HONG KONG. In big breaking news, Airport Authority Hong Kong (AA) has awarded its duty free liquor & tobacco concession to the CDF-Lagardère Company Limited (CDF-Lagardère) joint venture, and the perfumes & cosmetics & fashion accessories concession to Shilla Travel Retail Hong Kong Limited (Shilla)
As revealed by The Moodie Davitt Report in February, CDF-Lagardère is a joint venture between China Duty Free Group and Lagardère Travel Retail.
[Look out for full analysis and reaction via our real-time blog, Moodie Davitt Live, which we’ll be bringing you throughout the day. That will include interviews with the winnners and comments on a well-run tender in which Airport Authority Hong Kong successfully sought to persuade a glittering field of contenders that HKIA offered rich commercial pickings in the future, despite the difficulties of recent years.]
Both retailers will begin operations at Hong Kong International Airport (HKIA) from November 2017. The awards each follow highly competitive open tenders which attracted many of the world’s most powerful travel retailers (see list of bidders below). The incumbent was DFS Group, which chose not to bid on liquor & tobacco and failed to retain perfumes & cosmetics and fashion accessories.
Airport Authority Hong Kong Executive Director, Commercial Cissy Chan said: “As a world-class international and regional aviation hub welcoming over 70 million passengers in 2016, we strongly believe that this collaboration will form HKIA’s signature stores, introducing attractive and diverse choices, sought-after brands, as well as unique and engaging shopping experiences.
“We are confident that the new concessions will elevate the overall airport experience and create a new shopping journey for the worldwide passengers.”
The liquor & tobacco concessionaire will have the flexibility to include complementary products and upmarket gourmet food items. The perfume & cosmetics and fashion accessories concessionaire will offer a one-stop shopping destination for beauty and fashion accessories, such as sunglasses, fashion watches, small leathergoods and handbags.
HKIA’s new liquor & tobacco concessionaire will be introducing several new experiential concepts, including the widest assortment of Chinese liquor yet seen in travel retail; a whisky chamber bringing an extensive offering under one roof; an in-store VIP lounge; tasting bars and more.
Shilla will bring a wide spectrum of beauty products and fashion accessories representing almost 100 brands that are new to HKIA. The offer will include a dedicated zone for male-specific products, as well as a ‘New Generation’ zone providing a platform for emerging Korean and Japanese brands.
Catering to the emerging trend of omni-retailing, both concessionaires will bring in new ideas to deepen customer engagement through digital initiatives.
China Duty Free Group President Charles Chen said: “We are honoured to be awarded the liquor & tobacco concession at HKIA. This marks an important milestone in the international development of our organisation’s duty free business.
“We extend our sincere gratitude to the AA for their trust, and we will join hands with Lagardère Travel Retail to present a world-class duty free shopping experience to the HKIA passengers.” [We will bring you more reaction from Charles Chen very soon].
Lagardère Travel Retail Chairman & CEO Dag Rasmussen said: “We look forward to growing our long-standing partnership with one of the world’s finest airports. Our teams across the world are excited to collaborate with our brand partners to bring to life a new benchmark for quality and engagement in travel retail.”
Hotel Shilla Travel Retail President Roberto Graziani said: “This highly competitive win is attributed to our teams’ innovative category insights; our deep understanding of customer needs as well as our long standing operational excellence.
“We are grateful to the AA for this vote of confidence and look forward to warrant to our customers and all stakeholders, offers, services, and operational performances which will stay abreast of trends and changes in the consumers’ preferences, always maintaining a strong competitive edge throughout the length of the concession.”
DFS was gracious in its response, commenting: “We congratulate Shilla Travel Retail on their selection by the Airport Authority Hong Kong to operate the beauty and accessories concession at Hong Kong International Airport.
“While we are disappointed not to have been successful, we thank the Airport Authority for their partnership over the last five years. DFS remains committed to serving travellers to Hong Kong through our downtown T Galleria stores and other activities, during a time of significant transformation in the travel retail market in this part of the world.”
COMMENT: The HKIA awards are huge boosts for the two winning bidders – one a Sino-French alliance that always looked a powerful contender from the moment the partnership was revealed; the second a deeply ambitious Korean player which urgently needs to grow its presence on the international stage.
When The Moodie Davitt Report revealed in February that China Duty Free Group (CDFG) & Lagardère Travel Retail had bid for both concessions we called it a “blockbuster combination” and this important contract victory confirms it.
It’s difficult to overstate the significance of the award to CDFG, for which HKIA represents a huge international stepping stone. Deeply ambitious, and now part of the new Chinese tourism ‘super force’ created by China International Travel Service’s merger into China National Travel Service (HK), CDFG has made international growth a core element of its development strategy.
Hong Kong is, of course, part of China, but its airport is one of the great international hubs of the world, synonymous with fine shopping, and characterised by a diverse, though Chinese-led passenger profile.
In a bullish interview with The Moodie Davitt Report to be published soon, CDFG President Charles Chen emphasised his determination to create world-class airport stores in several locations – some through tender victories, some by refurbishing existing Mainland Chinese operations. There can be fewer better, broader canvasses on which to paint your desired masterpiece than HKIA.
CDFG’s complementary partnership with French ally Lagardère Travel Retail was a shrewd move by both parties. CDFG understands the Chinese consumer better than most and has tremendous connections through its parent company with the whole Chinese travel chain. Lagardère has plentiful experience of blue-chip international airport retailing and its expertise in wines & spirits can be seen by its exhilarating offer at Nice Airport in France as well as at Charles de Gaulle.
Lagardère Travel Retail has long seen Asia as pivotal to growth, and this glamorous airport concession will provide a rapid accelerant.
As we wrote at the time, “International acumen, regional knowledge, combined strength: this is a force to be reckoned with alright.” That view has just been confirmed.
For The Shilla Duty Free, the win here is the perfect antidote to all the stresses of recent months in the company’s Korean heartland. There it has faced a proliferation of downtown competition, a hostile anti-chaebol political climate, and a recent slump in Chinese visitors due to the THAAD dispute between China and South Korea.
HKIA represents Shilla’s third offshore airport concession, following earlier successes at Singapore Changi and Macau International airports. And while those contracts have been troubled, the learnings have been swift and the HKIA operation (and Shilla’s buying power) will benefit considerably. As the engine room of publicly listed Hotel Shilla, The Shilla Duty Free simply must produce a growth story. In the face of ever-proliferating competition and intense pressure on profitability at home, it had to look abroad for targets. It has certainly found one here.
The final word goes to the incumbent, DFS Group, for whom the result represents a bittersweet moment. When it bid for the three core category concessions on offer in 2011 (liquor & tobacco, perfumes & cosmetics, airside general merchandise), DFS did not seek (and probably did not really want) all three contracts. But having snared them in seemingly one of the great tender triumphs of recent times, it watched the wheels come off in the wake of President Xi Jinping’s crackdown on corruption, conspicuous consumption and official gift-giving. With the MAG linked to HKIA’s rising traffic – and silent on its falling retail spend – the end-result was a catastrophic series of annual losses.
The perversity of the tender system means that while DFS may have just lost one important concession (it only bid on beauty & accessories), its 2018 P&L will take a US$100 million-plus turn for the better.
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