As some travel retailers have distanced themselves from the tobacco industry in recent years, Gebr. Heinemann has only strengthened its commitment to its supplier partners and recently celebrated its new status as ‘Habanos Specialist’ with Frankfurt Airport.
As originally reported by TRBusiness in May, Frankfurt Airport Retail (FAR), a joint venture between Gebr. Heinemann and the airport operator Fraport, announced that it had become a ‘Habanos Specialist’ for its store in the airport’s Terminal 2; the first and only airport shop in Germany to achieve this status.
LTCF (liquor, tobacco, confectionery & fine food) accounted for the greatest share (56%) of Gebr. Heinemann’s €3.6bn retail sales in 2018. The company says differentiation from the domestic market remains key to the category, with a strong focus on unique products, craftsmanship, tailor-made labels and exclusive promotions.
In an exclusive interview with TRBusiness, Gebr. Heinemann says it is determined to drive sales of tobacco and cigars, despite the regulatory challenges the retailer has faced, and it looks like (in some locations) that this is paying off.
Rüdiger Stelkens, Director Purchasing Liquor, Tobacco, Confectionery & Fine Food at Gebr. Heinemann and Dirk Mörchen, Managing Director Frankfurt Airport Retail were approached for this year’s annual Cigar report which appears in the September issue of TRBusiness magazine.
When many other retailers are attempting to distance themselves from tobacco (and cigars) Heinemann is sending a strong message of support of this industry; especially with its latest Habanos Specialist accreditation. Is this your intention?
Rüdiger Stelkens: Yes. Tobacco is still one of our core categories for retail and distribution and due to further complexity in terms of legislation, like track and trace and plain packaging, we are investing heavily to fulfil the needs of the law.
Therefore, we see ourselves as the No 1 choice for our distribution and supplier partners.
For retail, tobacco is still of great importance because the category brings customers into our stores, as we offer a very attractive price saving on tobacco. In Frankfurt we have a price saving of at least 20% compared with the German domestic markets, whereas in Norway for example consumers benefit from at least 60% in savings due to the very high taxes imposed on the local market.
Tobacco consumers are also the ones which are more than willing to make purchases in other categories on premium products such as Cognac, whiskies and perfume/cosmetics. We will continue with our strategy in cigars because on the domestic market there are only a few shops which are really specialised in selling them.
Last, but not least, we will further develop the NGP category to serve those consumers which have made the change from combustibles to e-cigarettes, vaping and heat-but-not-burn products. Space for cigarillos and cigar short fillers will also be enlarged due to strong consumer demand.
Do you believe there is room for both cigars and vaping products/next-gen products (such as Iqos or products similar in addition to Shisha) within Heinemann’s offer at Frankfurt Airport?
RS: Yes indeed. At the moment we are focusing on NGPs (next generation products) as we see a strong market trend for offering smokers a healthier alternative. Products like Iqos, Glo, Blu, Ploom, Juul, Logic, Vype and others will be in future presented in a different way and within their own category.
Dirk Mörchen: Both areas are currently ‘en vogue’ and are developing rapidly and dynamically.
Especially in the NGP area, we look closely at what is happening in local markets in order to decide in good time what the right products/brands are for our international clientele. We are happy to rely on the expertise of our colleagues at Gebr. Heinemann in Hamburg and regularly exchange ideas with other airports worldwide.
It is no secret that tobacco is facing huge obstacles at the moment and sales – as a result – are declining overall. Has the cigars category been able to maintain its sales for Heinemann?
RS: Sales of cigarettes have seen a decline in terms of volume, but not in value, due to price increases in most of the local markets, which means we can still offer significant savings. Nevertheless, there are certain markets like Turkey where we saw a dramatic [dive] in local currency last year.
Therefore, we had to adapt pricing in order to still offer a saving compared with the Turkish domestic market. This consequently resulted in a loss in value. Tobacco has certainly been affected by the introduction of plain packaging, such as in the UK or France, and sales have been negatively impacted by almost 40%.
However, in markets like Norway where we faced the introduction of plain packaging last year, we saw hardly any decline in volume sales, because we were still able to offer a 60% saving compared with the domestic market.
When it comes to our cigar business we have not seen a decline at all. This is helped by the fact that we are able to offer aficionados limited editions and exclusives.
Therefore, we are continuously investing in our walk-in cigar humidors, with the latest opening happening at New Istanbul Airport, where we are qualified as a Casa del Habanos, Habanos Selling Point and Habanos Specialist.
We will indeed roll out this concept in other airports worldwide. Recent openings include Amsterdam and Frankfurt. In Istanbul and Amsterdam we are offering a very limited range which include 50 Cohibas which Gebr Heinemann auctioned in Cuba for the 50th anniversary of Habanos. This Humidor sells these for €370,000 each.