"It would be sad if Travel Retail just became a copy of FMCG" - Interview, Edrington MD for Travel Retail, Tellis Baroutsis

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Tellis Baroutsis joined Edrington from Nike six years ago and has since moved up to lead The Macallan owner's Travel Retail division. Speaking to just-drinks at the Tax Free World Association exhibition in Cannes last month, Baroutsis discussed Edrington's structural overhaul in Travel Retail, the launch of The Macallan Boutique and why Travel Retail must not become just another FMCG channel.

Tellis Baroutsis has been Edringtons GTR managing director for the past two years

Tellis Baroutsis has been Edrington's GTR managing director for the past two years

just-drinks: You took over as Edrington's Travel Retail head roughly two years ago now, coinciding with the start of the channel's current downturn. That's rather unlucky for you, isn't it?

Tellis Baroutsis, Edrington's managing director of Travel Retail: I came into a bumpy road, I guess (laughs). Two year ago the single malt category was growing at 18%. Now it's flattish. When I started, one of first tasks was to dissolve Maxxium Travel Retail and start our own thing in Europe. We also took over distribution in North and South America through a joint venture with WEBB.

Meanwhile, [Middle East unit] Fix, used to be a JV and is now standalone. Now, we have Global Travel Retail as an umbrella unit, with wholly-owned distribution companies throughout the globe and the JV in North and South America as the exception.

j-d: So now you can sit back and relax?

TB: Yes, that would be nice (laughs). We've tried to build the ship while sailing it. We moved from building everything from scratch and now we're in an optimisation phase.

j-d: Any more changes ahead?

TB: No structural changes planned. We've been performing quite well.

j-d: How well?

TB: The locomotive of growth is The Macallan. Fiscal year ending March, GTR had 10% sales growth, while The Macallan grew 25%. The growth of The Macallan was turbo-charged by our Rare Cask Black [a slightly-peated Macallan], which was a new price point, a new product with a slightly different taste profile. So there was no cannibalisation. Also, it was only launched in October last year, so it's only a half-year number.

j-d: Do you expect that growth to continue?

TB: It has stabilised at a really nice level. Between US$300 and $800, its already the number one product [in GTR]. From a customer perspective it hits an interesting price point at $450. We saw that was a sweet spot for an affordable gifting product. It hits the spot for both consuming and for gifting.

It's aspirational but still accessible. And it's not only selling well in Asia, but across the globe. In all, it accounted for about half of that 25% Macallan growth.

j-d: Will the new Macallan distillery [due to be finished next year] make a difference to you in GTR?

TB: This year we are dramatically increasing our investments in retail, so we are just about to open a Macallan boutique in Taipei airport as well as a shop-in-shop in Singapore's Changi airport. We see these boutiques and shop-in-shops as the physical extension of the distillery, so you would see a lot of the elements that you'll see in the distillery's visitor's centre in this place in Taipei. Also, some of the distillery exclusives will be available in these boutiques.

j-d: Does the boutique draw any inspiration from Diageo's Johnnie Walker House?

TB: Yes, but along with a lot of other luxury brands. Of course, we looked at Johnnie Walker House, but we also looked outside of the spirits category. Extending the experience to the consumer is not a new trend, so it makes a lot of sense for us to be there as well. Also, the boutique is in the same spot that the Johnnie Walker House used to be in.

j-d: You announced a brand overhaul on The Famous Grouse here in Cannes a couple of years ago. How is it doing?

TB: Grouse is performing well but we've taken some actions that have taken down volumes a bit. We walked away from some promotions, so Grouse numbers are coming down a bit. That's a deliberate choice. For us, being owned by a charitable trust, growing top line is not interesting unless the bottom line comes along.

j-d: What about Brugal? It has had its problems in domestic. Have they translated to GTR?

TB: Brugal in Travel Retail is not that big so it was a flattish year for it. I wouldn't call it a success but I wouldn't call it a failure. We're holding ground on Brugal. The role for Brugal in TR is mainly to support the key domestic markets, Spain and Dominican Republic.

However, there is scope to move beyond. The new Brugal 1888 is a new premium offering, and is one that we can look at moving on outside of the core markets.

The end is nigh for Global Travel Retail - Comment

j-d: One of the big talking points in Cannes is retailer issues within Travel Retail. What is your view?

TB: The longer-term future of the channel is bright, just thanks to the increased passenger numbers that we all agree will come across. But it's going to be a bumpy road for the next couple of years.

As for consolidation [among retailers], that is to be expected and will continue. Obviously with this structure of the whole value chain, the problem is the bidding for concessions, which introduces a margin squeeze. I don't have a good answer on how to move away from that. I would just hope that airport authorities would look into a bit more on the quality that can be offered, rather than just the monetary side of things.

If everyone is squeezed then that has an effect on the quality that can be offered and the investment that can go into Travel Retail. That would be sad if it just became a copy of FMCG.

I absolutely think there are opportunities to keep this uniqueness because it's very different from a consumer in a hurry going into a grocery store on their weekly shop and picking up a bottle of whisky on the way.

There will continue to be great opportunities for experiences in Travel Retail.

Sectors: Spirits, Wine

Companies: The Edrington Group

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