“If you’ve been to one airport, you’ve been to…. one airport.”
Anyone who has worked in the airport industry knows that every airport is unique and that there’s no “one size fits all” solution to any commercial program. So when it comes to pouring rights, it’s important to know that each agreement can be custom-tailored to meet an airport’s specific circumstance.
Pouring rights agreements are strategic partnerships between beverage companies and airports that allow exclusive rights to sell specific beverage brands within the airport premises. These agreements can be meaningful in generating revenue, enhancing customer experiences, and aligning with the airport’s strategic objectives. Given the unique nature of each airport, these agreements must be tailored to address individual needs and goals.
In this article, we’ll explore 10 different ways that pouring rights agreements can be customized for airports, highlighting the importance of bespoke terms that reflect the airport’s specific requirements.
Note: This article is #4 of a 12-part series — all focused on pouring rights in the airport industry. If you missed it, make sure to review our series opener, “Why Airports Are Implementing Pouring Rights Now“.
1. Program Objectives
At the outset of evaluating the merits of a pouring rights agreement, it’s important to consider the various objectives that could be at play. These objectives will influence how the agreement is negotiated and structured. Potential objectives include:
Revenue Generation:
For many airports, the primary objective is to maximize non-aeronautical revenue. Pouring rights agreements can be structured to optimize financial returns through upfront payments, annual fixed sponsorship payments, variable volume-based rebate allowances, ongoing vending commissions, and performance bonuses.
Improving Guest Experience:
Enhancing the passenger experience is another critical objective. Tailoring beverage offerings and marketing strategies to meet passenger preferences and improve the guest experience can significantly improve satisfaction and loyalty.
Supporting ACDBE Tenants:
Airports can design agreements to provide protections and benefits to Airport Concession Disadvantaged Business Enterprise (ACDBE) tenants. This support can include favorable pricing terms, marketing support, and product placements that bolsters these businesses.
Boosting the Concessions Program:
Aligning pouring rights agreements with broader concessions programs can drive overall sales and enhance the retail environment within the airport. Strategic promotions and co-branded initiatives can elevate the profile of both the beverage brands and the airport’s concessions.
Combination of Objectives:
In many cases, airports will have multiple objectives, including revenue generation, passenger satisfaction, and sustainability. A well-crafted pouring rights agreement can balance these goals, ensuring that the airport benefits holistically from the partnership.
2. Level of Exclusivity
Typical Exclusivity:
Most agreements guarantee 90-95% exclusivity for the beverage company, ensuring that their products dominate the market within the airport. The level of exclusivity can vary, even by year (in order to gradually introduce pouring rights over the term).
Custom Carve-Outs:
Airports can negotiate exceptions for local brands or competitors like Dr Pepper. These carve-outs allow for greater product variety, catering to diverse passenger preferences and supporting local businesses, enhancing the airport’s community engagement and passenger satisfaction.
3. Level of Advertising
Airport Autonomy:
Many airport executives are concerned that their beverage partner will demand advertising that does not align with the airport’s environmental standards. Airports maintain full control over the marketing activities of the beverage company within their premises, and can dictate the exact parameters of advertising reach. This control ensures that marketing efforts align with the airport’s overall branding and strategic goals.
Tailored Strategies:
By customizing marketing strategies, airports can integrate beverage promotions seamlessly with their existing marketing initiatives, ensuring a cohesive passenger experience. This could include aligning marketing campaigns with seasonal events, passenger demographics, or specific terminal characteristics.
4. Types of Marketing
Not only is the level of advertising open to the airport’s discretion, but the type of advertising is also customizable.
Traditional Signage:
Billboards, banners, and other physical advertisements are effective in capturing the attention of passengers as they navigate through the airport. Some airports prefer that a dedicated amount of advertisement spend is run through their advertising partner — and beverage companies can commit to this at the negotiation table.
Digital & Social Media Advertising:
Utilizing social media, digital screens, and mobile app promotions allows for targeted and dynamic marketing efforts. Airports can leverage real-time, geo-tagged data to tailor advertisements based on passenger behavior and preferences. For some airports, this is an untapped market where the beverage companies can provide meaningful insights.
Experiential Marketing:
Interactive marketing activations such as pop-ups, sampling events, and branded lounges create memorable experiences for passengers. These activities not only promote the beverage brand but also enhance the overall passenger experience. These marketing initiatives are typically not able to be produced by an airport’s marketing partner or by its concessions partners — thereby offering the airport new resources previously unavailable.
5. Length of Term
Standard Terms:
Typically, pouring rights agreements span 10 years, providing stability and long-term revenue predictability for both the airport and the beverage company.
Flexibility:
Airports can negotiate shorter or longer terms based on their strategic objectives. For instance, a shorter term might be preferred if the airport anticipates significant changes in passenger demographics or plans major renovations. Conversely, a longer term might be more suitable for airports looking for consistent revenue streams and stable partnerships, or for airports needing to phase in pouring rights over time to accommodate current leases.
6. Allocation of Sponsorship Funding
Cash vs. Projects:
Sponsorship funds can be structured as direct cash payments or earmarked for specific amenities and projects within the airport. This flexibility allows airports to address their most pressing needs and strategic goals. Most airports prefer a mix of both — and the degree to which the pie is split can be negotiated.
Initiatives:
Funds can be allocated to various initiatives such as sustainability projects, wellness programs, advertising campaigns, or social media marketing efforts. For example, sponsorship money could fund eco-friendly initiatives like installing water refill stations or supporting wellness programs that promote healthy beverage choices.
7. Pricing Structures
Price Targets:
Airports can suggest price targets to ensure beverages remain affordable for passengers, striking a balance between profitability and customer satisfaction. This can also be employed to lower the operating costs for tenants and concessionaire partners — providing incentives for companies wanting to do business at your airport.
Price Caps:
Implementing caps on annual price increases protects merchants and concessionaires operating within the airport from sudden cost spikes, ensuring stable and predictable pricing for passengers.
8. Product Offerings
Healthier Options:
Airports can prioritize non-sugar or healthier beverage options to cater to health-conscious passengers. This focus not only meets passenger demand but also aligns with broader public health initiatives.
Variety:
Ensuring a diverse range of products, including local and niche brands, enhances the passenger experience by providing choices that reflect their preferences and tastes.
9. Packaging Offerings
Sustainability Initiatives:
Many airports are considering sustainability initiatives, such as limits on single-use plastics and promoting eco-friendly packaging options. These commitments to environmental responsibility can be built into a pouring rights program. Such measures align with global sustainability trends and can improve the airport’s reputation among eco-conscious travelers.
Enlisting Beverage Company Resources:
By partnering with beverage companies that prioritize sustainable practices, airports can tap into resources beyond itself, creating a greener and more sustainable travel environment. Beverage companies can work with their designated partners to offer a feasible way to accomplish their goals.
10. Locations within the Airport
Specific Terminals:
Agreements can be scoped to specific terminals or areas within the airport, allowing for targeted marketing and exclusivity in high-traffic zones. This approach ensures that the most critical areas of the airport benefit from the pouring rights agreement, which can be tailored to better accommodate specific merchant lease language and provide airports with a “testing ground” to prove the pouring rights concept without committing the entire property.
Flexible Implementation:
Customizing the pouring rights program to fit the unique layout and passenger flow of the airport ensures optimal product placement and maximizes revenue potential.
Conclusion
Every airport is unique, with distinct operational needs, passenger demographics, and strategic goals. Therefore, pouring rights agreements should be customized to reflect these unique characteristics. By tailoring the term length, exclusivity, marketing strategies, sponsorship funding, pricing, product and packaging offerings, specific locations, and program goals, airports can ensure that these agreements not only maximize revenue but also enhance the overall passenger experience and align with their broader strategic objectives. This customization ensures that the agreements are mutually beneficial and sustainable over the long term, fostering a successful partnership between the airport and the beverage company.
Key Points:
- Flexible Exclusivity: Agreements generally ensure 90-95% exclusivity for the beverage company, with potential carve-outs for local brands or competitors to cater to diverse passenger preferences.
- Comprehensive Marketing Control: Airports maintain full control over marketing activities, allowing for a mix of traditional signage, digital advertising, and experiential marketing tailored to enhance passenger engagement.
- Tailored Sponsorship Funding: Sponsorship funds can be allocated as direct cash or earmarked for specific airport projects, such as sustainability initiatives, wellness programs, or improvements in passenger amenities.
- Varied Product and Packaging Options: Agreements can prioritize healthier beverage options and eco-friendly packaging, aligning with the airport’s sustainability goals and catering to health-conscious travelers.
- Customizable Term Length: Pouring rights agreements can vary in duration, typically ranging from 10 years, but can be adjusted to suit the airport’s long-term plans and strategic needs.
Related Articles:
The Ultimate Guide to a Beverage Deal
Dispelling Myths: The Top 8 Misconceptions about Pouring Rights at Airports
PHL Unveils Holiday Lounge – Powered by Pouring Rights
