HONG KONG. China Duty Free Group and Lagardère Travel Retail have unveiled a new travel retail brand, Duty Zero by CDF, for their liquor & tobacco joint venture at Hong Kong International Airport (HKIA). Travellers will see the new branding for the first time on Saturday 18 November when the partners take over the stores from DFS Group.
The new name and branding was revealed at a special event at the Ritz-Carlton Hotel in Hong Kong on Thursday, attended by senior management from both retailers, as well as Airport Authority Hong Kong and brand owners. The Moodie Davitt Report was the sole travel retail media present.
As revealed exclusively by The Moodie Davitt Report, the joint venture – CDF-Lagardère Company Limited – was awarded the liquor & tobacco contract in April. Across its eight stores and around 3,400sq m of space the concessionaire will introduce several new experiential concepts, including the widest assortment of Chinese liquor yet seen in travel retail; a House of Single Malts concept; the first Hennessy boutique at an Asian airport, tasting bars as well as an upmarket gourmet food area themed on Hong Kong afternoon tea culture. The new concepts will be introduced in phases, with completion due by June next year.
Duty Zero by CDF will also set up dedicated Customer Service Desks across HKIA. Each will provide customers, members and VIPs with a range of services including booking and pick-up, membership and enquiry services. There will be dedicated in-store VIP lounges for one-on-one shopping advice and an opportunity to preview limited-edition premium products.
A new pricing pledge also aims to make HKIA more competitive within the region. If a shopper finds a lower price on the same product within 30 days of purchase, Duty Zero by CDF will offer a refund of double the difference.
China Duty Free Group President Charles Chen said: “It was a great honour to be awarded the liquor & tobacco concession at HKIA, marking a major milestone for our commitment to going global. We are grateful to Airport Authority Hong Kong for their trust and confidence. Together with Lagardère, we will present a brand new travel retail experience.”
He added: “Just hours from now the Duty Zero brand will appear at HKIA’s liquor & tobacco stores and greet passengers at the airport. Hong Kong is one of the busiest airports in the world, with 70.5 million passengers in 2016. It connects 220 worldwide destinations, many of them in China. That is why the Hong Kong Airport liquor & tobacco business is highly significant in the travel retail industry. It is in light of Hong Kong International Airport’s influence that we have chosen the platform of this contract to launch Duty Zero by CDF.”
Chen noted: “We sought a way to re-define duty free through this new name and brand. Duty Zero is not only a new term of reference in duty free, but also a fresh start for our core business.
“Duty Zero by CDF will create a new yardstick in travel retail. It takes flight at HKIA but in the near future the brand will appear at Beijing Capital International Airport, Guangzhou Baiyun International Airport and other locations. Our grand hope is to build the brand to become a major player.”
Chen later told The Moodie Davitt Report: “We wanted to find a name that represented a fresh start. Duty Zero does that. We have many concepts and experience stores in the duty free industry, but this is totally different. It’s a new yardstick and shows the best of duty free. It’s also a China Duty Free brand, not one from the JV company. In future we’ll use it in other airports to give people the impression of the highest quality brand in duty free.”
He added: “For the past 30 years China Duty Free Group has developed in Mainland China. Hong Kong is the first international airport beyond the Mainland and that carries great meaning. If we can manage this airport well we can go anywhere. It’s not only about sales, but the brands will see what we can do and this can be a platform to develop more and more partnerships with the major brands and extend them to other locations. We respect the brands and want to help them grow.
“Being here also gives us confidence as a company that we can take the lessons elsewhere. Our managers from Mainland China can come here and learn about the business. It’s very exciting to be in this important duty free location.”
Lagardère Travel Retail Asia Pacific Chief Operating Officer Emmanuel de Place said: “This launch marks a new chapter in global travel retail and is a very important day. It’s an exciting new brand and the beginning of a new partnership between China Duty Free Group and Lagardère Travel Retail. Being awarded this concession is recognition for both companies of our category leadership, our operational expertise and of the partnership itself.”
He added: “We are grateful for the trust placed in us by the Airport Authority. We are confident that the launch will set a new standard for travel retail. This ‘East meets West’ alliance is best positioned to leverage our joint expertise and to offer a brand new duty free experience. We are confident at Lagardère Travel Retail that we will demonstrate our global category experience in liquor and fine wines in particular. This launch also underlines our strategy for this region and worldwide.”
Airport Authority Hong Kong Executive Director, Commercial Cissy Chan said: “We are delighted by the opportunity to collaborate with CDF-Lagardère in offering a brand new retail experience for travellers, further reinforcing HKIA’s status as one of the world’s best airports.”
CDF-Lagardère said that according to its research, most international travellers at HKIA have over three hours to spare and 65% of them are interested in learning about products and manufacturing processes. It said in a statement: “Traditional duty free stores tend to focus on enhancing transaction convenience, often neglecting to offer value-added services that enrich the retail experience. Duty Zero by CDF will introduce in stages multiple customer interactive zones with themes ranging from Cognac and whiskey production to Asian liquors. Experiential themes will be refreshed every season to give customers a brand new experience, even for locals and visitors who travel in and out of Hong Kong multiple times throughout the year.”
De Place noted several key areas of focus for the joint venture at HKIA. “One is in the product mix. Our combined strengths allow us to present many things: a fantastic selection of single malts; the world’s large Chinese liquor & tobacco corner and a new Hennessy boutique, a first for an Asian airport.
“On pricing, we are revamping the pricing model for liquor & tobacco. We want to raise awareness that the best prices are available at HKIA.”
De Place added: “On the retail experience, we will introduce many innovations, and on customer service we aim to introduce the highest standards, aided by ISO-certified training programme OSCAR.
“Our ambition is to deliver the leading experience in travel retail to the travellers of HKIA so that on top of the many wonderful things Hong Kong has to offer, travellers will wish to stop at the airport just to experience the future of travel retail.”
De Place said later: “This confirms our strategy of development in Asia. We started to develop the region seven years ago, to confirm our presence in the big airports such as Hong Kong and Singapore, and to develop the business in other locations. Here we are a minority partner of course but it definitely marks a great day for the group.
“Hong Kong is a flagship airport and a showcase for our know-how and our category leadership. We want to bring our expertise in category management. And we can build in other channels too. We will open a food service concept later in the year in Hong Kong, building on our strategy to grow across duty free & luxury, food service and travel essentials.
“We want to make this airport an anchor showcase in the region. It’s a great alliance between east and west, with Asian and international brands.”
CDFG Chief Operating Officer Lee Charn Cheng (CC) and Lagardère Travel Retail CEO Greater China Eudes Fabre also addressed local media and The Moodie Davitt Report during a Q&A session on Thursday.
Lee said: “It’s a big business move for CDFG. We plan to grow our business not only within China but also internationally. Hong Kong Airport is a natural platform for us to grow in duty free and it fits well into our strategy. We know the Chinese customers very well. Many Mainland Chinese come to Hong Kong for shopping and we believe we can offer them a superior level of service, customer understanding and product understanding through the airport.”
He added: “We are focused on being the best. We want to combine the best of east and west at the airport. In the assortment we will deliver a wide variety to consumers, tapping into the strengths of the combined companies.”
Fabre said: “Hong Kong Airport’s liquor & tobacco concession is one of our industry’s biggest contracts and here customer service is key. We have our ISO-certified OSCAR system dedicated to training and selling skills for our front line teams. But service is also about providing an experience. It’s not only about sales or product, it’s about enhancing the journey. We want to give people something they didn’t expect, something that surprises them and that enhances the trip.
“The availability of unique and ever-changing exclusives in our stores will, we hope, convince travellers to become regular customers. A key pillar of the strategy is to re-set the price perception of the airport. We want Hong Kong to be positioned as the most competitive in the region, offering the best prices. So it’s about price and about unique items. We’ll have the biggest Asian and Chinese liquor offer in any airport. That’s a selling point we think will transform the shopping offer and encourage people to come ahead of time.”
On the choice of concepts, Lee said: “Single malts are in great demand and we see this both in China and in Hong Kong. This will a statement for travellers going through Hong Kong Airport. We also know there is demand for Asian liquor not only among Chinese but among people from Hong Kong who want to buy it as a gift. It’s a key differentiator.
“The first Hennessy boutique in an Asia Pacific airport is also a statement. It’s a major brand with a big following in Asia and that is very significant for our partnership. We are very pleased to get them onboard. The store will also house an exclusive Dom Pérignon corner, another element that you won’t find anywhere else.”
On the range and pricing policy, Fabre noted: “In the past the business was led by luxury. Our challenge here is to have exceptional one-off items while also having an entire range that appeals to all travellers at different price points. The business is changing. We see budget airlines and new customer profiles across the industry. We know that Mainland Chinese are vital here and that they are price savvy and well informed. We see potential to grow business among the local Hong Kong clientele too, that they are assured that they can find the most expansive selection at any price point. It’s about variety and about value.
“Hong Kong is an expensive place to do business. But we currently see relatively low conversion rates. Of course renewal and expansion of the retail will help, but the big focus is on the experience. We want new features and services to expand the customer base. We want to make it more democratic and accessible but ensure that the connoisseurs are well served through VIP services and customised shopping.
“Also there will be some brands that are not available anywhere else. One way to address new consumer trends is to add new niche, craft brands. We identify pockets of growth in Champagne or in white spirits that are under-represented and where there is demand.”
Lee added: “Having a strong value proposition doesn’t mean we are not focused on luxury. At CDFG we serve hundreds of millions of Chinese consumers every year and we understand them. Even the Millennials buy luxury, whether it’s in liquor or in fashion. We are not restricting the assortment only to luxury but focused on value. Take single malt: we will have a variety of very different price points. It’s the same with Asian liquor: we will have a range that is unsurpassed in Asia Pacific. When the stores finally open you’ll see what we mean by ‘east meets west’. Through our partnership we are bringing the best single malts and best Asian brands, plus Cognac and other categories. We are tapping into all our experience at CDFG to provide the biggest range possible.”
The joint-venture partners also plan to introduce new digital innovations to build awareness among travellers before they fly and to ensure payment systems are made easier.
Charles Chen said: “Digital will be a big part of our strategy. Duty free operators can do e-commerce and we are thinking our way through this in China. Young people are doing things differently. Next year e-commerce will be a bigger part of what we do.”
Lee said: “We will create a pre-order app and allow people to pick up on return. We are also partnering with WeChat for when the stores are up and running. That is a big thing. It makes purchasing seamless and easy and allows people to pay using their phones. It’s about responding to customer demand.”
Fabre said: “We will have a fully functional e-commerce platform in partnership with the airport authority and that is new. It’s still emerging but there is demand from people who want convenience or want to do their homework in advance. But we are not only selling, we are curating an experience. On that basis the physical shop still matters. It’s about embracing change. People want omni-channel communication, and want to buy any time anywhere, but they also have time to spend at the airport, they are open to new sensory experiences, and to discovery. Online on its own cannot satisfy that curiosity.”
The partners also commented on the climate for the business in Hong Kong.
Charles Chen said: “The environment is gradually improving. More and more people are visiting Hong Kong. Also, the purchasing power of Chinese people is strong so the potential market is there. What is also important is that we are part of the number one tourism group in China [CITS] and can benefit from our tourism membership. We can use the policies of the government to our advantage too. The market is there.”
Fabre said: “We see a rebound in the Hong Kong economy but also on tourism. Visitor numbers are growing, especially from Asia, so there is optimism.”
On the expectations for the business Lee said: “DFS is an excellent operator, has done a great job here and deserves credit for its excellence in the operations at Hong Kong Airport. But we see further upside here. We know that visitor numbers are rising and we believe we can increase conversion. We can achieve higher penetration through our innovation, service and marketing. That includes within China, where we can improve brand awareness.
“Consumers are more discerning than ever. The travelling Chinese and Hong Kongers often travel and purchase overseas. We need to give them a reason to buy in Hong Kong instead of other destinations. Value is one reason, the assortment is another. If we tell them they won’t find a better price elsewhere, that gives them a reason.”
On developing the relationship with Lagardère Travel Retail, Chen said: “We will explore opportunities overseas and are thinking about this for the future. Lagardère Travel Retail has helped bring us great brands such as Hennessy in its own boutique. They are a strong company with the brands, in liquor especially. We know the Chinese traveller and have brought the Chinese brands so it works very well.”
De Place added: “With CDF, this was not only a tactical partnership just for this location. We have spoken about partnering for years and we have similar ambitions. They want to grow outside China and we want to grow in Asia. We can learn from one another and raise the bar for retail standards. At this location we both realised we could not win alone. Later the partnership can go beyond Hong Kong. We have a deep respect on both sides and will explore further opportunities, maybe even beyond Asia if possible. It is two companies and strategies meeting and joining forces.”