Gebr. Heinemann is integrating its sustainable business strategy in all areas.
Covid-19 pandemic causes revenue decline of 67 per cent in 2020 – financial independence remains unimpaired.
Gradual pick-up of sales business expected in H2 2021.
A more efficient assortment and data-driven, shopper-centric tools to unlock full revenue potential.
Hamburg, 8 June 2021. Gebr. Heinemann has gone through the past year as a strong family business, despite the consequences of the Covid-19 pandemic, which are still posing major challenges for the company. In close cooperation with stakeholders such as airports, global brands and suppliers, employees and banks, Gebr. Heinemann worked on several strategic, operational and financial initiatives to steer the future of the company and the Travel Retail marketplace. “We firmly believe in the travel market and are setting our organisation up for the restart, ready to come back even stronger than before,” says CEO Max Heinemann.
Commitment to corporate responsibility
Firmly convinced that the business will return, Gebr. Heinemann used the time of crisis to further develop its offer for travellers and to redefine the company’s role in Travel Retail. “Part of our understanding of creating the future is our commitment to corporate responsibility and responsible Travel Retail. We are convinced that responsibility in times of crisis and, above all, shaping a sustainable future for Gebr. Heinemann are more important than ever,” says Max Heinemann. The company’s determination to make progress on its journey towards more responsibility in the travel industry, and to holistically embed corporate responsibility in all business areas, is highlighted by the publication of its first integrated Annual Business & Corporate Responsibility Report 2020. The company is advancing its sustainable business strategy in all areas. These include, for example, the successive reduction of greenhouse gas emissions at the point of sale and in logistics, the consideration of the principles of the circular economy in its shop design, sourcing a more sustainable product selection, reducing plastic and disposable products, such as single-use bags, bottle protectors and gift wrap, as well as a more sustainable supply chain with high environmental and social standards.
Financial figures for 2020
The Gebr. Heinemann Group closed the challenging business year of 2020 with a controlled turnover of 1.6 billion euros. This corresponds to a decline of 67 per cent compared to the turnover of 4.8 billion euros in 2019. Turnover in the retail segment slumped by 68 per cent to 1.2 billion euros. The distribution segment decreased by 57 per cent to 0.4 billion euros. With a 63 per cent share of turnover, business at airports was the largest sales channel for the Group. It is followed by the border shop business, which accounts for 21 per cent of total turnover. Broken down by category, the Liquor, Tobacco and Confectionery product range accounts for 55 per cent of Group sales, followed by Perfume & Cosmetics with 33 per cent and Fashion & Accessories with 9 per cent share of sales. Europe remains the region with the largest share of turnover, with 80 per cent, followed by the Asia Pacific region (10 per cent), Middle East (5 per cent), Africa (4 per cent) and the Americas (1 per cent).
Target for 2021: Financial independence remains unimpaired
For the first time in its more than 140-year history, Gebr. Heinemann was forced to make severe cutbacks in all areas in 2020. After the global closure of nearly all retail sites and the standstill of the distribution business, all sources of income had almost completely dried up for the company. To safeguard the business model during the crisis, the clear objective was to reduce costs while ensuring liquidity. For Gebr. Heinemann, this meant streamlining the product range, negotiations on conditions with landlords and suppliers, and personnel measures. Worldwide, the company was forced to let go of around a third of its employees – a stab in the heart for the family business.
“Despite suffering very great losses, we are financially well equipped. We have managed well and have always acted with sufficient care regarding new projects and investments in the past. In addition, we concluded a syndicated loan agreement with our five principal banks in January 2020 just before the onset of the crisis. This provides us with financial security in the long term, while giving the company room to manoeuvre. Our objective is to continue enjoying the high privilege of financial independence and to remain in control of our company’s future,” says Stephan Ernst, Chief Financial Officer.
Gradual pick-up of business expected in H2 2021
Until the worldwide decline in travel, all of Gebr. Heinemann’s sales channels started at a high level overall at the beginning of 2020. The impact of the crisis on the company’s sales channels and regions is heterogeneous. “The 2020 business year was yet further affirmation that we are better off using different channels to balance risks more effectively. As a globally operational business, the pandemic has hit us hard everywhere. But it is this broad regional footprint in almost every form of travel – be it air, sea or land – that is now helping us reboot our global business,” says Raoul Spanger, Chief Operating Officer. The company is now expecting a gradual pick-up in travel with the 2021 summer flight schedule. Aside from the progress of vaccinations, the success of travel bubbles will be key to Gebr. Heinemann’s business recovery, especially in the airport channel.
Higher average spend per passenger at airports
Depending on travel restrictions and developments pertaining to the pandemic, some shops at airports have already been able to partially or temporarily reopen. Some airports where Gebr. Heinemann is operating shops, are currently only open for local travel. However, the airports in Istanbul, Moscow and Kyiv were significantly less affected than the northern and western European sites. Walk-through shops were also allowed to open in some cases to better control and distribute passenger flows, e.g. in Frankfurt. However, despite the fact that very few people were flying during the past 15 months and affluent traveller groups from Asia have been completely absent at hubs such as Istanbul, Amsterdam and Frankfurt, there are also encouraging signs to note: where shops were allowed to open and few people travelled, they also made purchases – with a higher average spend per passenger. This represents a huge opportunity for coping with the present lower passenger numbers. Further positive signs for Gebr. Heinemann in 2020 were the extension of the contract at Vilnius Airport and the long-awaited opening of its retail operations at the new Berlin Brandenburg Airport (BER). In the Heinemann Duty Free shops at BER, the company is implementing its Local Sense concept with products and influences from the region. The regional context and its special presentation are an integral part of the individual shop identity, transforming the capital’s fashion, art, design and its unique attitude into a lively shopping experience. “Our aim is to present ourselves differently at each location. The motivation is to highlight differences that are clearly visible to the customer. Every store must become a ‘just here’ place. It's no longer about making our brand recognisable by looking the same everywhere, but by looking different everywhere,” says Raoul Spanger. The launch of smartseller, a joint venture founded in 2020 with travel catering specialist casualfood, offers regional airports added value by combining Travel Retail with Food & Beverage. This comprehensive approach provides expertise in all areas and services from a single source, alongside a modern experience for passengers that is highly flexible and geared to their needs.
Further growth in the Asia Pacific region
With retail locations across Australia, Malaysia, Hong Kong and on board cruise liners, as well as an extensive distribution business, Gebr. Heinemann also continues to focus on the Asia Pacific region as a major growth market and is striving to build upon its partnerships there. The long-term contract renewal in Sydney, which was achieved in the beginning of 2020, is an important basis for driving further growth in the region and with Asian travellers worldwide. The company is focused on actively pursuing new growth and diversification in the region, such as with its new retail concession in one of Macau’s new hotel resorts. The shop will expand Gebr. Heinemann’s presence in Greater China and at the same time give the company a foothold in a very popular destination for Chinese travellers.
Border shops partly exceeding previous year’s sales
Gebr. Heinemann expects the border shop business – as shown in the summer of 2020 – to return to its original level relatively quickly once the easing of travel restrictions takes effect. When international travel came to a standstill, shopping at border crossings became increasingly important. The company’s operations in Bulgaria and Romania performed very well during this period, partly exceeding sales of the previous year. A similar picture emerged in the Czech Republic, Slovenia and Croatia – despite business closures spanning several weeks. In Russia, Belarus and Georgia, however, retail and distribution business came to an almost complete standstill in the wake of closed borders and rigorous lockdowns.
New stores aboard several cruise liners
While the last year has been very challenging for the cruise segment, Gebr. Heinemann has continued to build upon its successful cruise partnerships by securing additional contracts. The company will be operating stores aboard several newly built ships that are coming later this year and in 2022: the Odyssey of the Seas, the Icon of the Seas and the Wonder of the Seas from Royal Caribbean, the Mardi Gras from Carnival Cruise Line and the Enchanted Princess from Princess Cruises. Authorities are yet to define the conditions under which cruises will be possible again. However, even if the passenger numbers are initially limited, the prospects for the future are good, as the loyal cruise community's interest is constantly high. Additionally, in the next 18 to 24 months, fewer ports will be visited and more time will be spent on board – a huge positive for onboard retail operations. As one of the first sales channels, the northern European ferry business picked up again in summer 2020. After the lockdown in spring, traffic and thus business, quickly started up – albeit with smaller fleets and reduced passenger numbers due to social distancing regulations. Besides Scandinavian routes, ferry shopping between the UK and France is also expected to recover quickly, with new Duty Free routes created in the English Channel by Brexit.
New home delivery offer for inflight retail
Inflight retail has been hit extremely hard by the effects of the pandemic. Gebr. Heinemann’s Inflight & Catering sales division used the time of the crisis to design a new home delivery project for its airline customers. With this pragmatic solution, the web shop of the airline or of the onboard retailer will act as the front-end interface for the customer, while Gebr. Heinemann will fulfil the order.
Streamlining and automating order processes
Another example of future-oriented marketplace collaboration is HeiCloud (“Heinemann Cloud”). This internally developed, web-based communication platform is automating and streamlining order processes between Gebr. Heinemann and its distribution customers – as well as, in the medium term, with the company’s own retail sites. The development of this platform reaffirms the company’s firm belief in the distribution business and the potential of this sales area. Additionally, Gebr. Heinemann is further developing its role as a holistic distribution partner by supporting customers in their expansion with purchasing, retail, marketing and logistics expertise.
More efficient assortment to quickly fulfil traveller’s wishes
In 2020, Gebr. Heinemann analysed its broad product range in view of market-specific sales data and profitability. The company identified a strong core range, upon which a greater emphasis will be placed in the near future. “Two key aspects are important to us for our assortment: the extraordinary and regionality, both which will help us to create wow effects and achieve the best possible sense of place. In the future, Gebr. Heinemann will stand out even more as the curator that always arranges and presents new, exciting ranges to inspire travellers,” says Dr Dirk Schneider, Chief Commercial Officer. The streamlined range will ensure fast and flexible fulfillment of demand, even during volatile periods. “Travel Retail will continue to be one of the highest-quality platforms for brands, strengthening their image and providing them with excellent visibility. However, this marketplace has to be developed in order to impress with a distinctive profile in the new reality of travel,” says Dirk Schneider. To curate an assortment for travellers with a clear distinction versus the online and domestic markets, Gebr. Heinemann’s category strategies proactively embrace new customer demands – establishing the perfect basis for growth. The desire for responsible consumption and a sustainable, healthy lifestyle is growing within society and an increasing number of consumers are making their purchasing decisions on this basis. In the Perfume & Cosmetics category, Gebr. Heinemann has addressed this topic, for example, by launching Clean Beauty last year, a range of high-performance products beneficial to both the body and the environment. In the Liquor, Tobacco and Confectionery category, the company is putting more focus on healthy snacking, among other things. In addition, Travel Retail Exclusives will continue to be extremely important for the travel market, as will price advantages.
Supply chain management to secure operational effectiveness
Efficient supply chain management achieved by working even more closely with suppliers and partners, facilitated the restart for Gebr. Heinemann. The company used the crisis months to critically examine structures along goods distribution chains and press ahead with advancements in forecasting, inventory management and warehouse processes. The result is a significant increase in efficiency, in product availability and costs, as well as increasing digitalisation of processes for the Travel Retail business.
Digitalisation and smart data to unlock full revenue potential
For Gebr. Heinemann, smart data has great relevance for the future. “It is not about quantity, but about the use of data. This presents us as a retailer with a huge opportunity to become a more comprehensive and trusted travel companion throughout the customer journey. We are currently pursuing some big opportunities for the excitement of our customers,” says Dirk Schneider. In order to unlock its full revenue potential, the company is moving forward with its digital shopper-centric services, such as the enhanced Heinemann & Me Loyalty Programme. The goal of the loyalty programme is to ensure that members have particularly positive experiences and are surprised by what Gebr. Heinemann has to offer – with regard not only to products but also to inspiration, services and individual interaction.
Fit for future and shaping a new Travel Retail market
To ensure growth and competitiveness in the future, Gebr. Heinemann is setting the course to shape a different Travel Retail market and to define its role in this new market. At the centre of all its efforts is the drive to create new, future-proof models of marketplace collaboration and to build an even more magical shopping experience. The company is continuously working on building the bridge between its physical and online presence to create a seamless, efficient and rewarding customer journey. Gebr. Heinemann believes in the brick-and-mortar business at the point of sale just as much as in the necessity to become an omnipresent digital travel companion. The company therefore continues to invest in new technologies as well as the physical marketplace. With its subsidiary GHARAGE, launched in March 2020, Gebr. Heinemann is working on several projects to diversify its retail and service offering to meet the omnichannel needs of younger and new target groups in particular. One example is the current testing of KOALA, a digital payment provider, allowing customers to scan and pay for items with their smartphone and leave the shop via a fast lane. In addition, the innovation hub GHARAGE is currently identifying and establishing promising new business models, new brands and memorable experiences that build a bridge to the company’s core business. “We are reshaping the Travel Retail ecosystem with the aid of increasingly sophisticated technology. It’s about the entire offer – the big picture of how we engage with travellers and how we see the balance between offline and online, physical and digital. We are looking to the future and we are well prepared for it. The Group, the family shareholders and all employees are fully committed to the future of Travel Retail. Gebr. Heinemann has a long and successful history ahead of it,” Max Heinemann concludes.
You can find the Gebr. Heinemann Annual Business & Corporate Responsibility Report 2020 here.
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