Gebr. Heinemann (Heinemann) reached €3.6bn in turnover for FY23 – a 25% increase on FY22 – as it took important steps to diversify its business portfolio in the wake of major economic and geopolitical uncertainty across Europe and the Middle East.

Its major growth area was MEA (Middle East & Africa), wherein Heinemann secured concessions at Jeddah Airport, saw €1bn in turnover at Istanbul Airport, and entered the Saudi cruise market, winning a contract with Cruise Saudi.

As has historically been the case, Europe remained its largest market share, accounting for 59% of group turnover, though its Norwegian locations were negatively impacted by regulatory changes and the devaluation of the Norwegian krone.

Despite solid turnover growth across APAC – Heinemann recorded an 83% turnover increase year-on-year when compared with 2022 – the €321m in turnover for the region was only 62% of pre-covid levels.

Globally and in terms of category LTC (liquor, tobacco, and confectionery) was the clear winner, providing the business with a turnover of €1.68bn (47%) on the year, though thanks to its 50% stake in Nobilus Group – as of June 2023 – the beauty category wasn’t far behind at €1.46bn (41%).

“We gained 29 new distribution partners in 2023, especially in Africa, in Western Europe, and also the in-flight channel,” noted Spanger.

“We had one of the best financial years in our history and, importantly, these figures come without ‘one-off effects’ like government support or rent reduction at airports, namely in 2022. In 2023 we have a clean, clear result shall we say.”

MEA

“If you see our business model on airports, it’s naturally high risk if a concession ends. You can easily lose those hundreds of millions – if not billions – in one day, if you don’t get a continuation of that contract,” said Spanger, adding: “And every tender is getting tougher than it used to be, so there is no relaxation post-pandemic.”

This is one of the reasons why Heinemann has continued to diversify its business portfolio through a series of strategic investments.

One thing which became readily apparent during the press conference was the pre-eminence of the MEA region within Heinemann’s broader diversification strategy. Its European operations of course remained persistently strong, but MEA accounted for 31% of total turnover, and with good reason.

Istanbul

Turkey was the ‘golden goose’ for Heinemann in terms of single-region performance, turning over €1.97bn in retail, and a further €304m in wholesale.

Heinemann operates 27 boutique shops at iGA Istanbul Airport, and fragrance especially is booming.

“Istanbul is a fragrance-oriented market, both for low-priced and luxury. the strength of Istanbul is really in a trend for niche products, and the same can be seen across our border shops globally too,” said Callen.

“Turnover in Istanbul was unstoppable,” said Schlafstein, continuing: “We were worried when Chinese pax started to dwindle, but last year, Russian passengers accounted for 40% of fashion turnover alone, and Middle East pax has largely filled the gap, especially those from Saudi Arabia; they’re not spending money in Saudi Arabia, they’re spending the money abroad, which makes for a good passenger base in Turkey.”

Israel

One of the most prominent of its recent strategic investments included the acquisition of James Richardson’s shares (owned and operated by the Danos Family) in the JR/Duty Free joint venture, established in 2017, thus making them 100% owner of the airport and security business at Tel Aviv’s Ben Gurion Airport.

Despite a massive downturn in pax (60%) following the onset of the Israel-Hamas conflict, Heinemann is confident in the future potential of its Israel holding.

Bernard Schlafstein, Director Sales – Middle East and Africa, said of the move: “Even though we are now 100% owner of the business, the company will continue with the same management. They’re very experienced, flexible, and agile, and it accounted for 95% of total retail turnover in the Middle East. That’s just one shop.”

Though Schlafstein said a 15-20% reduction in turnover is expected for 2024, its business at Tel Aviv was the highest SPP in the entire Heinemann group and will doubtless continue to play a key role in Heinemann’s ongoing diversification strategy across MEA.

Heinemann also snapped up the remaining shares in Travel Free, a JV between Heinemann and Unimex established in 2004 which operates 20 border shops in the Czech Republic. “Border shops are a business which carry lower volume but higher profit margin than the airport concessions business,” noted Spanger.

There are further challenges looming on the horizon however; the current Israeli government has renewed calls for a ban on duty free tobacco sales to Israeli nationals, and with up to 20,000 packs either sold or in transit on a daily basis under Heinemann’s purview, if these suggestions become reality, Heinemann will be forced to lean heavily on its liquor, perfume, and cosmetics assortment there.

Jeddah

Heinemann has been intently growing its presence in the UAE and surrounding countries, too.

“We established a company in Dubai last year, primarily as a means of establishing representation and we’ve established several new contracts through Dubai,” noted Schlafstein, adding: “We also use it as a trading facility, and a supply source for local goods in Dubai and niche items otherwise not found in our assortment.”

One of the major benefactors of this recent move will be Heinemann’s retail operations at King Abdulaziz International Airport in Jeddah, Saudi Arabia.

Schlafstein said it has been a lengthy process, owing to the various checks and balances placed on an upcoming merger with Jordanian Duty Free and Astra Group, the JV for which is called Jeddah Duty Free: “Merger control took three months, then of course we need to recruit a workforce and go through all the permissions and licences for that. You’re only allowed to register officially when you have a company, for which you need a bank account.”

As of last week, Jeddah Duty Free is now a registered company in Saudi Arabia, and operations will begin in earnest come July.

Of the 10,000sq m of total retail space operated there, only 40% is set to be operational for July 2024, with the rest forecast to be ready by May 2025.

In terms of diversification, Jeddah serves as a double-header of sorts. Supported by its base in Dubai,  Heinemann secured operational rights for retail operations aboard Aroya Cruises, the new premium cruise line from Cruise Saudi.

Africa

Heinemann signed 20 new contracts over a period of 18 months ended December 2023 in Africa. Heinemann currently operates in 35 African countries, including 3 JV’s, though the majority of its turnover came from wholesale distribution (€108m) and not retail turnover (€66m).

“Retail turnover is mainly coming from the Big Five, because the Nigerian operation as well as that in Egypt are not performing well,” said Schlafstein, who added: “Overall however, numbers are rising and we have seen double-digit growth. We also see a lot of potential for smaller airports in African countries. We supply them directly which is why we had an increase of 40% wholesale turnover.”

Schlafstein noted its primary focus within Africa is ensuring the continued prosperity of its business in South Africa, whilst raising the profile of its retail presence in Ethiopia, Angola and Egypt. As Schlafstein put succinctly, “You need a presence in South Africa to be present in Africa.”

Heinemann Oceania

The most recent announcement from Heinemann was the renaming of Heinemann Australia to Heinemann Oceania.

Max Heinemann, Co-CEO of Heinemann, wryly noted: “It made a whole lot of sense to change from Heinemann Australia to Heinemann Oceania, not least because you don’t tender in New Zealand with Heinemann Australia. It’s also a logical step in regards to our distribution business.”

APAC will no doubt continue to be a testing market for Heinemann; likely much the same can be said for its competitors as the slow return of Chinese pax continues to present an issue, and lingering questions remain over changing spending/travel habits.

“In Europe overall, you can summarise that spending patterns have not changed, generally. In Asia however, the biggest question is do the Chinese spend the same amount a travel in the same patterns. A year from now our figures for Asia may well be dominated by Sydney and Malaysia, and be better than today,’ said Spanger, continuing: “But according to the first quarter of this year they’re still not where we’d like to have them.”

Sustainability

A large focus of Heinemann’s overarching sustainability goals focuses on its supply chain, the four pillars of which are: performance; resilience and scalability (the second one goes both ways); cost-efficiency, and sustainability.

To this end Heinemann has focused heavily on building regional supply and logistics hubs to reduce the travel time – and concurrently fuel consumed – couriering goods to and from its border shops, airport locations and cruise terminals.

“We also organised a sustainability summit last year, where we invited 29 forwarding agents into our Norway hub, defined for them our net-zero targets and essentially said if you don’t reach these, we will have to change forwarding agents,” said Inken Callsen, CCO of Heinemann.

E-trucks will be used on main cross-country routes within Germany, its Norway and Hamburg locations are being served with alternative fuels; and many of the products stocked at it’s Istanbul locations will be delivered by rail or supplied through an MEA logistics hub operated by an as yet undisclosed third-party.

Physical first, Digitally influenced

Alongside the re-intrdouction of its Heinemann & Me app, which has amassed over 1.6m users in just over a year, Inken highlighted its HeiSights data platform, which is a service it provides to over 200 suppliers who can check weekly data on products, shops, rankings and customer insights.

“This is massive data which can be downloaded, and the industry can work with it. We are giving a lot of information to the industry, including even stocks in our stores and warehouses,” noted Callen.

HeiSights is not the only data-focused activity Heinemann has launched in an effort to promote the free sharing of data within travel retail.

“Travel retail data innovation group, which we launched in 2018, offer the exchange of master data via data pool and while we had to stop it during covid, it’s very much alive. The perfume industry pushes it now and its really the first step in a powerful collaborative effort between us [Heinemann], Lagardere, and Avolta,” added Callen.

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