In April, Gebr. Heinemann revealed solid growth of +6.6% for its 2017 financial year as the business stepped over the €4bn line (for its group of controlled companies). Consolidated sales were less eye-catching, reaching €3bn from €2.9bn in 2016, largely due to the company’s reduced stake in its Frankfurt business (now a joint venture with Fraport).
Nevertheless, global tender wins – chief among them being the joint venture with James Richardson at Israel’s Tel Aviv’s Ben Gurion Airport (started in January) – give the Hamburg-based operator good opportunities going forward (see fact file below).
So good in fact, that the family-owned international duty free and travel retail business is predicting a double-digit sales rise for the 2018 financial year.
The company has successfully opened up in the fast-expanding Asia Pacific region – and is picking up the pace in the Americas market through the cruise business. This laudable global push has changed its regional mix, but not to a major extent.
Asia Pacific now has an 11% share of revenue – almost double its 6% share in 2015 – under the direction of Max Heinemann. He will return to Hamburg this summer to take up a position on the Executive Board and ensure a fifth generation of the family stays at the helm. Despite the Asia Pacific gains, Heinemann remains very much a European business driving 84% of revenue (85% in 2016).
Developments in Europe – notably Turkish operations and the vast Istanbul New Airport – are set to make the company even more Europe-reliant. Globalisation strategies sound good in theory, but in practice the unpredictability of the DF&TR business – especially the tender process – can make it difficult to actively reshape regional portfolios, for any retailer.
A fine balance to strike
Heinemann must also consider where its wholesale/distribution business – the plank on which it was built in 1879 – is heading. Last year group-wide distribution turnover slipped by -5.8% to €854m as retail sales soared +10.6% to €3.2bn.
Retail now has a 78% share of turnover (75% in 2016), and distribution 21% (24% in 2016). In previous years the shares were even closer. In 2017, the distribution division itself saw growth of +7.5% because it integrates pure wholesale activities as well as retail sales.
Heinemann’s wholesale/distribution business is integral to its success. It ensures the company deals across a very wide range of customers, allowing it to pick up on certain trends quickly. Supply operations also offer valuable insights to locations where the company may bid for concessions in the future.
Like its larger rivals, Dufry or Lagardère Travel Retail, chasing tenders is the name of the game in DF&TR, so retail will remain the main driver. And if the entire business is growing, then a reduced share from distribution is not necessarily critical. However, given its historical roots and value to the business as a whole, extra focus here is important.
One reason, perhaps, for Heinemann raising the profile of its distribution division with a new unifying brand: ‘Supplying Success’. It is essentially a performance promise to customers – and internally. The move positions Heinemann very clearly against international competition, and with a collaborative thrust. It’s a smart move at the right time.
Gebr. Heinemann fact-file 2017
|Group revenue||€4.1bn (€3.8bn in 2016)|
Liquor, tobacco, confectionery =57% (58%)
Perfume & Cosmetics = 32% (31%)
Fashion & Accessories = 9% (8%)
Other = 2% (3%)
|Key tender wins 2017||
– Hong Kong International Airport (8 confectionery shops, 1,000sqm)
– Ben Gurion Airport, Tel Aviv, Israel with James Richardson (7 stores, 4,000sqm)
– Gold Coast Airport, Australia (2 stores, 1,400sqm)
– 4 Carnival Cruise Line ships (3 in the Americas, 1 in Asia Pacific, 1,220sqm)
– Moscow Domodedovo Airport (7,000sqm)
|2018 investment||€100m (chiefly for the ongoing project at Istanbul New Airport (INA) and digital developments in ‘connected travel retail’)|
|Top 3 locations||
Istanbul = €472m (2017), but targeting €800m from INA in first full year
Oslo = €410m (2017)
Tel Aviv = €400m (target in 2018)
Source: Gebr. Heinemann