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“We promise to create an authentic and living representation of Sydney that breaks away from tired stereotypes, by delivering an environment that is an extension of the city of Sydney in all its exuberance“ |
Max Heinemann, CEO, Heinemann Asia Pacific |
AUSTRALIA. In big breaking news, German travel retailer Gebr Heinemann has been awarded the duty free contract at Sydney Airport, where it will replace long-time incumbent The Nuance Group.
Gebr Heinemann will commence operations on 17 February 2015. The contract will run for seven-and-a-half years until 31 August 2022. The duration is notable given that the original RFP stipulated a term of just over six-and-a-half years, ending 31 August 2021, suggesting that an extended contract duration was a key part of final financial negotiations with the much-respected German company [also see Comment below].
A delighted Heinemann Asia Pacific Chief Executive Officer Max Heinemann told The Moodie Report: “It has been a long way, but a long way of exceptional teamwork across three continents that we are very proud of.” [Look out for more reaction from Max Heinemann in coming days].
“Heinemann has extensive global expertise and will deliver a new and innovative offering for the 13 million international passengers travelling through Sydney Airport each year,” said Sydney Airport Chief Executive Officer Kerrie Mather.
“We saw this as an opportunity to completely transform the airside experience and in partnership with Heinemann we will create new and dynamic retail offerings that will support one of the most exciting duty free experiences of any airport globally.”
The news will come as a blow to Korean travel retailer Lotte Duty Free, which submitted a highly ambitious financial and technical bid. Given its well-documented losses in Sydney over recent years and its recent sale to Dufry (a deal that is expected to close shortly), Nuance’s missing out on the concession comes as no surprise.
Heinemann will operate a total of five duty free shops in the following areas of the terminal, in addition to a landside service. This includes:
– Main departures “˜Forum’
– Departures Pier B satellite
– Departures Pier C satellite
– Arrivals Pier B
– Arrivals Pier C
Mather continued: “Heinemann will introduce more than 400 new brands to the airport tailored to our evolving passenger mix, along with an innovative design concept creating a unique Sense of Place. The space will be reconfigured to focus on customer orientation zones and establish clear lines of sight to aircraft gates and other areas of the terminal to significantly improve the passenger experience.
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“We saw this as an opportunity to completely transform the airside experience and in partnership with Heinemann we will create new and dynamic retail offerings that will support one of the most exciting duty free experiences of any airport globally“ |
Kerrie Mather, CEO, Sydney Airport |
“Along with wide-ranging choice, another key criteria in the selection of our new duty free partner was to offer value for money to our customers and Heinemann with its global scale has the ability to do this.
“Heinemann will also offer a multi-channel digital commerce strategy offering customers the convenience of online shopping, mobile shopping, a digital loyalty app and a number of other unique digital features.
“This is a fantastic outcome for our passengers and we look forward to working with Heinemann and our on-airport stakeholders to deliver the exciting concepts and initiatives planned.”
In a written statement Max Heinemann said the company was looking forward to partnering with Sydney Airport.
“We were particularly encouraged by Sydney Airport’s challenge to “˜Rethink’ all elements of its duty free business because this aligns precisely with Heinemann’s philosophy of constantly challenging the status quo,” he said.
“We promise to create an authentic and living representation of Sydney that breaks away from tired stereotypes, by delivering an environment that is an extension of the city of Sydney in all its exuberance.”
Sydney Airport conducted a global tender process, shortlisting three candidates.
“We were delighted with the number of high-calibre submissions from global operators who were eager to work with Sydney Airport,” Ms Mather said.
Sydney Airport thanked its current duty free partner The Nuance Group for its work over many years.
“I would also like to acknowledge the strong partnership between Sydney Airport and The Nuance Group, operators of SYD Duty Free, and Philippe Boyer and his team for their dedication over the years and wish them all the very best for the future,” Mather said.
COMMENT: Gebr Heinemann’s victory brings an end to one of the most intriguing airport retail tenders of recent years, one with numerous talking points and sub-plots – some still to be played out.
Besides the choice of concessionaire, the big talking point is the contract term, one year more than offered in the Request for Proposals (RFP). As mentioned earlier, it’s likely that the extended tenure was a critical component of discussions between Sydney Airport and Gebr Heinemann and could well have convinced the latter to raise its financial offer, nearer perhaps that of a higher bidder.
The German company places a major strategic emphasis on growing its Asia Pacific business but it is too cautious and canny a retailer to have submitted what it perceives to be a high-risk bid. Despite Nuance’s huge losses at Sydney in recent years (the major factor in a A$58 million Australia-wide loss in 2012 alone), Heinemann will believe it can drive a sustainable business, underpinned by excellent supply chain management, much expanded space and an enhanced product offering.
Make no mistake, this is a critical gain for Gebr Heinemann, which is now well and truly on the Asia Pacific map. Typifying the way it never enters markets with a short-term view, the company has invested heavily in a ‘slow burn’ approach to the region, operating out of its Singapore base. Already it has picked up a number of smaller contracts as well as key supply agreements but this is its first high-profile concession success in the region. Almost certainly it will have made a long-term assessment of ways to consolidate its fledgling Australian position and will be eyeing other opportunities that may arise.
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Heinemann Asia Pacific has already proven itself an innovative partner for Sydney Airport with two acclaimed specialist shops, National Geographic and A Little Something |
So to the sub-plots. Firstly, what does this mean for Nuance in Australia? From being the overwhelmingly dominant player in the country (and until not long ago a major force in New Zealand), Nuance will from next February only have Melbourne Airport remaining in its duty free portfolio, a modest loss-maker. Under Dufry ownership (or even if Nuance had not been sold), why hold on till the concession expires in 2018? A sale of the remaining business seems likely, with obvious potential acquirers being Gebr Heinemann, LS travel retail and JR/Duty Free.
And what about the current duty free tender taking place at the second-biggest airport in Australasia (Sydney is the biggest), Auckland, New Zealand? Several parties expressed interest in both the Sydney and Auckland concessions but whoever won Sydney was never likely to bid for the opportunity across the Tasman Sea, due to the direct competition for spend between the two airports on both Arrivals and Departures duty free.
Logically then, that takes Gebr Heinemann out of the Auckland play. But at the same time the result will make jilted Sydney suitors LS travel retail (certainly) and Lotte (probably) extra keen on the New Zealand opportunity, alongside incumbents JR/Duty Free and DFS Group.
Certainly Auckland Airport will be satisifed with the Sydney result as Gebr Heinemann was never one of the likeliest candidates for one of the two concessions on offer. Its commercial management will know that it now has the perfect climate for a hard-fought contest between all or most of the parties mentioned, and probably at least one other major international player.
Finally, the Sydney result is another disappointment for Lotte Duty Free, which has struggled to impose its Korean stature, influence and excellence on the international stage to the degree it would like. This is the second time it has come close in Sydney. Add to that its failure to wrest any of the core Changi contracts (a loss made worse by the fact that arch rival Shilla did succeed) and Lotte will be reflecting once more on what it takes to deliver its global ambition of being the industry’s number one player.
Lotte has succeeded in opening new business in Guam (an excellent offering), Japan and Indonesia, respectively, but collectively they represent modest gains in revenue and status compared to winning a blue-riband concession at a major hub. How to change that? Perhaps Lotte needs to do more in an ongoing PR sense to communicate just how good it is at home and that it really does have the ability to replicate that quality abroad (as it has demonstrably proven in Guam)?
Are acquisitions the way ahead? Or perhaps the creation of an international division, headed by international management? In its internal debriefs, the hugely ambitious Korean retailer will be weighing all its options. But it will come again, and next time (perhaps Auckland?) its appetite will be even keener. Music, no doubt, to Auckland Airport’s ears.
