SOUTH AMERICA. Past and present members of South American duty free association ASUTIL board concluded the body’s final stand-alone conference last week with a dedication to all the directors who had participated over the past 21 years, writes Lois Pasternak*.
ASUTIL also bestowed a special award of appreciation to Enrique Urioste, who was the first Secretary General of the Association and was so instrumental in directing the organisation in its formative years. Urioste, now the CEO of Neutral Duty Free, remains an ASUTIL board member.
A surprised and visibly touched Urioste shared his gratitude with the many other people who participated along the way, before an onstage gathering that included two of the organisation’s original founders, former Brasif executives Santos Fagundes (father of current ASUTIL President Gustavo Fagundes) and Samuel Kauffmann.
Urioste spoke of the success the Association has enjoyed in unifying the industry over the past 21 years. His words followed heartfelt closing remarks from Humberto Mota, President and Chairman of Dufry do Brasil.
As reported, the 2017 Rio de Janeiro ASUTIL Conference represents the last solo conference of the organisation. From next year it will participate in a Summit of the Americas in partnership with the International Association of Airport and Duty Free Stores (IAADFS).
The final ASUTIL Conference concluded with an elegant dinner and dancing at Rio’s renowned Copacabana Palace hosted in true Brazilian style by Dufry. On Friday, about 130 attendees also spent a day touring some of Rio’s spectacular highlights, hosted by ASUTIL.
Conference report – Latin American duty free “back on track”
The travel retail industry in Latin America is “back on track” and ready to move forward, said ASUTIL President and Dufry Brasil and Bolivia COO Gustavo Fagundes, during his welcome address to delegates on Wednesday morning.
“The majority of our members grew [sales] by two digits,” he said.
In his annual state of the industry in the region address, ASUTIL Secretary General Jose Luis Donagaray confirmed the recovery, reporting that sales in the region increased by +30% in first quarter 2016 versus Q1 2017, higher than the +23% increase in passenger traffic. The average ticket increased by +5%, he said.
All categories showed gains, with perfume sales up by +28%, liquor sales +36%, tobacco +33%, foods/confectionery +45%, electronics +44% and miscellaneous +23%.
Donagaray conceded that the increases were flattered by very low numbers last year, but nevertheless, the recovery is “striking”. Most importantly, “people are travelling again,” he added.
He also spoke about the latest Duty Free World Council (DFWC) study on the perception of travel retail shopping in Latin America, and announced that ASUTIL is working with DFWC on an economic impact study for the region.
Donagaray said it was “not only tobacco” that faced legislative and lobbying threats. He cautioned that certain groups are looking to control packaging on such items as chocolate and alcohol, and warned of potential problems that might lie ahead.
Dufry Brazil overview
Referring to the theme of this year’s conference – Back to the Future – Dufry’s Fagundes stated that today’s reality of today is very different to that of the past, when the first ASUTIL conference took place.
Stressing the importance of “developing relevance to our customers,” Fagundes said that each pillar of the value chain must work together to move the industry forward and that the customer perspective is the most important element of the puzzle.
Brazil, with 48% of the continent’s area and 53% of South America’s population, accounts for 50% of the market. Over the past five years, Brazilians spent, on average, three times more traveling aboard than foreigners spend in Brazil. As a result, Fagundes says that one major challenge is to bring more tourists to Brazil.
Even with Brazil hosting two major international events – the 2014 FIFA World cup and 2016 Olympic Games – Brazilians still account for the majority of the country’s airport retail customers. Domestic travel dwarfs international travel nearly 7 to 1 – in 2016 the airports in which Dufy operates handled 22 million international passengers compared to 175 million domestic travellers.
But with traffic levels stagnant – from January-April 2017 traffic at Dufry airports in Brazil was flat – Fagundes said the company is focusing on growing the spend per passenger, rather than growing the passenger numbers.
The exchange rate is another factor directly impacting on the purchasing power of Brazilians. As a result, Dufry’s goal is to increase spend per passenger in local currencies, not just in US dollars, said Fagundes.
Brazil’s infrastructure – while significantly improved – is still not delivering the fiscal volumes they are capable of generating, but opportunities for growth exist. Brazil invested some BRL26 billion for the 2014 World Cup and BRL40 billion in the Rio Olympics for infrastructure transformation. In addition to the Olympic Park, the country has new museums, and enhanced public mobility with subways and BRT buses, as well as the new airports.
Much of the airport investment came from privatisations: Brazil’s top ten airports account for 98% of international traffic, he said. And while state-owned INFRAERO maintains 49% ownership of airports privatised in the first round of auctions, state ownership is not a requirement of the latest round of privatisations, which took place earlier this year.
Dufry has played a big role in the airport renovations. The company currently operates 99 airport stores in Brazil. They embrace 38,000sq m of space, up from 16,000sq m before the World Cup. The average contract is now 12.6 years.
To make best use of the space, Dufry has introduced several new concepts, including “state of the art” walk-through stores. “We must make sure that all these new square metres are efficiently generating more value and the best spend per passenger,” he said.
*Note: Lois Pasternak is Owner and Editor of Travel Markets Insider, a specialist travel retail publication dedicated to the Americas. She can be contacted on editor@travelmarketsinsider.net
The Moodie Davitt Report and Travel Markets Insider have a close, informal working relationship.
