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Phil Humphreys: faith in the channel’s ability to double sales |
INTERNATIONAL. Diageo Global Travel & Middle East Managing Director Phil Humphreys has underlined his belief that liquor sales in the travel retail channel can be doubled in value to US$12 billion over the next five years – and emphasised the critical role of customer marketing, improved partnerships with retailers and building relationships with airports in achieving that goal.
In a key move for the business, Diageo also plans to create new, standardised trading terms with all of its retail partners, beginning later this year. The move will include a provision for retailers to benefit from discounts off a new, single global price list and to gain additional investment from Diageo based on their performance.
In a travel retail media briefing today, Humphreys said that liquor sales in the channel could still double even against the current trading backdrop, which he described as “the most challenging of my working life”.
He said: “The past 12 months since I entered the travel retail channel have been tough, but I’m proud of the fact that we have risen to the challenges, and we are stronger and more ambitious for having faced them. Far from adopting a defensive position, we have sought to look for new possibilities to drive the category as well as our brands forward.
“I think we’ll look back at these 12 months as a defining period for the industry, just as we look back now on intra-EU duty free abolition in 1999 or the LAGs crisis.
“All the old certainties have been swept away, which makes our target even more audacious, but it also means we require new thinking from brands, retailers and airports. Our focus will be on category development allied to customer marketing, underpinned by our shopper insights, in partnership with our retailers; a premium approach that encourages shoppers to buy better; and conversations with airports that take the message out of the store and into the concourse.”
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Diageo is focusing heavily on engaging consumers through its Summer Spirit campaign |
The role of airports
Humphreys emphasised the value of involving airports directly in its activities. “At Dubai International Airport’s new T3, we have been running our Summer Spirit promotion via a camper van in the concourse, which was fantastic. It’s something we never did before, something we never thought would be accepted, but it shows us that when you change the rules, you can change the game.”
In response to a related question from The Moodie Report, Humphreys said: “Six months ago our relationships with the airports were pretty non-descript, but now we are having meaningful conversations with Dubai, BAA, JFK and others around driving footfall. Footfall within liquor has to grow from 23% to 36% if we are to double the size of the category. We have set ourselves an internal goal for driving footfall, and we can’t do that without significant cooperation from the authorities.
“In that vein we’ve also changed a lot around digital marketing and customer marketing pre-travel, we’ve targeted specific airport databases, and going into unknown territory, which is very exciting.
“Through our involvement as GTME with the on-trade in the Middle East, we have a unique opportunity to engage with consumers throughout their journey, and the airports are key to that.”
Humphreys also underlined the value of learning from other channels and categories. “As a channel we have got to be more open and to learn from the best, for example from the efficiencies and supply chain where it’s done well in domestic retail. The size of the opportunity – where suppliers and retailers work together to provide flawless sales execution – remains huge, and it’s one that we can address by engaging in best practice as an industry.”
He added: “Another key issue in our conversations with customers is price – but many of those conversations are based on out of date assumptions about shopper desires. I simply don’t think it’s good enough for operators or suppliers in this channel to say that we don’t know what motivates shoppers to purchase. The sales drivers in travel retail are known and can be strictly defined.
“So there is a big opportunity to collaborate with retailers based around clarity in our investment against their execution. Our ability to double the business is based around the quality of our sales execution to the standard of the best. That’s what I’ll be demanding of our customers and I’d expect them to demand brilliant sales drivers from us in return.
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Activity around Johnnie Walker Black Label is a vital element in growing the size of the category |
New trading terms
“It’s against that background that we’ll be standardising our sales terms with our customers beginning on 1 July. This will involve contracts with the opportunity for retailers to earn discounts from our single global list price, based on the scale of their custom with us. But much more significantly, it will hinge on the quality of their execution against the agreed sales drivers.
“I believe this change will offer a massive “˜win-win for this industry. For the first time we’ll be bringing our shopper insight and our understanding of sales drivers into play in a much bigger way.
“Over the past few months [Commercial Director] Peter Jacobson has led a team inside Diageo GTME to design these new trading terms. Peter will begin detailed discussions with our customers from this month. We plan to have these terms in place among the biggest customers this calendar year, and with all of our customers soon thereafter.”
Humphreys said the reaction had been “positive” among Diageo’s biggest travel retail customers.
He added: “To summarise, there will be a single price list across travel retail, per sku. Customers will be entitled to a scaled discount across all product categories, which will reward customers for their size.
“There will be a number of clearly defined sales drivers by product group and channel, based on performance. There will be opportunities for retrospective investment, payment efficiencies, for supply efficiencies too. Basically we are taking an old, withered trade terms structure which has not been consistent to a different place now. It will be fair and it will be defensible.
“The key point is that it has to be a two-way street. If we’re going to double the size of the category, then the expectation from us is that the operators execute the sales drivers in a much bigger way.”
NOTE: Phil Humphreys is to take part in this year’s ACI Airport Business & Trinity Forum, the world’s leading airport commercial revenues event, which takes place in Macau on 23-25 September. The event is jointly organised by Airports Council International and The Moodie Report.
For programme and sponsorship details please contact ACI’s Andreas Schimm at aschimm@aci.aero or The Moodie Report’s Martin Moodie at Martin@TheMoodieReport.com
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