According to data distributed by the company after today’s (8 June) annual press conference, which took place virtually, the distribution segment decreased by 57% to €400 million.
Business at airports (63%) is the largest sales channel for the group, followed by the border shop business which accounts for 21% of total turnover.
On the category front, liquor, tobacco and confectionery products account for 55% of total sales, followed by perfumes and cosmetics (33%) and fashion and accessories (9%)
Europe remains the region commanding the largest share of turnover (80%), followed by Asia Pacific (10%), Middle East (5%), Africa (4%) and the Americas (1%).
Despite the consequences of the coronavirus (Covid-19) pandemic, which the company says continues to pose major challenges, Gebr. Heinemann has navigated the past year as a strong family business.
STRATEGIC, OPERATIONAL AND FINANCIAL INITIATIVES
In close cooperation with airports, global brands, suppliers, employees and banks, Gebr. Heinemann worked on several strategic, operational and financial initiatives to steer the future of the company and the travel retail marketplace. Max Heinemann, CEO, Gebr. Heinemann said: “We firmly believe in the travel market and are setting our organisation up for the restart, ready to come back even stronger than before.”
Addressing journalists, Max Heinemann, who described 2019 as the most successful year in the company’s history, further reflected on the impact of the pandemic which has led to job cuts, remote working and digital communication only.
“Despite these challenges we moved much closer together. This is our biggest strength and what success is built on.”
He added: “People is the heart of our strategy. We had to ensure all our employees were safe at work and in their personal lives. Short-term work schemes have proved a good vehicle to safeguard us during the crisis, but this puts pressure on individuals.”
On the financial strength of the company, Max Heinemann says its discipline in the past has clearly paid off. “We did not have to take on loans or new debt. After being hit the hardest in our history we are still in good shape.”
For the first time in the company’s 140-year history, Gebr. Heinemann was forced to make severe cutbacks in all areas in 2020. After the global closure of nearly all retail sites and the standstill of the distribution business, all sources of income had almost completely dried up.
To safeguard the business model during the crisis, Gebr. Heinemann said the clear objective was to reduce costs while ensuring liquidity. This meant streamlining the product range and negotiating on conditions with landlords and suppliers and personnel measures. Globally, the company was forced to relinquish around a third of its employees.
Echoing Max Heinemann’s words on the company’s financial stability and providing further details, Stephan Ernst, Chief Financial Officer, Gebr. Heinemann said: “Despite suffering very great losses, we are financially well equipped. We have managed well and have always acted with sufficient care regarding new projects and investments.
“In addition, we concluded a syndicated loan agreement with our five principal banks in January 2020 just before the onset of the crisis. This provides us with financial security in the long-term, while giving the company room to manoeuvre.
“Our objective is to continue enjoying the high privilege of financial independence and to remain in control of our company’s future.”
STRONG BELIEF IN THE CHANNEL
While the impact of Covid-19 has shook Gebr. Heinemann and the wider DF&TR industry to its core, the company’s belief in the channel is unbroken. Max Heinemann said: “We plan to play a very proactive part in pushing this industry forward.
“Our biggest competitors are entertainment distractions such as Netflix, Disney and Spotify. These type of things are keeping people out of our shops so this is another set of customers we have to penetrate much better than in the past.”
Convinced that the business will return, Gebr. Heinemann has used the crisis to develop its offer and redefine the company’s role in travel retail. Max Heinemann (pictured below) commented: “Part of our understanding of creating the future is our commitment to corporate responsibility and responsible travel retail.
“We are convinced that responsibility in times of crisis and, above all, shaping a sustainable future for Gebr. Heinemann are more important than ever.”
All Gebr. Heinemann sales channels were performing at a high level at the beginning of 2020, before the worldwide travel decline kicked in. The impact of the crisis on the company’s sales channels and regions is heterogeneous, the company emphasised.
Raoul Spanger, Chief Operating Officer, Gebr. Heinemann (pictured below) said the 2020 business year was yet further affirmation that the company would be better off using different channels to balance risks more effectively. “As a globally operational business, the pandemic has hit us hard everywhere. But it is this broad regional footprint in almost every form of travel — be it air, sea or land — that is now helping us reboot our global business.
“The company is now expecting a gradual pick-up in travel with the 2021 summer flight schedule. Aside the progress of vaccinations, the success of travel bubbles will be key to Gebr. Heinemann’s business recovery, especially in the airport channel.”
Depending on travel restrictions and developments pertaining to the pandemic, some airport have already partially or temporarily reopened. Certain airports where Gebr. Heinemann operates are only open for local travel, however, airports in Istanbul, Moscow and Kyiv were significantly less affected than the northern and western European sites.
“The airports in Eastern and South Eastern Europe have helped us actually in difficult times in the summer, later summer and even in the winter because in these countries the Covid measures have not been as strict as in Central and Northern Europe,” Spanger remarked.
Gebr. Heinemann’s determination to progress on its journey towards more responsibility in the travel industry and to holistically embed corporate responsibility in all business areas, is highlighted by the publication of its first integrated Annual Business & Corporate Responsibility Report 2020.
Max Heinemann called the publication of the Corporate Responsibility Report ‘incomparable’ and said this was first time the company had combined corporate responsibility and business in one report.
Additionally, the company is advancing its sustainable business strategy in all areas. These include the successive reduction of greenhouse gas emissions at the point of sale and in logistics; consideration of the principles of the circular economy in shop design; sourcing a more sustainable product selection; reducing plastic and disposable products, such as single-use bags, bottle protectors and gift wrap; and a more sustainable supply chain with high environmental and social standards.
Walk-through shops were also permitted to open in locations such as Frankfurt, for example, where Terminal 2 reopened on 1 June. This would enable the airports to better control and distribute passenger flows.
Despite the fact few people have flown over the past 15 months and affluent Asian traveller groups have been absent from hubs such as Istanbul, Amsterdam and Frankfurt, Gebr. Heinemann notes a higher average spend per passenger.
The company believes the higher spend per passenger represents a huge opportunity when it comes to working with lower passenger numbers.
Further positives in 2020 were the extension of its contract at Vilnius International in Lithuania and the long-awaited opening of its retail operations at the new Berlin Brandenburg International Airport, where the retailer is implementing its Local Sense Concept (products and influences from the region) in the Heinemann Duty Free Shops.
“Our aim is to present ourselves differently at each location. The motivation is to highlight differences that are clearly visible to the customer. Every store must become a ‘just here’ place.
“It’s no longer about making our brand recognisable by looking the same everywhere, but by looking different everywhere,” Spanger said.
Further discussing the company’s Berlin operations, Spanger, who revealed the company invested a significant amount of money into its new shops at Berlin Airport said: “When we established our retail brand 10 years ago, it was a kind of target that our shops should be identified to be similar at all locations. This story is definitely over and for the next 10 years every shop will look different.
“Berlin is the first step in this new development and this includes elements such as assortment, design and communication and other elements to ensure it is identified as a local retailer but in a global retail brand.”
The launch of the Smartseller joint venture in 2020 with travel catering specialist Casualfood offers regional airports added value by combining travel retail with food & beverage. Heinemann says this approach provides expertise in all areas and services from a single source, alongside a modern experience for passengers that is highly flexible and geared to their needs.
ASIA PACIFIC GROWTH
Gebr. Heinemann is continue to focus on the Asia Pacific as a major growth market with locations across Australia, Malaysia, Hong Kong and on cruise lines. It also has an extensive distribution business in the region, where it is striving to build upon partnerships.
The long-term contract renewal at Sydney Airport, which was achieved at the beginning of 2020, is an important basis for driving further growth in the region and with Asian travellers worldwide, according to Gebr. Heinemann.
Pursuing growth and diversification in the region through initiatives such as its new retail concession in a new Macau hotel resorts is the prime objective. The shop will expand Gebr. Heinemann’s presence in Greater China and give it a foothold in a popular destination for Chinese travellers.
Spanger commented: “We tried to open a kind of downtown business in Macau last year, which will now open in August or September this year. This is a step forward into the downtown duty free market.”
In terms of the border shop business, Gebr.Heinemann expects this to normalise relatively quickly once travel restrictions ease. When international travel came to a standstill, shopping at border crossings became increasingly important. The company’s operations in Bulgaria and Romania performed very well during this period, partially exceeding the previous year’s sales.
A similar picture emerged in the Czech Republic, Slovenia and Croatia, despite businesses being closed for several weeks. In Russia, Belarus and Georgia, however, retail and distribution business came was almost at a standstill in the wake of closed borders and rigorous lockdowns.
“When the borders opened we had absolutely strong traffic,” Spanger emphasised. “The border shops were obviously supporting the households and the daily commodities. People had to catch up and purchase more merchandise than they did in 2019. This represented quite a nice start and meant the border business initially helped us get out of this disastrous turnover situation.”
While last year was extremely challenging for the cruise segment, Gebr. Heinemann has built on its successful cruise partnerships by securing additional contracts.
The company will run stores on board several newly built ships which will set sail this year and in 2022. These include The Odyssey of the Seas, the Icon of the Seas and the Wonder of the Seas from Royal Caribbean, along with the Mardis Gras vessel from Carnival Cruise Line and the Enchanted Princess from Princess Cruises.
Authorities are yet to define the conditions under which cruises will be possible again. Gebr. Heinemann notes, that even if passenger numbers are initially limited, future prospects are positive as the loyal cruise community’s interest is constantly high.
The company also predicts that fewer ports will be visited in the next 18 to 24 months and that more time will be spent on board — a huge positive for onboard retail operations.
Additionally, in the next 18 to 24 months, fewer ports will be visited and more time will be spent on board — a huge positive for onboard retail operations.
Spanger said: “We must see what will develop as far as the cruise business is concerned. Before 2019 the cruise business was on a high and we clearly took the decision to invest in this area. We must see how it comes back and hope it comes back strongly. Hopefully our new investment in these shops will be a step forward into cruise retail.”
Inflight retail has also been hit extremely hard by Covid-19, but this has not stopped Gebr. Heinemann’s Inflight & Catering sales division from designing a new home delivery project for its airline customers.
With this solution, the airline or onboard retailer’s web-shop will act as the front-end interface for the customer, while Gebr. Heinemann will fulfil the order.
Another example of future-oriented marketplace collaboration is the development of HeiCloud (“Heinemann Cloud”). This internally developed, web-based communication platform is automating and streamlining order processes between Gebr. Heinemann and its distribution customers — as well as in the medium-term with the company’s own retail sites.
The development of this platform reaffirms the company’s firm belief in the distribution business and the potential of this sales area. Additionally, Gebr. Heinemann is further developing its role as a holistic distribution partner by supporting customers with purchasing, retail, marketing and logistics expertise.