THAILAND. Jaidee Duty Free runs a trio of land border stores in traditionally high international passenger traffic locations along the Mekong River region – on Thailand’s borders with Cambodia, Laos and Myanmar.
The company, headquartered in Bangkok, was established in late 2019 to meet the growing appetite for branded goods by Indo-China travellers and others. And then along came a global pandemic. Founder Lukas Coates told Martin Moodie how the enterprise has survived the most severe and sustained crisis in travel retail history and is now set to reap the benefits of Thailand’s opening up.
It takes bad luck – a lot of it – to launch a duty free retail company just weeks before a global pandemic sweeps the world and devastates the tourism sector. It takes courage, resilience and no little business acumen to keep that company going through 26 months of subsequent border closures.
Welcome to the unlikely story of Jaidee Duty Free, a fledgling privately held duty free retailer created by American Lukas Coates in late 2019. The future shone brightly for the Michigan-raised businessman when he opened his first land border store in Thailand that December.
Just a few weeks later, on 13 January 2020, Thailand became the first country outside China to report a case of the then-mystery new coronavirus as what would turn into a full-blown worldwide pandemic began to plunge the travel retail channel into darkness.
Jaidee Duty Free has actually opened two more shops since the pandemic started, underlining Coates’ ultimate faith in his business and the sector as a whole. But it has been a gruelling period, a test of durability both mentally and commercially.
Speaking to The Moodie Davitt Report by Zoom from Michigan during a recent visit back to the USA, Coates says with what turns out to be typical understatement: “It was a little bit daunting there in the beginning, because it was only about two months before COVID started that I had entered into doing my own thing, independently owning and operating my own duty free stores.
“I thought, ‘Wow, okay, this is what’s going to happen. We have to stay focused, and we have to get it in our mind that there’s only one way through it and to do whatever it’s going to take.
“I remember thinking, ‘Well, maybe this is only going to be a six-month thing, and then it will calm down. And then six months comes around… and here we are after two years. It’s been quite a rollercoaster. Let’s say that it’s tapered expectations on things that you want to achieve… but I think that we’re now in a good position to move forward.”
That optimism will have been reinforced by the Thai government’s decision to abolish the need for vaccinated visitors to undergo RT-PCR tests upon arrival and the Test & Go scheme from 1 May, the latest of several measures designed to revive the country’s stricken tourism sector. While the Thailand Pass registration system is still in place, urgent pleas from tourism executives to scrap it are gathering momentum and the future for the sector now looks brighter than at any point since before the pandemic.
“I really hope that things are moving in the right direction because the financial and economic consequences have been really starting to reveal themselves in many places,” says Coates. “For me, operating in Thailand, to see the lack of tourists has been quite amazing.”
And sobering. But if the past two years have taught Coates one thing it is patience. “There have been many challenges but what we know today about COVID is vastly different than what we knew when it started,” he reflects.
“We understand the health implications better and the benefits of getting the vaccine or not getting it, according to your viewpoint. But the single most challenging aspect has always been in listening to the policymakers and decision-makers in the respective governments.
“It has been a case of this is the policy today but then after a week it changes.” Policies have not only changed regularly but have often been inconsistent, he says.
“It’s just seemed like a lot of mixed messaging, which has all compounded over time. I guess it’s always about just staying focused on the long term and trying not to allow things to play too much on your emotional sentiments. To say, ‘This is what it’s going to be like for the next month, so this is what we need to do. Let’s just stay focused’.
“My main long-term objective was just to plough through it but at the same time you have to go step by step. To make sure that you’re neither minimising your expectations nor jumping ahead, because what’s there today is different than what could be there tomorrow.”
Anyone who monitors LinkedIn regularly will have noticed how often Coates uses the platform to communicate new brand agreements and to keep Jaidee Duty Free front of mind within the travel retail community.
“There’s been a little more time available than usual over the last couple of years, so I’ve spent some of it trying to learn a little bit, whether it’s been about finance, accounting stuff, digital marketing and the impact of social media,” he notes.
“I’ve been playing around a little bit on LinkedIn, especially over recent weeks when we have seen a light at the end of the tunnel. We are starting to see opportunities with events and exhibitions, for example, and more people starting to travel into Thailand.
“So it has been about asking what is the reach that I can get with all these people in the travel retail network… the different entities of the Trinity? It’s something that I’ve been really trying to play with over the last few weeks to see how I can reach not only existing partners, but also how I can create more visibility and awareness with prospective business partners.”
Learning from the best
Coates’ life in the travel retail sector traces back to 2007 when he moved from Michigan to Dubai to take on the role of International Key Account Manager with Oriental General Trading, a Jebel Ali-based firm which specialised in the distribution of Chinese liquor & tobacco products such as Chunghwa, Panda, Double Happiness, Wuliangye, Moutai and a plethora of other famous brands. The company was “way ahead of the curve” in terms of its focus on the needs of the still-emerging Chinese traveller audience, Coates recalls.
The first retailer he met was Sharon Beecham, the long-time Purchasing Manager (now Vice President – Purchasing) at Dubai Duty Free, an experience he remembers as having a formative influence on his subsequent career. “Going to talk to Sharon about Chinese cigarettes was not the easiest of tasks but they gave us a chance and then it transpired from there,” he says.
Being involved with a company that was pioneering a still fledgling category was a steep but enjoyable learning curve. “I loved it, especially spending time on the shop floor with the sales staff and having the path to go into Dubai Duty Free as a vendor. I use them as an example because just seeing the scale of their passenger and customer numbers; the sheer amount of space; and all the offerings across whatever category you could possibly think of really stuck with me. So did simply seeing how those things were done, by working with people on the shop floor, in the back office, and on the purchasing and logistics side.
“I’d had a lot of experience on key account management and got to know a lot of people on both the brand side and operating side. If you have an open mind and you go in to talk to somebody and not just try to sell them cigarettes, but actually listen to the things that people like Sharon talk about – that are important to them as an operator – you can pick things up quickly. Things like what they have to achieve or what they need to do to contribute to the various parts of their P&L.”
It wasn’t just about big retailers. Working with Oriental General Trading took Coates into a range of emerging markets in Africa, allowing him to witness how the duty free trade functioned in places such as Morocco, Senegal, Ethiopia and Côte d’Ivoire. “It all piqued my interest about what these people were really doing in duty free, even if it was just a small airport shop. That put me on the path [to creating my own business] and then – fast forwarding to 2019 – until through meeting the right people I had an opportunity in duty free retail.”
But first there were more learnings. Oriental General Trading eventually diversified into operating its own duty free stores, opening around a dozen shops in multiple countries including Mongolia, Cambodia, Laos and on the US-Mexico border. Given his relevant experience, the company suggested that Coates look after the buying and the sourcing for all its duty free shops across Asia.
Taking the plunge into duty free retailing
That took in a myriad of experiences from cold calling on eventual clients such as Japan Tobacco International’s office in Kyiv, Ukraine in 2008 and the Philip Morris International team in Istanbul, trying to convince multi-national giants of the integrity and value of a fledgling duty free retail business.
“It was cold calling but it kind of came together,” Coates remembers. “And just by the grace of good relationships in Thailand, I was able to get access to a duty free licence. It was an opportunity and I thought. ‘Well, now’s the time. Let’s go, let’s see what can be done.’ ”
The single store, on the Thailand border with Cambodia, started up in December 2019. Soon after though, Coates was approached to sell the operation to a Singapore-based Chinese businessman. He did so but having acquired another duty free licence and armed with cash reserves from the sale he proceeded to open a new store at Aranyaprathet.
“So I was able to continue. That injection of cash flow at the time was significant,” Coates comments. “Because when you’re starting up, it’s one thing to show that you’ve got the licence, the shop, the space, the business model and the modus operandi but the most important aspect is the finance. So you’ve got to pick and choose how you want to move forward, make your relationships and handle things as best as possible.”
One shop quickly became three and today Jaidee Duty Free runs a trio of stores. The first is in Aranyaprathet, a town in Sa Kaeo Province in eastern Thailand on the border with Poipet in Cambodia; the second in the north-eastern location of Mukdahan by the famed Friendship Bridge II that crosses into Laos, opened in late 2020; and the third in Mae Sai, Chiang Rai province Thailand on the border with Tachileik in Shan State, Myanmar, inaugurated in early 2021.
While the stores have remained opened Coates doesn’t sugarcoat the difficulties of running such businesses through the pandemic.
“We’ve just been focused on truck drivers, day trippers, workers, people that are 100% relying on cross-border life for work or family reasons. The tourists from China are not there, the Western people are not there, so it’s been hit and miss. But for when the opportunities are there you have to be prepared. You get into that mode where you just have to stay focused and do what you can and then move on when you can.”
For now, Jaidee Duty Free’s offer is mainly liquor and tobacco and over recent weeks Coates has taken to LinkedIn to announce a series of extensions to the range, including Baron Philippe de Rothschild, Bardinet, Bottega, Brown-Forman, Campari, Distell, Diverse Flavours, Edward Snell, Penfolds, Tobacco Authority of Thailand, Waldemar Behn, William Grant & Sons and others.
He hopes to expand the range to other categories post the pandemic. In that context, he talks hopefully about the days when COVID is “permanently in the rearview mirror” and believes his business will eventually rebound strongly. “As and when the tourists come back and however high the levels of business, we will move hand in hand.”
Coates says he is looking forward to meeting existing and potential brand partners at May’s TFWA show in Singapore and to the better days that now surely lie ahead as Thailand opens up. It’s a quietly impressive story from an understated and yet determined character who ranks not only as one of the travel retail sector’s newest entrepreneurs but surely as one of its bravest.
Contacts
Email: lukas@jaideedutyfree.com; Web: www.jaideedutyfree.com
