show review · confectionery & fine food 1.2 -0.2 source: generation research *preliminary...

CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

SHOWREVIEW

There’s no doubt that Asia continues to drive the travel-retail business—growth in the channel in the region came in at 14.2%

in 2018, according to Generation Research. And beauty is the star category, accounting for 52% of Asian travel-retail sales last year. Beauty exhibitors had a strong presence at this year's TFWA Asia

Pacific Exhibition & Conference, with 72 companies at the show (up from 69 last year). Top management from both the supplier and retailer sides of the

business attended, while there was also an interesting showing of new brands—new exhibitors at the show this year numbered 66. Show organizers, the TFWA, said that this year’s event managed

to break a new record in terms of attendance, with visitor numbers up 5% from last year to 3,367, and exhibitors reaching 314, a 1.6% increase from 2018. In this special edition from the show, BW Confidential brings you

the news and views that emerged from the event, as well as key launches presented and the major talking points in Asia and the travel-retail channel.

BW Confidential Special Show Review Edition - TFWA Asia Pacific 2019 -

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INSIGHT

TFWA Asia Pacific Exhibition & Conference 2019

Asia forwardTFWA Asia PacificTook place: Singapore, May 12-16

Visitors: 3,367, +5% vs 2018

Exhibitors: 314, +1.6% vs 2018

New exhibitors: 66

Fragrance & cosmetics exhibitors: 72 vs 69 in 2018; 23% of total exhibitors

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Beauty drives growth

Travel-retail sales of perfume and cosmetics in Asia Pacific grew 19.9% to $18.2bn in 2018, cementing the category’s position as the region’s leader in terms of both sales and growth, according to preliminary statistics from Generation Research.“Over 50 cents of every dollar spent on duty free and travel retail in this region goes

towards a fragrance and cosmetic purchase,” TFWA president Alain Maingreaud said in his opening address to the conference. “The next largest product category, fashion and accessories, claimed a little over 13 cents by comparison and showed only half the growth of fragrances and cosmetics.”Figures presented at the conference also demonstrated the strong continued growth

of the travel-retail channel overall, with total annual sales up 9.3% last year to $75.7bn, compared with $69.3bn in 2017.Asia Pacific was the largest region in terms of total travel-retail sales and the fastest

growing last year. Total sales in the region reached $35.2bn, up 14.2% over last year. Travel-retail sales in Europe rose 5.8% to $21.2bn, followed by the Americas, where sales grew 3.8% to $12.1bn and the Middle East, which saw a sales increase of 7.2% to $6.4bn. Inbound international passenger traffic grew 2.9% globally and 6% in Asia Pacific, according to travel trends analyst ForwardKeys.Maingreaud noted that while many stakeholders might question the accuracy of the

figures, they are the only statistics available. He added that in order to truly understand trends in the market, the industry must move towards greater sharing of data.

Travel retail & duty-free sales by region 2018*Region Sales $bn % change

2018/2017Asia Pacific 35.2 +14.2Europe 21.2 +5.8Americas 12.1 +3.8Middle East 6.4 +7.2Africa 0.8 +3.4Total 75.7 +9.3

Source: Generation Research *preliminary figures

Asia Pacific travel-retail & duty-free sales by category 2018*Category Sales $bn % change 2018/2017Perfumes & cosmetics 18.2 +19.9Fashion & accessories 4.7 +10.6Wines & spirits 4.2 +10.2Watches, jewelry & fine writing 2.7 +9.8Tobacco 2.5 +6.1Electronics gifts & other 1.7 +8.1Confectionery & fine food 1.2 -0.2

Source: Generation Research *preliminary figures



s The TFWA Asia Pacific opening ceremony

”TFWA president Alain Maingreaud

Over 50 cents of every dollar spent on duty free and travel retail in this region goes towards a fragrance and cosmetic purchase

“



Staying relevantDespite the rosy figures, uncertainty arising from new Chinese laws designed to curb daigou sellers impacted some companies in the region—especially in Korea—in the first quarter. Although some brands reported sales had picked up again from April. Maingreaud also noted that travel-retail sales are still not rising in line with traffic growth,

and underlined that the industry’s biggest challenge is relevance in the face of increasing competition from online retailers. “There is scope for us to show far greater creativity and innovation,” he said. “And when we talk about our customers, I would humbly suggest that we never again use the phrase ‘captive audience’. Our shoppers are far from captive. Considering them as such will bring the kind of complacency that’s causing the death of so many retail chains on the high street. The answer lies in the experience we can offer.”Maingreaud highlighted sustainability as a key area that could bring the travel-retail

industry closer to its customers and pointed to L’Oréal and Estée Lauder Companies as groups that had taken the lead with public commitments to sustainability goals. “We must recognize that air travel is far from green,” commented Maingreaud. “As an industry we can do more, and failing to act will make us seem complacent and out of touch.”

Views on Asia, Chinese travelers & digital

“With the number of airports being built in China, more Chinese travel directly from their home cities. Direct routes from tier-three and tier-four cities are increasing. The way they travel is not the same depending on where they come from; they don’t necessarily have the same traveling patterns or look for the same brands. Another key trend is that Chinese global shoppers are more digital, so it's important to leverage digital tools to be more relevant and to surf the digital opportunity.” L’Oréal Travel Retail managing director Asia Pacific Emmanuel Goulin

“There will be a place for niche brands in travel retail, but the expectations that retailers have are too high. They are worth their space, but it will always be a niche space in terms of volume and business. They will enable retailers to increase the rate of conversion and offer the possibility of capturing more clients and bring them into the shops.” LVMH global travel retail managing director Gianluca Toniolo

“Perfumes and cosmetics account for 24% of our business; perfume is 14%, and cosmetics and make-up 10%. That has been boosted by Chinese traffic. Some 4% of our customers last year were Chinese, but they accounted for 17% of our business, a lot of which is in perfumes and cosmetics. There are 16 flights a day out of Dubai airport to cities in China, and providing that traffic continues, [the beauty category] will continue to grow.” Dubai Duty Free executive vice chairman and ceo Colm McLoughlin



Views on Asia, Chinese travelers & digital


“The BAT [Chinese internet companies Baidu, Alibaba and Tencent] are investing in innovation hubs and accelerator programs to engage with the consumer differently. We don’t see [Tmall‘s moves to expand social commerce] as competition, we see it as an opportunity to co-create. We can work with them and leverage the database and community they already have to make engagement with the consumer more seamless.” Shiseido Travel Retail global digital and media marketing manager Shi Ling Tan

“In Korean travel retail, Lotte, Shilla and Shinsegae offer price advantages and other benefits for travelers who come from China and Asean countries, so we expect the volume of visitors to increase. Recently, we’ve seen the emergence of Chinese retailers putting a lot of effort into expanding their markets. We are monitoring that closely and expect it to increase market profitability.” Amorepacific travel retail unit executive vice president Michael Youngsoo Kim

“The trend [in Asia] is good. We haven’t really seen a reduced turnover in relation to the Chinese laws on daigou, but then we are not necessarily the brand that is going to be impacted the most. But I also don’t have the impression that other brands have been significantly impacted either. We haven’t seen any slowdown in Asia at any rate.” La Prairie vice president travel retail Laurent Marteau

“Travel retail is a big priority for us. Our focus is on the big travel hubs for sophisticated buyers, so certainly North Asia and going more into Southeast Asia. We want to expand our consumer base and appeal to a new generation of consumers. That has been a successful strategy in China where our consumer is younger, aged 25 to 35. For the consumer that we appeal to, efficacy is a strong driver. The target audience is urban, high income and generally willing to invest in her skin.” Johnson & Johnson vice president Asia Beauty Ellesha Kirby

“The beginning of the year in Korea—which is our largest business in travel retail here—was not easy. It is due a bit to the daigou effect, but we also have the advantage that Koreans purchase a lot of our products, especially in duty free, and this has limited our losses.” Interparfums ceo Asia Pacific Renaud Boisson



Talking points

DaigouBeauty companies reported a mixed impact on their Korean travel-retail business as a result of new Chinese laws seeking to curb daigou. Many said the Chinese crackdown on daigou sellers has been less severe than expected. Filorga global travel retail director Nicolas Rimeau, for example, said the company had built a downturn into its sales forecasts for the first quarter, but said that daigou had returned from “one day to the next” around February 13. “I think [daigou sellers] were taking a wait-and-see approach. Certainly, when the Korean operators communicate their year-to -date figures, it seems like their level of sales has not been particularly impacted,” Rimeau said.

PricingWith price comparison apps gaining in popularity, harmonizing prices across the region’s fluctuating currencies is increasingly important—and time consuming. However, beauty brands continue to stress that price must not be the only reason to shop in travel retail, and that the offer needs to be enhanced so shoppers are seen to get more value from their money than buying online, even if the e-commerce price may be cheaper.

Price comparison appsPrice comparison apps are not the enemy of travel retail. Lagardère Travel Retail ceo Pacific Przemyslaw Lesniak said the company had partnered with Asia price comparison app Jessica’s Secret to offer customers greater transparency and build relevance. “It’s a great app for us to be known in mainland China,” he said.

New retail Customer expectations are being set beyond airport terminals by tech and social-media giants. Examples include Amazon Go or the plethora of New Retail experiences in China, which are delivering experience and convenience specifically tailored to local populations. “New retail is fun when you want it to be and fast when you don’t,” commented retail innovation consultancy GDR Creative ceo Kate Ancketill.

Dermo-cosmeticsThe dermo-cosmetics category is attracting increased interest from operators eager to tap into the health and wellness trend and differentiate their offer. More dermo-cosmetics companies exhibited at the show this year, including Filorga and Pierre Fabre.

Chinese travelersThe Chinese are increasingly using low cost carriers (LCC) to travel in Asia Pacific, according to new research from NPD Travel Retail and ForwardKeys, presented at the show. Total LCC global passenger traffic rose 8.2% year-to-date to 1.15 billion people, while APAC LCC passenger traffic rose 11.7% to 372 million people. NPD Travel Retail commercial head Kathryn Place said that although Europe was driving the majority of the overall increase of LCC traffic, Asian travelers—and especially the Chinese—were getting more used to using LCC airlines locally. She added that this could drive a surge of Asian travelers flying internationally with LCCs. LCC travel is expected to outstrip regular carrier travel in all regions, and especially in Asia Pacific, Place said. She explained that LCC travelers generally spend less in duty-free stores than regular airline passengers.




News & launches from the show


Haircare and skincare brand Moroccanoil will launch a seven-sku Color Depositing Mask line in global domestic and travel-retail markets in the fall. Previewing the launch, vice president of retail and travel retail sales John Gates said the temporary hair color products have a half-and-half care and color positioning. “It’s the first opportunity we have to speak to a wide audience,” said Gates. “Those who are serious for the care piece, and those who are playful for the color piece.”

Coty showcased its new make-up line for the Gucci brand. Gucci make-up is currently rolling out with a 58-shade lipstick line before expanding into face and eye categories. The lipsticks are 80% pigment, available in three textured formulas (satin, sheer and translucent) and can also be used on the eyes and cheeks.

French skincare brand Nuxe appointed Patricia Ho as Asia Pacific general manager with responsibility for distributor markets including Japan, Korea, Taiwan, Singapore, Malaysia, Indonesia and the Philippines. Nuxe global travel retail director Marion Bruimaud said Ho would be responsible for driving the brand’s Asia Pacific strategy, which is key for the brand. Bruimaud said Nuxe was concentrating on further developing local markets—it has an exclusive agreement with Sephora in China until the end of the year—before entering Asian travel retail in 2020.

Swiss brand La Prairie showcased its new store design that it is rolling out across Asian markets. La Prairie vice president travel retail Laurent Marteau said the brand plans to roll the design out to 60 travel-retail stores this year. He said La Prairie is seeing 30% to 40% growth in Asia Pacific travel retail and domestic markets on the back of a strategy focused on better service and key points of sale.

L’Oréal Travel Retail Asia Pacific unveiled a new booth that incorporates 90% eco-friendly materials and will be used for three years in line with the company’s zero-waste to landfill commitment by 2020. “At an event like this, everybody is producing massive quantities of plastic and waste to landfill for an event that lasts just a few days. With our size comes responsibility, and we want to lead the change to sustainable development in travel retail,” L’Oréal Travel Retail md Asia Pacific Emmanuel Goulin told BW Confidential.

Dutch skincare brand Rituals is opening a regional office, stores and a warehouse in Hong Kong in the coming weeks. Rituals director global travel retail Neil Ebbutt said the brand is taking a holistic approach to Asia Pacific and will expand distribution in key hubs like Singapore, Tokyo, Sydney and Bangkok.

Swedish beauty device company Foreo has signed a global deal to expand into European, Latin American and North American travel retail this year. Foreo global travel retail director Gary Leong said the deal would see the brand open a minimum 50 pos in new travel-retail markets by the end of 2019. He declined to name the operator as the exact locations of the stores had not been confirmed. “Our digital team has been putting a lot of effort into those markets. Latin America has shown phenomenal results, for example in Colombia, with minimum expenditure, social media has skyrocketed . The product is in demand,” commented Leong, adding the company is continuing to expand its presence in Asian travel retail, with a focus on India, Vietnam, Indonesia and Malaysia.



News & launches from the show


UK-based fragrance company Designer Parfums plans to launch the first fragrance under the Formula 1 brand at the Abu Dhabi Grand Prix in December, company chairman and ceo Dilesh Mehta revealed. Having inked the license in May, Mehta said the scent would draw on Formula 1’s roots in technology, risk-taking, racing and passion. “Formula 1 has 504 million followers; many of them are decision makers—the general managers and the ceos of the world—so we need to sell this to the high-end and give them something they will love and not just another car fragrance in a bottle,” said Mehta.

Parfums Ferragamo showcased a new scent for the Signorina franchise set to launch in global and travel-retail markets in October. Called Signorina Ribelle, the fragrance has been conceived to recruit millennials to the franchise. It comes in the signature Signorina bottle with a shocking pink bow featuring rough edges. The scent has red pear and pink pepper top notes, a jasmine heart and sandalwood base.

Shiseido at Jewel Changi: A new sense of shopping

Japanese beauty group Shiseido unveiled the SENSE immersive art installation as part of its Forest Valley West Trail initiative at Jewel Changi, Singapore. Shiseido Forest Valley is a three-year partnership agreement with Jewel Changi Airport, a major new shopping complex located opposite—but separate from—Changi Airport’s main passenger terminals. The Shiseido Forest Valley West Trail is a four-story indoor forest feature made up of more than 900 trees and palms and 60,000 shrubs. The SENSE art installation was created in collaboration with Tokyo-based art collective

teamLab. It uses scent, sound, smell and touch to immerse people in sensations of calm, peace, serenity and harmony as they experience the Forest Valley West trail. Inaugurating the installation, Shiseido president and ceo Masahiko Uotani said it was a demonstration of the company's commitment to growing its travel-retail business. Shiseido Travel Retail also unveiled a new pop-up concept for the Shiseido brand with

Shilla Duty Free in Singapore Changi Airport. The SENSE Beauty pop-up was inspired by the Shiseido Forest Valley and will run until early June. “This activation, along with our Shiseido Forest Valley at Jewel Changi, paves the way for what can be expected from Shiseido Travel Retail in the future as we look to elevate our consumer engagement and digital storytelling,” commented Shiseido Travel Retail president and ceo Philippe Lesné.



In and around the show

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1. Dubai Duty Free’s Colm McLoughlin

2. TFWA's John Rimmer

3. TFWA's Alain Maingreaud

4. Nuxe's Marion Bruimaud

5. Beauty Concepts’ Seema Bahety with BW Confidential’s Sophie Douez

6. BW Confidential’s Nicolas Grob with DFS' Ariel Gentzbourger and Shiseido's Philippe Lesné

7. Interparfums' Nathalie de Panafieu and Renaud Boisson

8. AmorePacific's Michael Youngsoo Kim, BW Confidential’s Nicolas Grob and Sophie Douez and AmorePacific's David Park

9. Coty's Markus Stauss

10. Designer Parfums' Santiago Alvarez and Dilesh Mehta

11. BW Confidential’s latest print magazine was distributed at the show

12. Guerlain's Laurent Boillot

13. Salvatore Ferragamo's Bonnie Fung and Dorian Yip


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13 141. LVMH's Gianluca Toniolo with Guerlain's Elise Vanden Brande, Aymar de Chergé and Celine Heuga

2. Shiseido's Masahiko Uotani

3. L’Oréal’s Emmanuel Goulin

4. LVMH's André Marzloff

5. BW Confidential's Nicolas Grob with Foreo's Gary Leong

6. La Prairie's Laurent Marteau

7. Moroccanoil's John Gates and Erin Newfield

8. BW Confidential's Nicolas Grob with Beauty Concepts' Tony Chin

9. Blue Chip Group's Flora Lee

10. Shiseido's Shi Ling Tan

11. The Body Shop's Alexandru Mihaila

12. Sensai's Yousuke Fukuda

13. Unilever's Rosalyn Frayna

14. Johnson & Johnson's Ellesha Kirby, Sandrine Tesniere, Dr Josh and Philippe Gueulet


show review · confectionery & fine food 1.2 -0.2 source: generation research *preliminary...

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