Basle-based tobacco products and accessories firm Oettinger Davidoff AG confirms it is in the throes of devising a new global travel retail strategy. TRBusiness obtains a timely update from Chief Commercial Officer Jim Young as part of an extended interview.
How has the Oettinger Davidoff AG travel retail business performed so far this year and has that performance equaled or surpassed your achievements of 2018?
2018 was a good year for us in travel retail. This is thanks to the products we have launched over the past two years (in the long filler segment) and in particular with exclusive products for GTR.
We experienced a positive trend and significant plus in Asia Pacific GTR, posting double-digit growth in a number of key locations and showed very good performances, especially in HK, Japan and Vietnam. We also had strong sales in the Middle East, capitalising on the overall category growth in many of the key airports and built on a consistent performance in Europe.
Can you identify a few highlights, be it on the product or activation side?
When it comes to products, the Winston Churchill Travel Retail Limited Edition 2019 was one of our highlights this year. Based on good results and customer feedback, we will definitely launch more of these GTR exclusive products in the future to accompany the success of our ongoing lines. On the activation side, we are pleased that our ‘Davidoff of Geneva Academy’ has shown significant impact in the training and education of our staff, our retailers and business partners.
At InterTabac (20-22 September), we showcased the launch of the new Camacho module. Like the other academy modules, it is filled with interactive information about the brand and assortment.
I understand Oettinger Davidoff AG is revising and implementing a new brand strategy for GTR. Tell us more…
Yes, we are indeed working on a new strategy for GTR. While it is still too early to reveal any details, what I can say is that we want to be closer connected to our teams and staff at the point of sale, focusing and enhancing the Davidoff Academy as a core tool for our retailers to become valuable brand consultants, and refining our assortment in the airports to better align with travellers’ repertoires and the domestic market.
In addition, we want to enhance our partnerships at international airports by opening up new walk-in humidors and/or Davidoff of Geneva stores where the traffic and category opportunity supports such an investment. Gifting and limited editions as well as exclusive travel retail editions will remain a focal point for Davidoff, as well as for the GTR trade in general on which we will further focus to delight our customers with exciting new innovative products.
You’ve opened walk-in humidors in the past; do they work in your opinion and will you be investing in the concept moving forward?
Yes, indeed we have opened walk-in humidors at different important airports around the world in the last year with some underway as we speak. They work very well in terms of sales, brand visibility and an enhanced consumer journey. Thanks to our Davidoff Academy certified brand consultants, we can ensure that through best merchandising and consumer consulting, our consumers leave with an experience and the product that meets their needs and taste expectations.
We will also continue investing in store concepts at leading international airports in the future; in addition to new shops in Istanbul and China, we are finalising a shop-in-shop project at Munich Airport to be opened in 2019 and we will open a Davidoff of Geneva store in Dakar Airport next year.
It seems like customers are seeking more custom blends and limited edition products. Is satisfying demand for novelty and innovation while ensuring you don’t alienate more conventional adult cigar smokers a tricky balance to strike?
Innovation is key for success in the premium cigar and accessories industry. In a fast-moving consumer environment, brands need to ensure that they delight customers continuously with special cigar blends. We try to make sure that our limited and novelty products match and extend our existing lines perfectly, offering a different and exciting taste experience. With this balance of existing lines along with novelties and exclusive offerings, we strive to make sure that we meet the expectations of any cigar aficionado.
You launched the ‘Taste the Elements’ communications campaign earlier this year to simplify engagement and promote a better understanding of the provenance of your brands. Do the messages surrounding cigar buying in general in duty free require demystifying and better consumer signposting?
Correct. The ‘Taste the Elements’ campaign has helped us a lot to inform our retail staff as well as consumers on the characteristics of our tobaccos and our cigars. This campaign was focused on our Discovery range of Davidoff Cigars – Davidoff Nicaragua, Davidoff Escurio, and Davidoff Yamasá. This story telling around our products helps to educate the customers on tobaccos, provenance, cigars and last but not least, our brand. We will definitely put more emphasis on this interactive engagement and education in the future, be it in our campaigns, at events, at retail or in duty free outlets in general.
Cigars have been somewhat shielded from the onerous regulatory demands placed on the cigarette segment through EU TPD (European Tobacco Products Directive). What for you are the main legal challenges you are contending with right now?
In some regions where Davidoff operates, we have seen the legislation for cigars become more stringent. Of course, these increasing regulations (e.g. track and trace) create more complexities that we need to manage, be it in the value chain or in the product presentation at the point of sale. However, our brands have not experienced any negative impact to date. Our intent as a company is to have an industry-leading, agile and compliant supply chain.
The next-generation and potentially reduced-harm products market in cigarettes is growing, but many cigarette suppliers believe conventional products will co-exist with next-generation products for some time. What is your take on that debate and where do cigars fit into all of this as a so-called ‘conventional’ tobacco product?
A cigar is enjoyed on a special occasion, at a special moment. It adds to the ultimate pleasure of luxury: time. At Oettinger Davidoff, we are dedicated to craftsmanship and the tradition of quality and consistency. Innovation in our cigar offerings might gain traction for the next generation combined with the development of new communication campaigns moving towards a younger and more widely relatable voice and visual.
We’ve spoken to Edward Simon (Chief Marketing Officer, Oettinger Davidoff) in the past about the cigar accessories segment and you’re focusing on this again this year with the Zino -Z- accessories collection. Why is it important for Davidoff to invest in the accessories segment and how important do you see this side of the business becoming in the years to come?
The duty free channel is a key opportunity for luxury brands like ours. It gives great exposure and showcases our brands and products to a wider audience. It is also a good channel to reach gifting consumers, an important segment in the cigar accessories business. The launch of the Zino -Z- accessories, a fashionable, accessible and modern line of cutters and lighters, was an outstanding contributor to the GTR success in 2018.
We expect our Zino -Z- accessories collection to keep growing, as first results show a great demand for this relevant and competitive line. The Davidoff Travel humidors are also kept in focus, as will be exclusive and limited accessories collections behind an increasing number of consumers looking for premium experiences in global travel retail.
Finally, can you share with TRBusiness some exclusive insight into what you are working on now and your travel retail plans for next year?
The engagement potential of the channel is unrivalled, given the combination of increased dwell time and the openness of consumers to try new products and experiences. Overall, the travel retail channel provides a great engagement opportunity for Davidoff.
Looking at the future, growth is the key word for us. This will require us to be flexible in our approach as consumers are looking for differentiation across a range of different price points. As travel frequency increases, passengers are becoming more aware of the offers and pricing of products across airport locations.
Also, there is a need for more differentiation and more innovation in terms of exclusive product offers as well as services. Within the Davidoff portfolio, we have a range of offers available, which we will deploy to optimise this potential in the channel.
Furthermore, both Camacho and Cusano are two brands that are both performing exceptionally well in the domestic markets and can add real value to the travel retail business. Oettinger Davidoff wants to ensure that we are seen as being the category experts and, therefore, as an indispensable business partner for our retailers.
To deliver this, we will continue to focus on generating category growth within all sectors, specifically premium cigars, cigarillos and accessories, as well as continuing the focus on education and training of all our staff to become brand consultant teams, offering service excellence and unrivalled shopping experiences.
For more on Oettinger Davidoff’s developing tobacco accessories business, see the February print issue containing comments from Edward Simon, Chief Marketing Officer and Head of Global Marketing Innovation.
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