CHINA. In major breaking news, China Duty Free Group (CDFG) 51% subsidiary Sunrise Duty Free (Shanghai Co) Ltd has been awarded the seven-year duty free contract at Shanghai Hongqiao International Airport and Shanghai Pudong International Airport, The Moodie Davitt Report can reveal.
The contract starts from January 1, 2019 and runs to December 31, 2025, a Shanghai Airport Authority spokesman told The Moodie Davitt Report, while confirming the award. Sunrise is the long-term and much-respected incumbent at both airports.
The award was announced by Shanghai Airport (Group) Co Ltd., Shanghai International Airport Co., Ltd and Shanghai International Tendering Co., Ltd.
“As the largest duty free operator in China, CDFG will continue to deliver on its commitment to making China’s duty free industry stronger, better and larger and to work towards bringing overseas spending back home and improving the international competitiveness of China’s duty free industry.” – Charles Chen, President of CDFG and Chairman of Sunrise Shanghai
Charles Chen, President of CDFG and Chairman of Sunrise Shanghai said, “I am deeply grateful to the project owner for its trust in and recognition of CDFG.
[Note: Look out for an extensive interview by Martin Moodie with Charles Chen in a blockbuster special edition of The Moodie Davitt e-Zine next week that examines this success and also the company’s Grand Opening with Lagardère Travel Retail of Duty Zero by cdf at Hong Kong International Airport on 12 July. Charles Chen is also a keynote speaker at this year’s Trinity Forum in Shanghai on October 31-November 1].
“This acquisition of the duty free business at Shanghai Hongqiao International Airport and Pudong International Airport represents another important milestone in CDFG’s history. From Hong Kong Airport and Beijing Capital International Airport in 2017 to Macau Airport and Shanghai airports this year, CDFG has made unforgettable leap-forward progress.
“This deal also demonstrates the tremendous success that CDFG has made out of the acquisition of Sunrise. After the two companies were integrated, CDFG has significantly improved its strength. I believe that with a growing market share and growing sourcing and operational capabilities, the ultimate beneficiary is China’s duty free industry, airport duty free business and theconsumers – along with a deepened strategic partnership with brands.
“As the largest duty free operator in China, CDFG will continue to deliver on its commitment to making China’s duty free industry stronger, better and larger and to work towards bringing overseas spending back home and improving the international competitiveness of China’s duty free industry.”
Hongqiao Airport’s current duty free operating area of 1,500sq m is expected to increase to 2,088sq m. At Pudong the duty free zone will be increased from 6,600sq m to 16,915sq m after the bid.
Hongqiao International had a passenger throughput of 41.88 million in 2017, CDFG noted. Pudong, one of China’s three largest international airports handled over 70 million passengers, making it the world’s ninth-busiest airport. “In the future, it will be built into a large-scale mixed-type hub serving both as… a domestic and international transfer hub at the same time… making it a heavyweight player in the air transport industry and airport travel retail industry.”
CDFG noted that Sunrise Shanghai has nearly two decades of operating experience at Shanghai International Airport. “While maintaining Sunrise Shanghai’s own existing good reputation, CDFG will actively work with Shanghai Airport Authority and Shanghai International Airport Co. Ltd towards their vision of building these two airports into the shopping window to Shanghai,” CDFG said.
It will do this by improving the shopping environment as well as enriching the brand portfolio through leveraging the travel retail expertise of CDFG and Sunrise in terms of products, range and the addition of more world-class brands popular among Chinese people.
“CDFG will continue to maintain its price competitiveness and provide domestic and foreign tourists with more attractive retail prices,” the company said. “With respect to services, CDFG will seek business excellence, while at the same time creating more a luxurious and convenient duty free shopping experience for consumers.”
BID TERMS
The Moodie Davitt Report has learned separately that Sunrise will pay Shanghai Hongqiao International Airport either a minimum guarantee of RMB 2,071,000 or a sales percentage of 42.5%, whichever is higher.
Sunrise will pay Shanghai Pudong International Airport either a minimum guarantee of RMB41 million or a sales percentage of 42.5%, whichever is higher.
BACKGROUND TO THE CDFG/SUNRISE ALLIANCE
As mentioned, Sunrise Duty Free (Shanghai) is the long-term Pudong and Hongqiao incumbent. As revealed by The Moodie Davitt Report, state-controlled rival China Duty Free Group (CDFG) acquired 51% of Sunrise Duty Free (Shanghai) Co. Ltd from Base Rich Investments Limited and Shanghai Wenyuzhai Books Co. Ltd in February this year.
The US$239 million deal covered all Sunrise Duty Free’s business at Shanghai Pudong Airport (the main location) and Shanghai Hongqiao International Airport. That transaction followed a similar 51% acquisition by CDFG last year of Sunrise’s Beijing Capital International Airport operations.
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