NAS & Travel Retail – The Truth–Guest post
The NAS issue is still causing a stir. I was contacted last week by an industry insider who read the posts (mine,Lukasz’s, Billy’s) and wanted to shed more light on what’s going on in the Travel Retail market, and Why we’re seeing more and more NAS expressions (overpriced and young) there. My source (let’s call him James) wanted to share his truth with you readers of the blog, but stay anonymous, and I shall respect that. So here goes, The Truth. And many thanks to James for sharing this with us , and allowing me to post this on my blog.
If you have already read Lukasz’s (here), Billy’s (here), Oliver’s (here) and Gal’s own posts (here), then you might have picked up the common thread about NAS whiskies:
1) The (generally) poor quality in travel retail
2) The fact that it tends to be younger whisky at a higher price.
So why is this happening? Well the general consensus on the above blog posts, is that the whisky companies themselves are looking to cash in on the current whisky boom. However, there is also another option here – the “greedy” travel retail companies are to be blamed.
Let’s take for example, a whisky producer in Scotland who wanted to have their range of products in travel retail. This producer is increasingly interested in moving into the travel retail sector, and after increasing amounts of difficulty, finally gets to speak to the right buyers. This is where the problems start.
The demands put onto producers by these Travel Retail companies are seriously shocking.
- Margins of 70-75%. To work out what they are paying lets look at a £30 bottle in Travel Retail (tax free) take the tax off a 70cl 40% bottle (£7.02) leaving £22.98 and then take off the 70%, let’s be generous, that means £6.89 going to the producer and £16.09 going to the Travel Retail company. That might not sound bad but let’s remember that £6.89 has to pay all the production, warehousing, transportation, bottling costs.
- The Travel Retail companies want the whisky producer to provide tasting stock, free of charge, allowing them to give “free” samples to customers. This obviously incurs no cost for the Travel Retail companies.
- The tasting bars at many airports are not manned by employees of the Travel Retail companies, but by agency staffed paid for by the whisky producers themselves. Consequently, these hard working employees are earning more money for the Travel Retail companies than the producers they are originally working for.
Now look at the above information and ask yourself “Why would any whisky company put any product into Travel Retail?” The honest answer to this question is that it puts the producer in the “shop window”, allowing numerous consumers to not only discover their products, but also try them. The problem occurs when the producer sells a 70cl bottle in high street retail for £30 (with a trade price of £15); against the sale of a 100cl bottle in travel retail for £40 (with a trade price of £10). It doesn’t make economic sense to lose money does it?
So what is the solution? Well many of the whisky producers are going down the route of keeping a product in the shop window. However they are now using younger, thus cheaper, NAS whiskies, which are less of a cost burden to them.
Travelling through Duty Free used to be a great experience with fantastic bargains. Sadly nowadays we find that it is being ruled by Travel Retail companies. Who not only greedily focus on their profits, but also squeeze the whisky producers in the same way the supermarkets have over the years. The prices of Travel Retail products are relentlessly increasing. A perfect example of this is the 1975 Auchentoshan released at an RRP of £500+, whilst currently being sold for over £800 in travel retail. Sadly we can say goodbye to the old bargains of duty free.
The question is – how do we, as consumers and whisky drinkers, solve this? Firstly, we should be supporting our whisky producers by buying their non travel retail whiskies. Secondly, we should try not to criticize their NAS expressions whilst they are being economically and considerably squeezed.
The Scotch Whisky Association are very keen on maintaining the quality of Scotch Whisky and protecting its identity, which is fantastic! So maybe it is time they stepped in and helped the whisky producers by putting pressure on the Travel Retail companies to cut their margins, thus allowing these whisky producers to get back to doing that they do best, making great whisky.