Heinemann drives ahead in Asia but needs to globalise faster

An appraisal of Heinemann’s business performance.

By: Kevin Rozario   •   email: kevin_rozario@yahoo.com

Independent duty free and travel retailer, Gebr Heinemann, turned in a strong sales performance in 2016, up +5.6%, despite two of its top markets – Germany and Turkey – seeing contractions, and Norway being flat.

Strong momentum in Asia and a re-ignition of growth in Russia/CIS (+33%) helped to offset the three countries above, but also serve as a reminder that geographical counterbalances are essential in the increasingly unpredictable world of DF&TR.

Co owners Gunnar and Claus Heinemann trunblocked Heinemann-sales-2016-by-region-and-channel

Hamburg-based Heinemann generated group turnover (retail and distribution) of €3.8bn (€2.9bn consolidated). However, it was the distribution side (accounting for 24% of turnover) that rose fastest at +13%, while retail (with a 75% share) struggled at +4%, due to impacts ranging from terrorism in Turkey to lower Chinese spending in Germany. Profitability was not disclosed

Co--owners Gunnar and Claus Heinemann, in Room 1879 in their Hamburg offices, which charts the history of the family company

Co–owners Gunnar and Claus Heinemann, in Room 1879 in their Hamburg offices, which charts the history of the family company

Sydney gamble pays off

Fortunately, under the leadership of Max Heinemann (the fifth generation of the family-owned company) the new and fast- expanding Asia Pacific operation has been a star performer.

The Australia business, spearheaded by its Sydney DF&TR concession (the largest departure duty free shop in the world at 8,000sq m), was up by +18%. The company also set up a joint venture with Duty Free International in Malaysia, and also claims a good performance from its retail business at Kuala Lumpur International Airport.

Heinemann remains Europe-centric

All that helped to increase Asia Pacific’s share of sales from 6% to 10%. However 85% of turnover is still in Europe (15% in Germany, 30% EU (excluding Germany), and 40% rest of Europe) – a big exposure in a region that is now undergoing some major political upheavals.

Furthermore, Heinemann is pumping huge resources into Istanbul New Airport which will eventually replace the existing Turkish Airlines hub, Istanbul Ataturk. Of €100m set aside for investment in 2017, a large chunk is likely to be gobbled up there.

At INA (tentatively set to open in Q1 2018) 50,000sq m of retail space will be managed by Heinemann and local partner Unifree. Right now a tourism slide due to terrorism incidents and the political clampdown following last summer’s coup attempt, has hit Heinemann’s existing Turkish sales which were down from €631m in 2015 to €576m in 2016.

Istanbul-New-Airport-is-a-key-focus-in-2017.

Istanbul New Airport is a key focus in 2017

Americas opportunities?

Heinemann knows it must prioritise its internationalisation efforts in order to achieve stable growth and keep pace with its larger Europe-based peers. Lagardere Travel Retail and Dufry both have much more balanced geographical splits already: LTR achieves 31% of its sales outside Europe and Dufry more than 55%.

The Americas remains one hope. The company has stepped up its cruise strategy by offering handy regional distribution points for clients, but acquisition may offer a quicker path to gaining share.

Its new 50:50 joint venture with Fraport, called Frankfurt Airport Retail, may also offer a model that can be modified for the US. Fraport has yet to do much with its 2014 US acquisition, Airmall (the airport concession manager), and Heinemann’s retail expertise could be an option for leveraging that business.

As a family-owned and innovative retailer, Heinemann is a much admired company and a fiercely independent force to be reckoned with. But as co-owner Gunnar Heinemann himself says: “We need to break new ground to remain competitive.”

Heinemann

2017-05-11T09:24:55+00:00May 5th, 2017|Categories: Airport, Airport shopping, Latest, Travel Retail|Tags: , , , |

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