognac in China leads to high sales of Hennessy.”

In terms of activations, these are just as important for Lotte in the wines and spirits sector as they are in other product categories. “An exclusive Hennessy product launch, for example, took place in our Seoul Incheon International Airport Terminal 2 flagship Hennessy store and went viral, courtesy of our Facebook and Instagram accounts.

“In addition, a photo zone has been exclusively installed for the Royal Salute 21yo Snow Polo launch in our flagship Royal Salute Seoul Incheon Terminal 2 shop.”

Gifting and self-drinking at home are among the key purchasing trends in the sector due to the ‘higher price competitiveness’ compared to the local market. When it comes to gifting, most Korean customers tend to favour blended whiskies, resulting in a ‘huge portion’ of sales from more popular whisky brands.

“Self-drinking purchases which has the smaller portion, applies to Korean customers who have a strong preference for malt whiskies and white spirits like gin.”

‘NEW AND DIFFERENT BRANDS’

Sales of gin and craft spirits continue to grow, but the portion remains small compared to more dominant categories such as blended whiskies and Cognac.

The spokesman said: “We are still bringing new and different brands to strengthen the merchant assortments.”

Securing limited editions and exclusives is important for the wine and spirits category so airport operators can offer value to customers in a different way. At the start of the year, for example, Bacardi launched a limited-edition travel retail exclusive Dewar’s 18yo Chinese New Year gift-tin, which Lotte listed at Seoul Incheon Airport.

“Lotte Duty Free has worked closely with suppliers to seize the opportunity of exclusive products by leveraging its infrastructure, be it online, offline or both. We have recently utilised digital platforms to better promote exclusive products even before the customers’ purchase experience. This creates synergies between the two parties,” the spokesperson concluded.

See the December edition of TRBusiness for more on Lotte Duty Free’s plans for the wine and spirits segment.