If you're a fan of the Seinfeld show, you might remember the scene from a particular episode where George and Kramer discuss the duty-free shop on their way to the airport to pick up Jerry. By the end of the scene, Kramer is singing about stopping at the duty-free shop. It's the usual stuff about nothing. However, travel retail is serious business, and that goes doubly so when it comes to booze. The world's biggest liquor companies generate a great deal of revenue at the airport, and this presents a buying opportunity of sorts. Read on and I'll explain.

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A Huge Market
In 2008, the top 50 spirit brands sold 17.4 million cases of liquor in the travel retail segment. That's approximately $10.4 billion in sales and is likely a conservative estimate. It's a huge amount of business, and the liquor companies know it. Win there, and you probably also win when your customers aren't traveling, which is a much bigger piece of the pie. There's a lot at stake. Diageo (NYSE: DEO) is the largest player in travel retail with a 25.8% market share, 280 basis points ahead of second-place Pernod Ricard. Together they control almost half of the market. Johnnie Walker (Diageo), the No.1-selling brand in travel retail in 2008 with 1.6 million cases sold, leads No.2 Absolut (Pernod Ricard) by 500,000 cases. However, of the top 10 selling brands, the biggest growth in case volume between 2003 and 2008 came from Brown-Forman's (NYSE: BF.B) Jack Daniels brand, which grew by 10.3% in the five-year period. Look for it to continue to make some headway as others in the bourbon whisky category, like Fortune Brands' (NYSE: FO) Jim Beam, take market share from weaker competitors.

Opportunities Abound
The travel retail business suffers just like every other segment of liquor sales due to the recession. This is especially true because it relies on people traveling to generate sales. Airport traffic is down, and that combined with an overall reduction in spending for liquor worldwide has made it difficult to grow. This reality can be your friend. How so, you ask? Figure out which stock presents the most value, and then wait for airport traffic to pick up. That's as good a sign as any that the economy is improving, and sales of liquor will surely follow. But don't take my word for it. Here's what Phil Humphreys, managing director of travel retail at Diageo, said back in February about its potential: "...We're going to double the category in total beverage alcohol from six billion dollars to twelve billion in five years." If it does this, you can bet Diageo's lead as the world's biggest liquor company will increase substantially as this positively impacts the rest of its business.

Overall Winner
Companies like Central European Distribution (Nasdaq: CEDC) and Constellation Brands (NYSE: STZ), as well as other regional players, can still do well in their respective domestic markets. However, to win in travel retail you need to own premium brands like Diageo and Pernod Ricard do. If you want to own Pernod, it's best to find a global ETF that owns the stock because it trades on the Paris exchange. Diageo trades on the New York Stock Exchange and is readily available. Investopedia's Aaron Levitt points out that Diageo sports a 4.4% yield and the world's No.1-selling spirit in Smirnoff, making it an attractive sin stock. Add to this the fact Johnnie Walker is the No.1-selling spirit in travel retail, and you have a winning combination.

Bottom Line
The economy will eventually improve. When it does, Diageo should achieve substantial gains in travel retail, which can only help the world's largest liquor company continue to grow. (For more, see Travel Smart By Planning How You'll Pay.)

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