CHINA. China Duty Free Group (CDFG) is on track to hit around US$2.26 billion in sales in 2017, a near +60% increase on last year, according to CDFG President Charles Chen. [We’ll bring you a full report on Chen’s speech in a special edition of The Moodie Davitt e-Zine, coming soon.]
Chen revealed the impressive 2017 performance during a strong keynote speech at the Trinity Forum in Bangkok on 2 November. He said that the increase has been driven by rapid store expansion, surging offshore duty free sales and China’s growing cruiseline retail market.
It has been a momentous year for CDFG. Its successes have included winning the liquor and tobacco concession at Hong Kong International Airport with French partner Lagardère Travel Retail; snapping up the Beijing Capital International Airport Terminal Two contract; the acquisition of a 51% share in Sunrise Duty Free’s Beijing operations; and the award of a string of arrivals duty free contracts on the mainland.
Last month, the retailer also secured the important Guangzhou Baiyun Airport Terminal 2 departures duty free concession. The contract at China’s third-busiest international airport runs for eight years. The spectacular new T2 opens in 2018.
CDFG, established in 1984, has accelerated its development in the last decade and now runs 248 stores in China.
“It’s a new era for China. There are many opportunities for all of us. If you miss China you miss the future.” – Charles Chen
Important coup
Interviewed by The Moodie Davitt Report Chairman Martin Moodie on stage, Chen hailed the Beijing Capital International Airport as a key step in the retailer’s ambitious growth strategy, including possible future downtown duty free shopping on the Mainland. “We have been preparing for downtown duty free in China for many years and, as you know, you have to pick up purchases from downtown duty free at the airport,” he said. Chen highlighted the success of the downtown duty free shopping model in countries such as Thailand (with King Power International) and suggested it could be highly successful in China.
Asked about CDFG’s acquisition of a stake in Sunrise Duty Free’s Beijing operations earlier this year, Chen was highly complimentary about Sunrise’s performance and expertise at Beijing Capital International Airport and the two Shanghai airports. “We have a lot to think about together for the future – within China and possibly even overseas development,” he said, in describing how the relationship might develop.
The CDFG-Lagardère joint venture concession at HKIA is set for a soft opening on 18 November, Chen confirmed. The Moodie Davitt Report will be on hand to report that opening.
Arrivals acceleration
CDFG has already opened six arrivals duty free stores and another eight will open in the near future, Chen said. The extension of arrivals shopping forms a key plank of the Chinese government’s efforts to boost domestic consumption.
“The Chinese government is paying more attention to the consumption of the Chinese consumer and keeping it within China,” he said. “I think there will be more arrivals stores in the future.”
There is also much potential to further develop offshore shopping on Hainan Island, said Chen. There are currently two duty free operations on the island, but the capacity is not meeting the demand, he noted.
New direction
Chen’s upbeat speech mapped out a bold future for China’s duty free market. China is the biggest source of outbound tourists in the world, with some 122 million travellers in 2016. The Chinese middle class, driven increasingly by the millennial generation, will play an ever more important role in global luxury shopping, he said.
Moreover, a growing number of countries are opening up to Chinese tourism, he said. Chen said that sales will be boosted by rapid evolution in the cruiseline sector, while independent travel will outgrow group travel in the future.
Against the backdrop of these changing dynamics, Chen underlined CDFG’s robust ambitions. Large duty free shops in key Chinese tourist destinations, such as Haitang Bay in Hainan, are highly attractive to Chinese consumers, he pointed out, so further similar developments are being examined.
Asked by Moodie if he had a single message for the travel retail industry, Chen said, “It’s a new era for China. There are many opportunities for all of us. If you miss China you miss the future.”
