SOUTH KOREA. Preferred bidders for the much-anticipated duty free concessions at Incheon International Airport were announced today – and there are some major surprises.

The two cosmetics and fragrances contracts tendered by Incheon International Airport Corporation are to be split between powerful downtown retailer Shilla Hotel (which gains the bigger operation) and AK Duty Free (one of the two current incumbents, alongside KTO, on liquor & tobacco).

The two concessions cover a) the existing Passenger Terminal Building West side as well as the new Concourse A due to open in August 2008 and b) Passenger Terminal Building East. The two contracts will span 2,294sq m (seven outlets) – to be run by Shilla Hotel – and 1,076sq m (three outlets) – to be run by AK Duty Free – respectively.

Lotte is the sole preferred bidder for liquor and tobacco (it currently runs fragrances & cosmetics, plus other categories such as fashion). The single concession covers 1,923sq m of space (12 outlets) in the Passenger Terminal Building and Concourse A. While Lotte will be delighted to have gained exclusivity on these key categories (see below for sales estimates), it will be hugely disappointed to have missed out on its core cosmetics & fragrances business – its major store at Incheon is the world’s most successful travel retail beauty products outlet.

Lotte and Shilla Hotel will split the fashion and miscellaneous (including destination merchandise and foodstuffs) categories. Of the two concessions, one (Lotte) covers 2,281sq m in Passenger Terminal East (12 outlets), while space of 4,635sq m (20 outlets) across the central area of the main Passenger Terminal Building and Concourse A will be run by Shilla Hotel.

This completes an outstanding result for Shilla Hotel, one of South Korea’s longest-established duty free retailers. It was the highest bidder last time around for the initial Incheon concessions but later pulled out. This time it is clearly in it for the long run.

The results are a triumph for Shilla, one of South Korea’s most respected downtown travel retailers

International companies, including King Power Group (HK) through its Korean subsidiary, DFS Group and Aldeasa, have missed out.

When bids closed on 14 June, eight travel retailers, comprising five Korean companies and three international players, submitted offers.

The five local companies were Lotte Duty Free, AK Duty Free, Shilla Hotel, Paradise Duty Free and Walker Hill. Three international companies joined them, incumbent DFS Group, King Power Hong Kong (through its newly created Korean subsidiary) and Aldeasa.

As reported Government-run tourism body and retailer Korea Tourism Organization (KTO) will run a series of fashion and accessories (plus miscellaneous items) stores under a separate agreement.

The Korean duty free trade is buzzing with news of the results. “Shilla is so pleased,” noted one local observer. “But the big talking point is Lotte not having perfumes and cosmetics. And there are no foreigners at all.”

One source said that the domination of Korean companies in the duty free and food & beverage results this week was predictable after Lotte’s recent failure to be awarded the Singapore Changi liquor & tobacco concession – despite outbidding incumbent DFS Group. That result caused a furore in South Korea. “The whole of Korea was upset by that and this may be payback,” said the source.

AK Duty Free loses liquor & tobacco but gains cosmetics and fragrances. And it will keep fashion; Lotte has gained liquor & tobacco on an exclusive basis and will run fashion but it has lost its pivotal beauty business

As reported Duty Free Korea (KTO) was not involved in the tender but will run a range of stores dedicated to fashion and miscellaneous items under a separate agreement; DFS will be out of Incheon after a clean sweep for Korean companies


Duty free sales at Incheon reached a record KRW850 billion (US$903 million) in 2006, an increase of +12% in local currency.

While The Moodie Report does not have a breakdown by category for 2006, in 2005 the mix was as follows:

Cosmetics and fragrances plus fashion and miscelleanous items:

Lotte Duty Free: KRW 311,238 million (US$336 million at today’s exchange rates)

DFS Group: KRW101,399 million (US$109.5 million)

Liquor and tobacco plus fashion and miscelleanous items:

AK Duty Free: KRW171,861 (US$185.6 million)

KNTO/Duty Free Korea: KRW170,038 (US$183.6 million)


Incheon names preferred bidders for food & beverage concessions – 26/06/07

KTO to operate 12 shops over 2,600sq m in west area of Incheon International Airport – 20/06/07

Korea Tourism Organization is granted separate Incheon duty free licence as main results are awaited – 19/06/07

Eight retailers contest Incheon International Airport duty free tender; 14 vie for F&B – 15/06/07

Incheon duty free contracts could realise more than US$7.5 billion over five-year term – 11/06/07

South Korean overseas travel booms in run-up to big Incheon duty free and F&B tenders – 28/05/07

Incheon International Airport Corp issues duty free and food & beverage tenders – 18/04/07

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