Gulf-Africa November 2020

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NOVEMBER 2020

DUTYFREEMAG.COM NOVEMBER 2020 · VOL 30 · NO 2

SEDUCE YOUR SENSES

Pioneers in the production and provision of French shisha tobacco-molasses, Mazaya offers a wide variety of natural flavours combined with high quality ingredients and manufacturing processes. For more information please contact Rawan Elayyan: (rawan.elayyan@mazayafze.com) or visit our website: (http://mazayamolasses.com).

New direction for IDFS p. 8  Record numbers at CDFG stores in Hainan p. 10  The future of airports p. 16  Iraq Duty Free sales take flight p. 20


REPRESENTING THE INDUSTRY ONE OF THE LEADING DUTY FREE ASSOCIATIONS IN THE WORLD

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Letter from the Editor

NOVEMBER 2020 · VOL · 30 · NO 2 Gulf-Africa Duty Free & Travel Retailing magazine (ISSN 0962-0699) is published three times a year May, October and November by Global Marketing Company Ltd. 3414 Mississauga Road, Mississauga, ON, L5L 1T2, Canada It is distributed to duty free operators and distributors in the following countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE, Yemen, Algeria, Azerbaijan, Benin, Cameroon, Cape Verde, Djibouti, Egypt, Ethiopia, Gabon, Ghana, Guinea, Iran, Ivory Coast, Jordan, Kenya, Lebanon, Madagascar, Malawi, Mali, Mauritius, Morocco, Mozambique, Niger, Nigeria, Namibia, Pakistan, Reunion, Senegal, Seychelles, South Africa, Sudan, Syria, Tanzania, Togo, Tunisia, Turkey, Turkmenistan, Uzbekistan and Zaire, as well as to duty free suppliers worldwide. Subscriptions: $200 for one year, $300 for two years and $400 for three years. Art and photographs will not be returned unless accompanied by return postage. The views expressed in this magazine do not necessarily reflect the views and opinions of the publisher or editor. November 2020, Vol. 30, No.2. Printed in Canada. All rights reserved. Nothing may be reprinted in whole or in part without written permission from the publisher. © 2020 Global Marketing Company Ltd.

GULF-AFRICA DUTY FREE & TRAVEL RETAILING 3414 Mississauga Road, Mississauga, ON, L5L 1T2, Canada Tel: 1 905 821 3344; Fax: 1 905 821 2777 www.dutyfreemag.com PUBLISHER Aijaz Khan aijaz@globalmarketingcom.ca EDITORIAL DEPARTMENT EDITOR-IN-CHIEF Hibah Noor hibah@dutyfreemagazine.ca DEPUTY EDITOR Laura Shirk laura@dutyfreemagazine.ca SENIOR EDITOR Mary Jane Pittilla maryjanepittilla@hotmail.com SENIOR WRITER Rebecca Byrne rebeccabyrne10@yahoo.com.sg ART DIRECTOR Jessica Hearn jessica@globalmarketingcom.ca

Learning to live with it

I

n a year that saw postponements and cancellations of innumerable events around the globe, both international and otherwise, it came as no surprise that the MEADFA Conference was also cancelled, disappointing though it may be. The recent news that an effective vaccine is very likely on the horizon brings a ray of light to our embattled industry, and as it comes on the heels of the announcement that TFWA Asia Pacific will indeed take place, the world is beginning to feel right way up. And recovery has begun. While passenger numbers and sales are a far cry from what they were in 2019, they are greatly improved from April of this year, when global travel was down 94% when compared to April of 2019. Domestic recovery has begun; China’s domestic travel has almost recovered, with some domestic tourist spots showing more visitors than even in 2019. While that is not matched the world over, it serves as a strong indicator that recovery is on its way. Slowly, international borders have reopened, and some countries are now offering unrestricted travel with a negative COVID-19 test — something the travel and tourism association is lobbying hard for. Meanwhile, our industry is investing in the future. That might mean creating a robotic bartender, as Pernod Ricard CEO of Global Travel Retail Mohit Lal discusses; it might mean producing new items, such as the new flavors by Mazaya, geared toward the South Asian consumer, it might be a new pop-up shop that allows more choice for the traveling shopper, as Dubai Duty Free has created, and for many companies it means a complete revision of the way they approach the consumer, as retail strategists and designers like Portland Design suggest they do. Challenge does indeed bring innovation, and at a time when the consumer has been forced into a completely different way of shopping, our industry is also being forced into a different way to keep up. Change might be hard, but it is necessary. As Ibrahim Ibrahim, Managing Director of Portland Design, puts it, the environment has created a “retail Darwinism.” Adaptation is what creates the fittest to survive. We at Gulf-Africa Duty Free magazine wish you all the very best in the coming months, and we wish you stability, success and, most of all, good health, for 2021. Hopefully we will soon be able to meet in person once again.

CONTRIBUTORS Wendy Morley

CIRCULATION & SUBSCRIPTION MANAGER accounts@globalmarketingcom.ca

Kindest Regards,

HIBAH NOOR Editor-in-Chief hibah@dutyfreemagazine.ca

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Contents

WHAT’S INSIDE

8

Lead Stories 5 COVID-19 Update

14 Dufry Group Update

Long haul journey Like never before, stakeholders in travel and tourism have come together with each other and in partnerships, doing everything possible to not only get through this time but come out the other side stronger than ever

Recovery on the horizon Dufry announces turnover, organic growth for Q3, offers insight to future and suggests the slow recovery is beginning

8 International Duty

16 Webinar: “Future Airports:

Increasing in turn In this exclusive interview with International Duty Free Shops President Christopher Tantoco, discusses how the company has managed to get through this year, new directions being taken to address customers’ needs and desires, the gradual improvement and his optimism for the future

Immersive, entertaining and engaging According to a panel specializing in retail strategy and design, the airport’s financial model and future in the retail area needs to be revised, and along with it, the entire concept of the shopping experience. Are airports ready to become what they have the potential to be?

Free Shops Update

10 China Duty Free Group Update

All eyes to China Due to swift action on the part of the government, the COVID-19 virus was quickly brought under control in China. The country has since quickly become a harbinger of positivity during a gloomy time, as we have seen consumers move back to shopping and travel, bringing record numbers to China Duty Free’s stores in Hainan

From Here to Where?”

20 Iraq Duty Free Update

Iraq Duty Free sales begin to take flight Iraq Duty Free is seeing an upswing in turnover thanks to a series of innovative promotions, as it prepares to open stores at a brand-new airport

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5 16

Features ARI invests in the future Virtual TR Expo hailed by all Surprise finale in QDF Factor competition

22 28 30

Pernod Ricard’s bright future 32 Mazaya preps for border openings 36 International Travel Retail adds to portfolio 38

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COVID-19 Update

Long haul

journey Like never before, stakeholders in travel and tourism have come together with each other and in partnerships, doing everything possible to not only get through this time but come out the other side stronger than ever

While travel will be back and travelers will shop, we remain in a state of great uncertainty

by HIBAH NOOR

I

t’s not an exaggeration to say that, after the initial shock of the virtual shutdown of international traffic worldwide earlier this year and the immediate scramble to ensure the health of employees, the travel industry at large — including travel retail — has been working hard to simply survive, let alone recover. That recovery has begun, however, though in a manner far from constant or universal. As predicted, domestic travel has begun to improve before international travel, and that is very much in part because international borders remain close or restricted almost the world over. Regional and global travel retail associations are working together with other stakeholders such as travel and tourism associations to try to convince governments of the necessity to revise border closure and quarantine measures, reminding them of the jobs directly and indirectly related to travel and tourism, and the industry’s financial contributions; travel’s global contribution to GDP is about 13%, while in some countries it is much higher than that. There has been a small degree of success as some countries are now accepting a negative test result instead of quarantine, but in the grand scale of things has still left International travel down 73% for the month of September, when compared to September 2019.

The region

Dubai was the first airport in the world to offer a quick COVID-19 test before boarding a flight, and Dubai’s airlines were among the first to offer changes to their flight experience along with flight crew attire and travel standards, to help control spread of the virus. Other airlines have followed suit, knowing that the only way travel will come back is if travelers feel safe. According to IATA, however, Middle Eastern and African airlines have had the most severe international passenger drops in the world, at –88.9% and –85.6% down year on year from last September’s Revenue Passenger Kilometres (RPKs), respectively. In addition, these regions also saw the highest drop in year-on-year load factor, at –38.5% and –34.7%. The Middle East region as a whole has seen a gradual reopening and lessening of restrictions, with most airports and borders now open, but with restrictions, often including the non-admittance of foreign nationals. Africa is a patchwork quilt, with completely closed countries surrounded by those with no restrictions, and many countries somewhere in between.

Vaccine on the horizon

The first truly good news since the beginning of the pandemic came this month, as it was announced that Pfizer and its

German partner BioNTech SE had created a vaccine that is showing itself to be both safe and more than 90% effective in a 44,000-person study. The drug companies say they expect this vaccine to be approved by the end of the year, though peer review has yet to take place. While a vaccine is undoubtedly good news, it is far from the panacea for the travel industry. First, natural post-virus resistance to the disease is not 100%. There are cases of reinfection, and some researchers believe that resistance may last only a few months. Second, even after approval it will take up to two years for enough people to get vaccinated that it will be considered under control.

Travel and shopping will return

Despite that, many in the industry are optimistic. Sales have gradually returned as traffic has increased, according to Colm McLoughlin, Executive Vice Chairman & CEO of Dubai Duty Free, but this is not an overnight event. “Our level of pick up at Dubai Duty Free has been very gradual, with sales for the year down 66% on last year. However, with more and more flights coming online, we expect that the situation will keep evolving,” says McLoughlin. Mohit Lal, CEO of Global Travel Retail for Pernod Ricard, is also far from a doomsayer. He says: “Travel is very intrinsic to humans. That desire will stimulate

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COVID-19 Update

people to travel and when people travel they will shop.”

Innovation and creativity

While travel will be back and travelers will shop, we remain in a state of great uncertainty. After a period during the summer when some parts of the world saw a return to at least somewhat normal activities and travel, the result of that was a second wave that hit like a sledgehammer. Restrictions were put back in place in some cases and not lifted in others. Getting through this time and coming out in a position of strength will depend largely on creativity. Companies during this time are putting resources into just that, improving their digital identity, innovating and creating partnerships that build on each other’s strengths. The Moodie Davitt Virtual Travel Retail Expo in October was a perfect example of this resourcefulness.

Expectations

Patrick Lucas, Director of Economics, ACI World recently took part in a comprehensive webinar conducted by Duty Free World Council (DFWC). During this webinar, Lucas stated that the majority of the world should see a return to pre-pandemic figures in about 2023 for domestic traffic, and 2024/2025 for international traffic, as long as these conditions are met: • The development of a vaccine and effective supply chains to deploy it

The first truly good news since the beginning of the pandemic came this month, as it was announced that Pfizer and its German partner BioNTech SE had created a vaccine that is showing itself to be both safe and more than 90% effective

Stable economic conditions (income, prices and consumer behavior) • Removal of quarantine measures and travel restrictions A number of factors can affect this timeline, including second and subsequent waves of infection, economic uncertainty leading to a prolonged recession, and consumers’ feelings of safety. Because the Middle East is known for a lot of international hubs, medium and long haul, he expects recovery in this region to pre-pandemic figures to take place in approximately 2024/2025. For Africa as a whole, because of travel restrictions in the region and again the dependence on

The Middle East region as a whole has seen a gradual reopening and lessening of restrictions, with most airports and borders now open

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international travel as the main market, he expects recovery to come later.

Working together

As ACI and IATA issued a joint call for a more reasonable approach to international travel; as other associations have worked together such as FDFA in Canada joining forces with dozens of other industries virtually shut down by the pandemic to lobby the government; as airport retail strategists call for a sharing of data between partners and as Dufry announces a joint venture with Alibaba, it appears that the one thing this pandemic has brought to our industry is a sense that we are in it together.


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International Duty Free Shops

Last year, IDFS doubled its floorspace in Casablanca’s newly extended T1; most of its airport stores are open once again

Increasing in turn In this exclusive interview with International Duty Free Shops President Christopher Tantoco, discusses how the company has managed to get through this year, new directions being taken to address customers’ needs and desires, the gradual improvement and his optimism for the future by HIBAH NOOR

A

The downtown shop will have a digital shopping service with home delivery, helping to serve customers in a way they desire given current times

8 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

fter several upgrades and openings last year including doubling its floorspace at the newly extended Terminal 1, Casablanca Mohammed V Airport, and the addition of several new brands including Benefit Cosmetics and Wright Tea, International Duty Free Shops (IDFS) found itself shuttered for several months due to Morocco’s closed borders. Morocco’s travel restrictions began to ease on July 15, allowing resumption of international repatriation flights with strict safety measures in place. Restrictions were further eased only this October when the Kingdom reopened its borders for nationals of visa-exempt countries, provided they comply with the requirements. “Presently, the majority of our airport shops are operating daily at a slow pace, except for some, which only operate a few days in a week,” says Christopher Tantoco, President IDFS. In May, with strict safety protocols in place aligned with the directives of Morocco’s Ministry of Health and WHO, IDFS began serving the diplomatic community through an enhanced and personalized ordering service. “We retrained our store team and employees to transform their ‘in-person selling skillset to


New directions

The team’s resilience, dedication and determination have been key in this new environment. “We know that change is constant, so we continue to be dynamic and agile in capturing opportunities as they arise. I would like to thank the team for their unwavering commitment during this time,” says Tantoco. “Recently, we opened a downtown boutique in Casablanca and soon will be launching a digital platform for home delivery, to offset the impact of the lockdown. This is an exciting development for us as we can now reach non-traveling customers and bring their airport favorites to their doorstep.” The current situation has helped IDFS to rethink its strategies on how to best serve its customers, such as the enhanced diplomatic ordering service. “We will also implement the same with our downtown boutique, where our local customers can order digitally and have their goods delivered conveniently at home,” says Tantoco.

Customer engagement, with limitations

Recently, IDFS opened a downtown boutique in Casablanca, offering the airport shopping experience to those currently not traveling

‘digital,’” says Tantoco. “This helped us in serving our customer through their preferred mode of communication: mobile, messaging, or email. As most were still on lockdown, we added doorto- door delivery for their convenience and safety.”

Continued values

“At the start of the crisis, we knew that our decisions would define us as a company. Thus, we made sure to focus and stay true to our corporate values in our operations: integrity, dedication and determination, flexibility, and service orientation — towards our employees and our customers. By focusing on these, we are hopeful to emerge from this crisis and serve Morocco for many years to come.” Tantoco is grateful IDFS did not have to close any shops during this time. “Like other companies, we reduced expenses in other areas to offset the impact of the lockdown. For our staff, we were able to maintain our regular employees to provide for their livelihood during this crisis.” Tantoco says the company remains in close communication with the Kingdom’s Airports Authorities, ONDA, for any operational concerns and directions. “We continue to work together in making our shop and our airports safe for everyone.”

According to Tantoco, the company is seeing that customers are beginning to engage again. “They appreciate the health and safety measures we have put in place, and the protocols our trained staff follow,” he says. “It is very important for us to provide a safe working environment for our team so they can provide our customers with a safe and pleasant shopping experience.” He adds that they are seeing changes in customers’ buying patterns, most significantly in the Perfumes & Cosmetics and Fashion categories. “We continue to see reservation from our customers to test products or fully engage with sales staff,” says Tantoco. “With Fashion, customers are showing restraint, as their focus has been on essential items. This has impacted us negatively in sales of P&C and Fashion, despite strict implementation of health and safety measures in our airports and shops.” While these categories are not doing as well as he would hope, Tantoco says the Tobacco and Wines & Spirits categories have remained strong. “Given our price advantage on these planned purchases, Tobacco has remained our number-one category driver, followed by Wines & Spirits,” he says. “With regards to assortment, we will definitely be focusing on products that are essential for our customers, because they are ‘at the heart of all we do.’ We understand our customers’ changing needs during this time and will ensure the best offering, whether these products are already existing in our portfolio or we introduce something new.”

Rebound coming

Tantoco states that the frequency of international flights is slowly increasing, month on month. As this is the case, the company’s revenues increase in turn. The sales volume varies according to region and airport, based on number of flights and passenger traffic, says Tantoco. “We believe that everyone, both in the business community and the government sector, are exerting all efforts to revive the business and the economy. With ONDA’s support and recovery plan for the Kingdom’s tourism in place, a rebound in the future is not far-fetched.” Throughout this year, all companies relied on established business relationships and cooperation in order to get through, and IDFS was no different. Tantoco is grateful for these partnerships. “We would like to take this time to thank our suppliers and partners, who have shown their continued support during this crisis,” he says. “We are grateful for your partnership and for your help in ensuring we continue to provide our customers with a pleasant and safe shopping experience.” www.dutyfreemag.com GULF-AFRICA DUTY FREE & TRAVEL RETAILING

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China Duty Free Group Update

All eyes to China

Due to swift action on the part of the government, the COVID-19 virus was quickly brought under control in China. The country has since quickly become a harbinger of positivity during a gloomy time, as we have seen consumers move back to shopping and travel, bringing record numbers to China Duty Free’s stores in Hainan by HIBAH NOOR

I

n April of this year as the pandemic was at peak disruption around the rest of the world, China had already brought its COVID-19 cases under control, and the country was just beginning to return to normal. At that time, during our interview with China Duty Free Group (CDFG) President

China Duty Free Group President Charles Chen

10 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

Charles Chen, he stated that Hainan would be the first place to show recovery in China; he has certainly proven to be correct. “All stores in Hainan Island are now open,” confirmed Chen in April. “Definitely Hainan will be the forefront of recovery for our business. Optimistically we can say that in the third quarter of 2020 for Chinese people it’s very typical to travel abroad if the COVID-19 can be controlled by other countries at that time. Hainan is one place where Chinese will be traveling within the country.” Because travel outside the country has been almost totally curtailed, Hainan has become an especially popular spot for Chinese travelers.

New off-shore tax free policy

Hainan has benefitted not just because Chinese domestic travel has continued along with international borders mostly remaining closed. Additionally, a new offshore duty free policy that began on July 1 of this year, which allows tax free sales to Chinese nationals in the offshore province of Hainan. According to Chen, this new policy has been “positive and effective.” China Duty Free has been able to add new duty free categories such as mobile phones and liquors. This has resulted in double- and even triple-digit growth this summer, at a time when most travel retailers are in large double-digit decline. The numbers show reasons for Chen’s enthusiasm. He says: “According to the data released on October 9 from General Administration of Customs, in the first mid-Autumn and National holiday after new offshore duty free policy, the sales of offshore duty free products is RMB 1.04 billion, the number of customers is 146.8k and the number of units is 998.9k, while the year-on-year growths are 148.7%, 43.9% and 97.2% respectively. We will try our best to provide better shopping experience, and attract more customers to Hainan through those activities.”


New offerings keep consumers excited

“With the new offshore duty free policy implemented, Hainan offshore duty free market released a strong upward trend,” says Chen. “We are actively introducing premium brands and categories, such as phones and liquor, which are very popular among Chinese customers. Additionally, the high unit price goods sales are also increasing very well. The second annual festival of CDFG Hainan offshore duty free had a Grand Opening on September 26, and we held the “Watches & Wonders” event in Sanya on September 29. At this event we presented the latest masterpieces of 11 international famous brands such as A. Lange, Baume & Mercier and Cartier.” Reacting to the consumer demand for watches, the “Watches & Wonders” event is a further reflection of the company’s strategy of resource sharing, offering mutually complementary advantages and synergy between strong market players like FHH and CDFG as long-term partners, says Chen. “We hope to show Chinese consumers the long history of brand watches, exquisite design and extraordinary technology as well as provide a great duty free shopping experience, so this cooperation came into being. I am fully confident that with our joint efforts and FHH’s support, this cooperation will offer a gala for watch and jewelry lovers in China.”

The desire for a better life

Throughout this time, reaching consumers and helping to ensure they want to shop has continued to be a priority for CDFG. The company tackled this on many fronts, including ensuring the offer stayed new and exciting. “The outbreak of COVID-19 has led the entire world into many uncertainties, which resulted in decline of consumer enthusiasm and desire to spend. Yet in China the desire to spend has been released as we see in Hainan market,” says Chen. And he does not see this trend stopping anytime soon. “The Chinese consumer has increas-

Thanks for visiting Moodie’s Virtual Travel Retail Expo and TRM@rketplace. Your Rodenstock Travel Retail-Team (travelretail@rodenstock.com)

Take a look at our virtual booth and get impressed by our great brands:

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China Duty Free Group Update

ing desire for and pursuit of a better life, and this will not be fundamentally changed. The enthusiasm for shopping will always continue. What one needs to do is strengthen cooperation with brand owners and give consumers more duty free options of the best quality, and with great value for money.”

Reaching Millennials and Gen Z through livestream

Chen says it was clear during the crisis that it would be important to create an environment where it would become easier to buy. This included increased online services, and then as an extension, livestreaming. “We all know that the duty free business differs from tax-included business, so our live broadcast content mainly focuses on brand promotion and business promotion,” he says. “We can see that many CDFG stores and their staff have respectively launched their livestreaming platforms, such as Sanya International Duty Free Shopping Complex and CDFG stores in Haikou, Beijing, Shanghai and Guangzhou, as a few examples. Livestreaming has become a powerful tool for marketers during the pandemic, as video clips and livestreaming efficiently reach out to Millennials and Generation Z, says Chen. “We are actively going with the tide and seizing these new trends on the consumer market,” he says. “Amidst the epidemic crisis, we have upgraded the official content platform of CDFG from text and graphics to video, which has been well received and praised highly. Besides, collaboration with external channel partners has allowed us to generate higher traffic on prominent content

12 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

platforms, attracting more consumers through livestreaming and building up customer loyalty.”

Cooperation across all levels

Chen says the keys to recovery in this challenging time are cooperation and innovation. Cooperation can be seen in two different senses: first, in cooperation on a societal level in doing what is necessary to control the virus, and second, cooperation on a business level, with stakeholders helping each other. “Cooperation is the only place leading to solution.” In the case of CDFG, Chen has been very grateful to its brand partners, who have offered “incredible trust and support.” He says discussions with global partners has been constant, how to maximize safety, consumer interest and sales through the close cooperation. Chen also suggests that CDFG is looking to cooperate with other retailers on a global level. He says after 40 years of reforms, it is a new era for China and China Duty Free. He has put out a call to the industry as a whole to create a future of mutual cooperation together, constructing a bright future for the duty free industry both within China and worldwide. “Whoever loses China also loses the future,” he says. He extends his best wishes to all in soon overcoming the crisis and enjoying a prosperous future. Chen says CDFG believes “more creativity, openness and collaboration are needed in the middle of this crisis, to share experiences in overcoming difficulties.”


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Dufry Group Update

RECOVERY ON THE HORIZON

D

Dufry announces turnover, organic growth for Q3, offers insight to future and suggests the slow recovery is beginning

ufry recently released its third quarter report. Organic growth continues to be down drastically from Q3 2019, but cost savings and other measures have helped stem the bleed.

in renewed travel restrictions. Thus, Q3 sales for the region reached CHF 274.5 million (US$300.7 million) in 2020 vs CHF 1,376.6 million (US$1508 million) in Q3 2019.

Turnover

While this region is showing perhaps more recovery than most, Dufry’s footprint in the region is geared towards international travel, which is still highly impacted. Most of Dufry’s locations in the region continued to be closed throughout Q3, though Dufry benefitted from China’s improved domestic travel numbers through its duty paid businesses. Therefore organic growth in the region during Q3 saw a drop of -88.8%, with turnover of CHF 17.1 million (US$18.7 million) versus CHF 164.3 million (US$18 million) in the same period in 2019.

Turnover in Q3 2020 was CHF 487.0 million (US$533 million) as compared to CHF 2,501.9 million (US$2740 million) in Q3 2019, for a decrease of -79.7% YOY in constant exchange rates (CER). Organic grown was -79.7%, with like-for-like performance reaching -76.9%. Contributions from net new concessions amounted to -2.8%. During the first nine months of 2020, turnover showed a decrease of -67.8% in CER. Turnover during the period was CHF 2,073.9 million (US$2272 million), whereas in 2019 the first three quarters saw CHF 6,682.0 (US$7320 million) in turnover. Organic growth during the first three quarters of 2020 was also -67.8%.

CHART 1

Asia-Pacific

Central & South America

The Caribbean Islands and Mexico are performing better than other subregions given more flexible travel restrictions, but the cruise industry remains shuttered, and Central and South America border restrictions remain strong. Organic growth came in at -82.7% for the region in Q3 2020 vs Q3 2019, with turnover of CHF 61.0 million (US$66.7 million) as compared to CHF 375.8 million (US$411.7 million) in 2019. South America did, however, begin to see some demand with border-shop openings and duty paid business in the region.

North America

The duty paid business in the US helped this region during Q3, as domestic flights increased during this time. Turnover in the region reached CHF 121.6 million (US$133 million) in Q3 2020 compared to CHF 515.3 million (US$564.5 million) in Q3 2019, and organic growth for the period was -74.9%.

Regional performance

Dufry realigned its regions under a new organizational setup as of September 1, 2020, to increase efficiencies and simplify the decision-making processes. Dufry will now give its regional reports under the new setup. Europe, Middle East and Africa contributed 57% of Q3 2020 net sales, North America accounted for 25%, Central & South America offered 12%, Asia Pacific contributed 4%, and Global distribution centers accounted for 2%.

Europe, Middle East and Africa

The organic growth in this region for Q3 2020 was -80.2% versus Q3 2019. Throughout Europe, July and August showed improved performance as restrictions were lifted and holidays began. COVID-19 cases began increasing again, however, which resulted

14 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

CHART 2


Business development

During 2020, Dufry opened four new shops, in Odessa (UKR), Singapore (SG), Salt Lake City, and Boston (US). The company also refurbished a number of shops, including but not limited to shops in Corfu, Mykonos, Thessaloniki (GR), Antalya (TUR), Belgrade (SRB) and Nashville (US). The company continues to deploy capital expenditures in accordance with its business requirement and recovery trajectory. By the end of 2020, Dufry will have spent approximately CHF 100 million, deliver around 23,000 square meters of new and refurbished space, consisting of around 90 shops and representing growth of around 5% compared to existing retail space, with much of it executed during Q3: • 11,750 square meters of new space with 4,700 square meters executed YTD Q3 2020 • 11,250 square meters of refurbished space with 10,500 square meters executed YTD Q3 2020 Dufry also continues to bid for new contracts. Most recently, the company was awarded a new 12-year concession contract at Istanbul Sabiha Gökçen International Airport. Dufry will operate a total of 3,900 square meteres of duty-free and specialty shops at the airport, which will increase its operational capacity from today’s 41 million to 65 million passengers by 2024.

Financing initiatives

Dufry is acquiring all remaining equity interest in Hudson for approximately CHF 295 million and delisting the company from the New York Stock Exchange. Dufry’s shareholders approved financing the transaction through a capital increase by way of a rights offering at Dufry’s Extraordinary General Meeting (EGM). The transaction and delisting are expected to conclude in Q4 of this year. Dufry Group and Alibaba Group reached an agreement whereby Alibaba Group will invest CHF 69.5 million (US$76.1 million) in Dufry via mandatory convertible notes. In part these proceeds will finance the Hudson acquisition, as well as for general corporate purposes, including projects and partnerships supportive for the future growth of the company. Upon closing of offering, Advent International owned 11.4% of Dufry and 6.1% of Alibaba. These deals will lock up within six months of the first day of trading the new shares. As of September 30, 2020, Dufry’s net debt amounted to CHF 3,735 million (US$4,092 million) compared to CHF 3,659.4 million (US$4,009 million) compared as of June 30, 2020, and CHF 3,101.9 million (US$3,398 million) at the end of December 2019. Dufry’s liquidity position amounted to CHF 2,065 million as of September 30, 2020 pro-forma, including: • Net proceeds from rights issue and mandatory convertible notes of CHF 867 million (US$950 million) • Cash outflow related to Hudson Transaction of CHF 295 million (US$323 million) • Cash and cash equivalents of CHF 748 million (US$820 million) Available credit lines of CHF 745 million (US$816 million) Cash consumption, defined as equity free cash flow, stood at CHF 51 million in Q3 2020. Including the above-mentioned proceeds related to the capital increase and the cash outflow

for finalizing the Hudson Transaction, pro-forma net debt as of September 30, 2020, stood at CHF 3,171 million.

Set up of strategic joint-venture with Alibaba Group

Dufry announced a joint venture with Alibaba Group, to jointly invest in travel retail in China and improve Dufry’s digital presence. The joint venture will be set up by the end of 2020 as a Chinese incorporated entity with Alibaba Group holding an ownership of 51% and Dufry of 49%. First operations are expected to start in H1 2021. Julián Díaz, CEO of Dufry Group, says the company is in a stronger position than it was. “Today, we are standing as a stronger and more resilient company than three months ago for three specific reasons. First, we have reached final stages in the implementation of our restructuring initiatives and group-wide reorganization, which include the full reintegration and delisting of our Hudson business in North America, which we expect to close in the fourth quarter of this year. Besides adding agility and simplifying the daily operational management of the company, these initiatives will allow us to reach significant cost reductions of CHF 1 billion in 2020, of which at least CHF 400 million are resilient structural savings also enduring in 2021 and beyond. “Second, with the total gross proceeds of CHF 890 million we have raised through the rights issue process, we have considerably strengthened our financial position and increased our flexibility to act on growth opportunities including new concession contracts and strategic partnerships. I would like to thank our existing shareholders and our new partners Advent International and Alibaba Group for their trust and support of the company’s long-term strategy and path towards recovery to emerge as a more efficient travel retail company. “Third, the collaboration with Alibaba Group, for which we are currently setting up a Joint-Venture company in China, will not only allow us to further develop travel retail in China but also to accelerate Dufry’s digital transformation globally. This is a considerable contribution in driving our e-motion strategy to increase customer touchpoints and engagement along their journey. We will keep you informed on the progress of the collaboration and the opportunities identified. With respect to the current performance, our business and the travel retail industry remain particularly exposed to the dynamic macroeconomic situation and the travel restrictions. “We have seen an encouraging travel uptake in July and August, with a plateauing in September caused by the increased quarantines imposed by certain countries. Nevertheless, the comprehensive set of actions implemented in 2020 in close alignment with our landlords, suppliers and other business partners as well as our current liquidity position will allow Dufry to comfortably endure even a prolonged recovery. “I would like to express again my personal gratitude to our employees, who continue to support the company through this challenging time and are embracing the new organization and ways of working with a high motivation. Their resilience and commitment have allowed us to quickly adapt the company to the new environment while also engaging in opportunities and new partnerships. Sadly, we have colleagues who were infected and I want to remember them and their families globally. We will continue to take all necessary steps to provide our employees with a safe working environment.”

www.dutyfreemag.com GULF-AFRICA DUTY FREE & TRAVEL RETAILING

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Webinar: “Future Airports: From Here to Where?”

Landlords, retailers and brands can work together to create an experience that makes the most of its space with engagement

Immersive, entertaining and

engaging ACCORDING TO A PANEL SPECIALIZING IN RETAIL STRATEGY AND DESIGN, THE AIRPORT’S FINANCIAL MODEL AND FUTURE IN THE RETAIL AREA NEEDS TO BE REVISED, AND ALONG WITH IT, THE ENTIRE CONCEPT OF THE SHOPPING EXPERIENCE. ARE AIRPORTS READY TO BECOME WHAT THEY HAVE THE POTENTIAL TO BE? by HIBAH NOOR

16 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

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ast month Portland Design joined together with travel retail blog trunblocked.com to launch an inaugural webinar series titled “Future Airports: From Here to Where?” The session on the commercial platform brought together a panel of experts in retail strategy, travel retail-specific strategy and architectural design to discuss the potential value of airports to brand and retail partners, and how that partnership could best be served. These consultants and designers appear to be in agreement about one thing: For the airport’s retail environment to succeed, management will have to recognize that there is no going backward. Ibrahim Ibrahim, Managing Director, Portland Design, says this extraordinary year has created a sort of “retail Darwinism: Customers and consumers are changing faster than retail can adapt.” The term we all keep hearing is “new normal,” but Herculano Rodrigues, Associate Director — Retail and Commercial Spaces, Javelin Group, says this term is not appropriate. He says things will not return to what any of us think of as normal. “Everything is continuously changing. We need to be flexible and nimble.” The difficulty lies in bringing about a change in mindset of management, to help them to realize the massive potential that lies in front of them. As the panel wholeheartedly agreed, landlords tend to be conservative. They also agree that this is the worst position to take at this point. “Management has to step out of embedded conservatism — they don’t take risks. When they do it’s very limited. The situation now is wholly different from anything before. They have little choice but to change. Everything has been mapped out in a way that [helps them understand] the need to take action or they’ll be dead ducks,” says moderator Peter Marshall, TRUnblocked.



Webinar: “Future Airports: From Here to Where?”

Other landlords and retailers

The model is beginning to change outside the airport environment. Rodrigues points out that since the pandemic began, four major landlords have changed the arrangements they have with retailers, offering a tiered system. “It’s about rent, footfall top-up, omnichannel replenishment, and a tiered approach. It’s a reckoning for the airports,” he says. And the landlords are not the only ones creating a new way to shop. Ibrahim mentions Showfields, which offers an “immersive, entertaining engaging experience. Digital and traditional brands take space but not for transaction — for immersive experience. Transaction happens online via mobile in the store.” Ibrahim says shopping must offer the “slow” experience, which means engagement, immersion and entertainment, or it is the “fast” experience, which is convenient and quick. He says offering something in the middle is a recipe for failure at this time, though it is possible to offer both. Retail is heading in the direction of extreme polarization, with value-immersive on one side and value-convenience and simplicity on the other. “This is not a choice between physical and digital. Both experiences are at once physical and digital.” He offers an example of being in an airport, seeing a backpack you like, taking a picture and that gets delivered to your home, or entering a store, taking a photograph of it and in that moment both purchase it and arrange for delivery. Meanwhile, the space is used for something altogether different than “meters and meters of bottles on shelves.”

Physical space

Ibrahim’s assessment is especially visionary. He sees physical space less as a place for bolting gondolas to the floor and putting up shelves and more as a space for entertainment and engagement. “We need a people revolution,” he says. “We need to stop thinking about real estate as leasing. Bring people in from hospitality, entertainment, ethnographers, journalists, storytellers, curators.” Ibrahim says landlords need to bring in people with new types of experiences and skills, to create a curated space that 18 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

is formulated over calendar years as a programmable kind of experience. In this way, landlords, retailers, brands can work together to create an experience that makes the most of its space with engagement. That way, measurement can be made by more than just dollars per square meter at the cash register, but also other forms of engagement — social media mentions, clicks, and shares, for example. It’s a radical proposal that Ibrahim says requires new people, ideas and diversity to fulfill, but with unheard of potential. Rodrigues concurs, saying one major landlord has changed the way weekly reporting is offered. Instead of just footfall and sales, success is being measured by consumer sentiment around the mall. The landlord is using social media analytics to understand what people are saying, and where. Then a weekly report to center managers on where they rank. Consumer-facing businesses must be customer obsessed. Lewis Allen, Senior Director, Portland Design, suggests that looking at the journey offers more opportunity for both receiving and utilizing valuable data. He says it’s not just about space. “What can data tell us about the sense of the journey? What is that traveler’s airport experience? We have data before they get to the airport. How can we make use of that data before they get to the airport? How good is my data at engaging each individual coming through airport?”

The complex relationship with data

Data is a complex subject. Airports are one of the richest environments for useable data — they know how many people will be there at any given time, the approximate time of arrival, time of departure; they know the gender, age and nationality of these travelers. They know who they’re traveling with. Then retailers have more data about shopper movement within the stores, for example. But these data sit in silos, rarely if ever being shared. At the same time, often the company that invested in gathering up the data is a) not clear on what they intend to use it for and b) so overwhelmed with data and the reality of cleaning it up that it ends up not being cost effective or even useful. There are a number of ways the airport experience can contribute to the value for a brand. An airport and the traveling


look at the broader picture –– how did the consumer enter that space? What brought him or her there? What happens after the customer leaves that space? How do we guide the customer into the place where they are talking with associate and not just rely on randomness?

Engagement and collaboration

experience offer many points of interaction and engagement, but stakeholders need to effectively measure effectiveness of a sales associate or the efficiency of space, for example, without relying solely on spend at that moment. What is the value of consumer engagement, if they purchase at home? And then

Allen says where “disruption” was once the goal, we are now past that. “We now need to engage people by offering what they want, and make them willing to engage, plan to engage.” As Adil Raihani, Chief Enabling Officer, #for1314 Consortium, suggests, collaboration is the key. The panel collectively agrees there has to be more sharing of data between stakeholders, that should be in any tenancy agreement. “The conservativism of industry holds us back,” says Allen. “We need to be able to show revenue models with data. What does it mean to capture it, process it. The impact of data and what data tells you about space and architecture. Data can tell us whether space is being used efficiently or inefficiently. If data is telling you that you have a dark space or customers aren’t giving you positive results, you need to be able to react.” Management must be shown how to easily use data to raise the bar in every area, and by looking at the possibilities in this new world we find ourselves in. They need to say, “Now it’s my opportunity, my responsibility to use this data to build the offer and create more revenue.”

“Disruption” was once the goal, we are now past that. We now need to engage people by offering what they want, and make them willing to engage

www.dutyfreemag.com GULF-AFRICA DUTY FREE & TRAVEL RETAILING

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ort

Iraq Duty Free

Departure Shop

Iraq Duty Free sales begin to take flight Basra International Airport

Iraq Duty Free is seeing an upswing in turnover thanks to a series of innovative promotions, as it prepares to open stores at a brand-new airport by MARY JANE PITTILLA

After 10 years of being denied the introduction of the Liquor category, Iraq Duty Free introduced a new liquor section in its Departure Shop, International Airlines Terminal, Basra International Airport

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usiness has been on the up since the end of July for Iraq Duty Free, the duty-free operator at Baghdad, Basra and Sulaymaniyah International Airports. This is welcome news for Fouad A. Jabbour, General Manager, Iraq Duty Free who is confident that the number of flights – and therefore sales – will pick up in the months to come, especially around the end-of-year festive period. Flight numbers at all three of Iraq Duty Free’s locations have been badly hit by the COVID-19 pandemic. For example, Turkish Airlines was operating 150 flights a week and this number was scheduled to go down to 22 flights a week at Baghdad Airport. Royal Jordanian Airlines used to have three flights a week to Basra; now it’s one flight per week. But Jabbour is confident that better times lie ahead. “The difference between what we used to have and what we have now – it’s a major issue for sales. We had to do promotions on all the categories we have, in order to entice the customers to buy,” he tells Gulf-Africa Duty Free magazine. “At the end of July sales started to pick up. We are not back to normal yet, but the improvement is there. People are still coming back to the airport to buy. We are taking each day as it comes. We are not expecting a boom, and we’re not expecting the worst. We know that it will pick up.” Jabbour is counting on two factors: the safety of the airlines, including the much hoped-for introduction of passenger testing before their trip on arrival at their destination and on their return. He believes this will instill confidence in air travel. In

20 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

addition, he is counting on people being fed up of sitting around and feeling the need to travel again.

Religious tourism returns

At the time of our interview, Iraq was experiencing a reduction in the number of daily virus cases and a reduced death toll. “The government is doing something positive and the country is open again,” he says. Now, Iraq is seeing a return to religious tourism. Initially, the government did not allow foreigners to travel to Iraq, but recently Emirates Airline and Qatar Airways has begun using the hubs from the UAE or Dubai and Doha to bring overseas passengers in. “When I recently flew back to Dubai, there were 300 passengers onboard. On the way back it’s 70, so the government has reopened religious tourism.” Despite the reopening of Iraq’s borders and the expected pick-up in flights, Jabbour does not see a return to 100% normality in its sales figures by the end of the year. “We’re hoping to get back to 60% - 65% of what we used to do in those months. We’re hoping that by Christmas and New Year, the expats will want to celebrate Christmas or the New Year with their families, so the diplomatic corps will start traveling again, along with the security companies.” Jabbour is thinking that families will start traveling overseas for the 10-day school spring break in February. “Turkish Airlines has excellent offers for tourists. You can get a ticket to Turkey for


US$600 or US$700 half-board for four nights in a hotel. People love to go there; the weather is nice in February, so it should be something exciting for them to do,” he enthuses. While the government continued to pay the salaries of state workers throughout the health crisis, COVID-19 hit private companies hard. All of Iraq Duty Free’s frontline staff working on the sales floor received their full salary along with office and other location staff, but out of the 150 employees at Iraq Duty Free, only 10-20% were laid off. Departure Shop of sales to the civil The company, which pays a percentage aviation authority, received support from the government for Basra International Airport airport fees. At Sulaymaniyah Airport, the rent had a reduction. “All due payments to suppliers we managed to pay them all for orders received between February and March because of the good cash flow in the company and the excellent support that was granted by all suppliers,” says Jabbour.

Other GWP’s have included a Lacoste shirt and belts. The company did promotions for every product category except confectionery because of the expiry date issue on such products. “We’re keeping the promotions running until the end of year unless we see a substantial increase in the number of people buying. We might run out of the GWP’s as we are using the slow movers for these campaigns. We are not putting a best-seller as a GWP.” In other news, Iraq Duty Free is set to make its debut at the new Kirkuk Airport, which is in the final stages of development. “The airport – and our duty-free shops – should be up and running at the end of March 2021.” Located in the north of Iraq, near Erbil and Sulaymaniyah, Kirkuk used to be a military base but was then handed to the civil aviation authority. “This is a brand-new airport with a lot of international flights. The neighboring communities of Kirkuk

Passenger purchasing behavior has changed since the pandemic struck. Now, travelers are sticking to best-selling products and brands. “We finished ordering in March and we’re selling from stock. Now we’re starting to place orders with suppliers but we’re ordering limited quantities of the best-sellers only,” he explains. Fortunately for Iraq Duty Free, people generally have confidence going into the shops. “Religion plays a big part. They believe in god, and they – and we – take precautions. Testers are given out by staff only; we have sanitation stations all over the shops; we have markings on the floor. In the fashion category, people are not trying on fashion products in the changing rooms.”

will use this facility more than Erbil and Sulaymaniyah, so it will capitalize on a lot of travelers.” Iraq Duty Free will have one Departures stores spanning 190 square meters and one in Arrivals, measuring 120 square meters. “In addition to the opening of Kirkuk Airport Duty Frees, we have started with the renovation of Basrah Arrival shop, the new arrival shop will change its location to accommodate a bigger number of brands, moving from 25 square meters to a 84 square meter space. Once the arrival shop is finished, we will start with the Basrah International Airport Departure shop, giving travelers a new open space for all categories to be presented in the best way. On another note and after 10 years of been denied of introducing the Liquor category to Basrah International Airport, last week we presented the category in our Departure shop to be followed by the Arrival Shop. When finished we immediately noticed an increase in sales by 20% over the same week during last year,” explains Jabbour. Looking ahead, Iraq Duty Free is not doing a budget for next year; instead, it is working on a six-month projection and then adjustments will be made over the following months. As he muses upon the current situation in the travel retail industry, Jabbour remains positive. “We know people will come back, but we don’t know how quickly people will come back. Everyone is in the same boat.”

Strong promotions

Iraq Duty Free implemented a number of promotions during the crisis. During lockdown, the company offered a 10% discount on all products. When the stores reopened at the end of July, the promotion was changed and linked to passengers’ purchases. “If a passenger spends US$75, they get 10% off the value of their purchases. If they buy US$250-300 worth of products, they get 10% worth of their purchase in products. The GWP is more interesting for people and helped a lot to increase the sales. You get a gift for free, either for yourself or someone else, and it’s [the equivalent of] a US$50 discount off your bill.”

www.dutyfreemag.com GULF-AFRICA DUTY FREE & TRAVEL RETAILING

21


Contents  Aer Rianta International

Carry on DESPITE CONTINUED GLOBAL TRAVEL RESTRICTIONS THAT SEVERELY RESTRICT INTERNATIONAL TRAVEL, ARI SEES PASSENGER SPEND RISE AND CONTINUES TO INVEST IN THE FUTURE, WITH NEW TECHNOLOGY AND NEW STORES by HIBAH NOOR

22 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

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In order to reopen, ARI had to determine the best way to work within government guidelines. Customers and staff have all needed to adapt to the “new normal”

hile true recovery throughout the world might be slow coming, across almost all of Aer Rianta International (ARI) stores, sales are recovering at a faster pace than passenger volumes. “We are getting great engagement from customers, reflecting the wide range of confidence-building measures in each of our stores,” says ARI’s COO Nuno Amaral. According to Amaral, per-passenger spend is up approximately 14% from this time last year in Dublin.“We have reacted quickly and effectively to the changing passenger needs, and our efforts have been very successful, materializing into higher average spend and better conversions. It’s early days, but there are lots of encouraging signs we can learn from and build on going forward.”


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Aer Rianta International

There are some small lights in the darkness, however. ARI serves the duty paid market in the domestic terminal in Riyadh, which has been relatively strong since opening,” says Amaral. Beirut also shows positive signs, despite even greater troubles there than elsewhere. “Beirut was hit very badly even before COVID-19 — huge economic and political issues there,” Amaral says. “Even now they’re struggling to form a government. But they’re resilient people. Our numbers in Beirut have always been relatively good in terms of passenger spend levels. Even after the bomb blast, people got together very quickly to try to bring the economy back on track despite the political tension.” Muscat is also relatively strong. “We reopened the stores on October 1. Until that point again the airport was only open for repatriation flights. We have a fantastic operation there, and we’ve done a lot during the downtime. In Muscat we have very strong promotional activities.”

ARI COO Nuno Amaral says people are still willing to fly once borders are open again

People want to travel and shop

Stating a decrease that would have seemed incomprehensible just a short time ago, Amaral says somewhere from 10 to 25% of passengers are coming through most stores in comparison to 2019. “Between April and June the majority of our locations were closed, with those remaining open having very little traffic. There is no doubt that COVID-19 has had a profound impact on every aspect of our operation. We are managing our business through the largest crisis in travel retail history. Today airports still have very low levels of passengers, in some cases it’s just a trickle in comparison to previous volumes.” One of the company’s biggest challenges at the moment is the level of restrictions being applied by governments and the various rules around travel. “The inconsistencies of approach and the fact these rules continue to evolve, is giving rise to more uncertainty and discouraging passengers from recommencing travel,” says Amaral. He states that although the industry has come together during this time, tough decisions still had to be made. “Retailers, suppliers and airports have really understood each other. We’ve all worked collaboratively,” he says. And despite governments around the world offering “great support,” with such extremely reduced numbers ARI still had to do some downsizing. “We try to minimize that because we truly value our staff,” says Amaral.

While the next wave of the virus has paused the progression of borders opening in Europe, Amaral says during the summer the company saw some “relatively good numbers” in the region. He says passengers from the UK flew a great deal within Europe, and ARI has some good locations there. “We believe that people want to travel, but all of these government restrictions are impeding on people traveling,” he says. “When a country opens up you see an immediate flood of passengers from that county. Eventually once restrictions ease up, people are still willing to fly. We are hopeful that we can get out of this situation in a couple of years.” The company’s first step on reopening was to make the stores work within government-imposed measures. “Should we restrict access? Should we have one-way circulation? I would say the biggest investment we had to make was ensuring that there were markings on the floor or ceilings. We moved freestanding units

All locations open

ARI has locations all around the world, and currently each of these locations is open despite the fact that some of the airports in which the retailer operates are closed to commercial flights, such as India and New Zealand. “There are repatriation flights happening, so in some way or form we have our retail spaces open to try to capture those opportunities,” says Amaral. “We have a huge operation in Auckland and technically Auckland has also shut down; there’s no international traffic.” 24 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

Cosmetics companies have been very helpful in letting ARI know what they needed in order to sell now that testing is not possible


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Aer Rianta International

Online investment

As has become clear to many companies, Amaral says the online experience is where ARI needs to invest. “We will be investing in e-commerce but also other platforms to direct traffic to our e-commerce platforms for example, Instagram and Facebook.” The company’s most robust online communities are in Dublin, Montreal and New Zealand. ARI is rolling out its e-commerce platform around the world, most recently for customers at YUL Montréal-Trudeau International Airport. The new website for that location, theloopdutyfree.ca, offers 4000 items in an intuitive, user-friendly experience that allows shoppers to “Click & Collect” up to 90 days before flying.

Five-year commitment

Montreal’s new e-commerce platform allows passengers to shop up to 90 days before their flight, using “Click & Collect”

here and there but there were no major reconfiguration,” he says. The next question is, how to move forward given the current state of things. “There will be a new normal obviously,” says Amaral. “We have commissioned extensive research during this period and understand that our passengers, while ultimately wanting safety reassurances, want as ‘normal’ as possible an airport experience, and they see shopping as part of that experience. We’ve worked very hard to provide a store environment that is safe and feels comfortable to shop in, still affording customers the ability to browse.” The new normal must include a new way to sample and test products. “People want contactless experiences,” he says. “We got a lot of guidance from cosmetics brands. Testers have stopped; tastings have stopped. We’re working on things like infusion technologies for fragrances and the virtual trying on of eyewear.”

The most recent news concerning ARI is its winning bid for the duty free retail concession at Tivat and Podgorica Airports in Montenegro. The stores will open later this year, with a contract that will run for five years. In Tivat ARI will have a 98.5 squaremeter store, and in Podgorica the store will be 122 square meters of duty free space, branded “Montenegro Duty Free”. ARI’s CEO Ray Hernan said the decision to open these new stores this year is a sign of the company’s financial position and belief in the industry’s future. “We are still committed to profitable growth over the longer term and will invest in the Montenegro market for at least the next five years. It is also a sign of our commitment to the industry and our confidence that it will return to strength.”

Customer first

“It always has to do with Millennials and Gen Z, who prefer a more independent shopping experience,” Amaral says. “This is new for us and our brand partners and for our staff. We’re trying to work out how can we improve on our sales techniques to fit this new environment. We’ve always been very proud of our engagement with customers. All our training is based on how to approach the customer and identifying their needs.”

Offering a concept that is fresh, modern and tailored to the passenger profile at each airport, ARI’s contract in Montenegro will run for five years

26 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020


PROFESSIONAL FACIAL REJUVENATION


 Moodie Davitt Virtual Travel Retail Expo Review

Navigation from the Virtual Main Atrium was simple and user friendly

VIRTUAL TRAVEL RETAIL EXPO HAILED BY ALL With the cancellation of all live events in 2020, the Virtual Travel Retail Expo offered an experience as close as could be imagined to a physical trade show by HIBAH NOOR

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ast month marked the end of a successful week at the inaugural Moodie Davitt Virtual Travel Retail Expo. Given the difficulties faced by our industry this year, it was especially important to have a time and space where we could come together, meet, conduct business, and feel the camaraderie that comes from engaging with familiar business associates. While nothing can replace being physically in the same space as we would have been in Cannes, with the cancellation of all live events the Virtual Travel Retail Expo offered an experience as close as could be imagined. The virtual event progressed in much the same way as the live event might have, with keynote speakers, information sessions, business meetings, product launches and even samplings, all made

Superior design made the Virtual Travel Retail Expo feel as close as possible to a live event

simple to access by the superior userfriendly design. We at Duty Free & Travel Retailing magazines would like to thank Moodie Davitt for inviting us to the inaugural Virtual Travel Retail Expo. We are sure all will agree this was a great event that was well produced, easy to navigate and easy to understand.

28 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

Speakers and workshops on demand

Each day at the Expo brought a wealth of information in the Knowledge Hub. While in any year keynote speakers are engaging and thought provoking, this year it is especially important to hear how others are managing the crisis. Speakers included some of the most experienced


Virtual booths allowed for brand-specific design with streaming and downloadable videos and PDFs, such as Haribo’s “100 Years of Haribo” logo evolution video.

Laid out visually like a live expo, the Exhibition Hall made finding your appointment extremely easy, and without the sore feet by the end of the day

and knowledgeable individuals in travel retail, discussing not only getting through this difficult time but using this time of change to be in a better position when travel returns. All eyes are on China and especially Hainan as it seems to have weathered the storm and turned the corner, at least in terms of domestic travel. The week began with Martin Moodie’s interview with Charles Chen, President, China Duty Free Group, on this very subject.

with Heidi Van Roon, Founder & President, SPARK Group of Companies and many, many more. One of the advantages of these s peaking events being held in the virtual realm is that we can access them on our own time, even after the Expo itself has finished.

A rallying time

As Mohit Lal, CEO GTR for Pernod Ricard, put it: “It’s been an extremely good experience. The Cannes event is an important event for us to meet key customers in a setting as a group. You don't get that opportunity all the time. But everyone is beginning to participate in the Expo, so it’s become a meeting ground for people. It’s very busy just like Cannes would have been in terms of meeting with customers, meeting with press, other things that we normally do at Cannes. In a way the rhythm of meetings and conversations in partnerships with different constituents of the travel retail ecosystem – this has become a rallying time because everyone is involved in the expo.”

New top retailer in the making?

But his was far from the only voice we heard; stakeholders as diverse as Sunil Tuli, President, APTRA & Group Chief Executive, King Power Group (Hong Kong), speaking on how crisis can bring about positive change; discussions of sustainability with brands JTI, L’Occitane and Rituals; to sales strategies

While SEVA Group is a well-known entity in travel retail, seeing the company as a Diamond Partner was a bit of a surprise. The reason became clearer when the company – already strong in distribution and as a brand owner and having opened a store in 2018 – used this virtual event as an opportunity to announce its plan to become a top-20 retailer within five years. The company also had strong presence at the Expo with its “Beyond Resilience” workshop.

Sampling and booths

Despite the limitations brought about by an inability to be physically present in each other’s company to meet and

sample, the Virtual Travel Retail Expo did an excellent job of providing a way for brands to present new products through its Engagement Lounge, and the stands in the virtual exhibition hall were simple to find. The virtual aspect of the event meant brands could present their offerings and marketing in an inviting and engaging manner, accessible with a click.

Asian influence

Asia is in a unique position as a region for a number of reasons – as the region with the most growth and highest population, as the top region for duty free sales and as the region where travel recovery has already begun, especially for domestic travel in China. Hainan is an exciting place for this and other reasons, and thus the talk “A golden invitation to invest in Hainan,” by Han Shengjian, Director General, Hainan Provincial Bureau of International Economic Development (Hainan IEDB), was especially interesting and relevant. This was far from the only Asiafocused speaking event. Others, such as Decoding the Post COVID International Air travel in China and India also offered great insight.

Closing off the week

The week closed on an exciting note as Qatar Duty Free Vice President of Operations Thabet Muslah joined Martin Moodie and Dermot Davitt to announce the winners of the QDF Factor competition. Making the note even more exciting was that two winners were announced. The Virtual Expo remained open for 30 days following the close of the event; while the engagement ended, the booth assets were still available, as were the workshops, speaking events and the Experience Hub, which allowed brands to hold virtual tasting and beauty events.

www.dutyfreemag.com GULF-AFRICA DUTY FREE & TRAVEL RETAILING

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QDF Factor Compeition

Lucky winner

The Sella sisters’ #cleanvibesonly philosophy helped them win first place in the inaugural QDF Factor competition

SURPRISE FINALE IN QDF FACTOR COMPETITION by HIBAH NOOR

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ne of the highlights of the Virtual Travel Retail Expo was the QDF Factor competition: “An unprecedented initiative to encourage and champion creativity at a time when travel retail needs it most.” The QDF Factor competition, which was put on as a partnership between Qatar Duty Free and The Moodie Davitt Report, was open to all brands and concepts, inside or outside the travel retail channel. The top prize offered was a complimentary six-month listing and high-profile promotion at Qatar Duty Free in Hamad International Airport, Doha, as well as a six-month US$50,000 multi-media advertising campaign with The Moodie Davitt Report. This offered an incredible opportunity to smaller brands. Entrants were judged based on the following criteria:

Long Haul Spa Luxury PPE kits have turned a challenging time into an opportunity, with products made in Australia and New Zealand that make the user feel pampered

Innovation: What does this product or concept offer that is unique, stands out from its competitors, and creates a talking point for retailer and consumer alike? What is its USP? • CSR – what additional social credentials does your product offer? • Presentation: What is compelling about the packaging? What makes it stand out on shelf? • Commercial viability: Who is your product targeted at? What makes it a winner? What is your pricing policy and (going forward) marketing approach? • Overall quality: Tell us about the R&D that went into your product, the quality of its ingredients/components. On the final day of the Virtual Travel Retail Expo, the winner was announced … as two winners! Long Haul Spa and Make Sure were named as the joint grand prize winners of The QDF Factor, while ethical jewellery brand Article 22 was named as the third-place runner-up. Both winners Long Haul Spa and Make Sure will receive the six-month listing and high-profile promotion at Qatar Duty Free in Doha, along with a US$50,000 multi-media advertising campaign with The Moodie Davitt Report, including a dedicated eZine. Article 22 will also receive a promotion at Qatar Duty Free in addition to a US$25,000 multi-media advertising campaign with The Moodie Davitt Report. All ten finalists will receive a six-

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month listing at Qatar Duty Free. This was announced by Qatar Airways Group Chief Executive His Excellency Akbar Al Baker on the first day of the Virtual Travel Retail Expo, long after the competition had closed. All finalists will also enjoy a complimentary double-page spread in an upcoming Moodie Davitt Report postexpo issue. The ten finalists were: 1. Long Haul SPA inflight travel kits 2. Make Sure hand sanitizer gel 3. Article 22: Jewellery handmade from bomb scrap in Laos 4. The Perfumist Pro application (by Big Data Solution) 5. The Dalmore Ensemble Collection by Whyte & Mackay 6. Caribbean Expedition Cognac by Camus 7. Somrus Cream Liqueur 8. Cihuatán Rum 9. Suqqu make up and skin care 10. Kind Bags: made from 100% recycled plastic bottles As reported by The Moodie Davitt Report after the event, Qatar Duty Free Vice President of Operations Thabet Musleh said, “We are beyond humbled by The QDF Factor journey. What this competition demonstrated is that travel retail really is the perfect shop window for innovation. We heard a lot about digital and ecommerce this week, but let’s not forget about the physical retail space where customers can touch, feel and really experience products. That’s what the industry is all about.


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Pernod Ricard GTR

The future is bright

Chivas Regal 13 Extra is a travel retail exclusive being brought to market as soon as there are enough travelers

Pernod Ricard’s Chairman and CEO of Global Travel Retail, Mohit Lal.

Pernod Ricard’s CEO GTR Mohit Lal explains why continuing to invest in travel retail at this time makes perfect sense by WENDY MORLEY

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hile many companies are choosing to postpone product launches in travel retail or perhaps at least choosing to place their marketing investments elsewhere, Pernod Ricard recently announced the release of two travel retail exclusives, Chivas Regal 13 Extra and Martell Cordon Bleu End of Year limited edition bottling, in addition to making considerable other investments in the travel retail channel.

Pernod Ricard’s Chairman and CEO of Global Travel Retail, Mohit Lal, says the word “launch” has more than one meaning behind it. “Any new product you bring to market goes through a period of product identification of deciding what you want to do, then the product development cycle, then finalizing commercialization, then getting listings and pricing, customer orders and finally putting it on the shelf. This takes a very long time.” Lal says Chivas Regal 13 Extra had been in the pipeline for quite a while, and the company is making sure it’ll be on the shelves in different locations when people start to travel again. “We are making sure we are ready. When it comes to the Martell Blue End of Year limited edition, that’s something that we do every year and we will do it this year too. Again, the planning started quite a long time back.” Chivas Regal 13 Extra is also being prepped so it’s ready to go; Pernod Ricard will be working with key partners to determine the best timing of availability. Each of these releases offer only a limited number of bottles and will be released where it makes the most sense for the spirits company and the retailer.

New ways to market

Sampling has always been an important way to introduce specific items to new people, but given current health and safety

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concerns and regulations, this has become a challenge. Lal says Pernod Ricard is looking at new ways to resolve this. “We are looking at new means in which you can start to build automatic dispensing units. We have a concept that we unveiled at the Expo, which is our robotic bartender. You can digitally order your drink.” He says the crisis has offered the opportunity to create engagement while solving a problem such as sampling, and the company is also changing the way it’s preparing for activations, “modularizing” them to decrease the lead time. Travel, border opening and closing and regulations are changing so quickly that it’s important for Pernod Ricard to be able to adapt on a dime. While normally activations would take three to four months to prepare, current reaction time must be much faster. Modular displays and furniture can be adapted to different spaces whereas this once necessitated rebuilding. Lal and his team are also investing in digitizing, to be able to adapt the displays and furniture to different brands. “We are digitizing our activation space and the furniture, making it modular in nature so it can be quickly assembled, taken down and moved to another location. Normally activation planning would take three to four months; the way the world is today and the way recovery can happen you need to respond quickly.”


Keeping track

As one might expect, this is not all being left to chance. The GTR team tracks mobility data and the pandemic itself through a number of mediums. “We track mobility data in terms of what's happening in domestic markets; we track what's happening with the pandemic in terms of testing and cases; we track regulations in terms of restrictions and movements; we track seat capacity and how this is all changing; we track forward bookings that people are making to fly. We have set up dashboards that are airport specific, so we can see which airports are moving from red to orange to green, and then depending on where we see the moment we can start to anticipate the changes and have constructive dialogues with our customers and partners.”

Digitization throughout the journey

Digitization is important to the company in terms of activations, but also in terms of early marketing. “It's not just at the airport,” says Lal. “From the time travelers start to express interest in travel, from an air ticket booking site or travel group tour right through the journey. A lot of people start to plan their travel significantly in advance, and even what they will buy in duty free reasonably well in advance. The sooner you can get your message out to them the better. We’ve done research on which touch points and at which times of the journey travelers are more susceptible to information regarding shopping, and then depending on the nationality and the platform we are able to refine how we

target them. So it's a fairly sophisticated piece of work when you look at the global scale. On a local scale it could be quite simplistic.” Lal says the number of travelers who will engage digitally to explore shopping possibilities has increased, because the pandemic has brought people to shop online who had never done so before. Pernod Ricard is therefore also investing in creating an ecommerce identity that is more impactful and move engaging. “We have always had presence on ecommerce but was that presence updated and rich enough to attract attention?”

Sustainability and responsibility

As has been a trend, especially with Millennials and Generation Z, the pandemic has brought with it an increased importance of sustainability for consumers. “Your consumer base expects you to protect the environment and the planet,” says Lal. “This sustainability aspect of how we drive promotional material gifts with purchase, etcetera, are things that we are beginning to look at quite actively so we can send out clear messages that we have goals of sustainability – the company is doing this on a global scale and not just for travel retail. Themes that were already relevant have become amplified during the crisis. We are making sure that we keep pace with consumer expectations.” Lal says a brand’s reputation now stands well beyond the key parameters from a few years back. “You need to be responsible as a brand and that is something we take very seriously.”

The future of travel retail

Perhaps most important is Lal’s message of positivity. “What we're seeing is slightly longer blip in travel retail,” he says. “Travel retail has seen many blips in the past – be it the economic meltdown, be it the creation of the EU, be it the SARS epidemic that happened in parts of Asia – but it's always recovered very strongly. Right now it is just a pause. We have firm belief in the future of this channel both in terms of potential it offers for the sale of fine spirits, but also in terms of potential that it offers for a very high level of distinctive engagement between brands and consumers. We therefore have eyes very clearly on the future. We will see travel bounce back very strongly. Business travel will remain suppressed to an extent because businesses have learned how to run things without need for physical travel, but travel will bounce back. In July 2020 there were more searches on Skyscanner than in July 2019, because the latent desire to travel has grown stronger. The desire for humans to travel has not gone away. “I've always had great faith in this channel I have met many doomsayers who talk about the end of this channel. They have always been proven wrong. I believe that if this crisis is bringing that to the fore in a big way, they are going to be wrong in a big way. Travel is very intrinsic to humans. That desire will stimulate people to travel and when people travel they will shop.”

Martell is just one of the brands that will benefit from Pernod Ricard’s new modular and digital furniture, which will make it easy to change the marketing from one brand to another www.dutyfreemag.com GULF-AFRICA DUTY FREE & TRAVEL RETAILING

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Rodenstock Update

Virtual presence

RODENSTOCK APPLAUDS VIRTUAL TRAVEL RETAIL EXPO by LAURA SHIRK

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lobal eyewear specialist, Rodenstock, says that it is absolutely delighted with the results of this year’s first Virtual Travel Retail Expo, organized by The MoodieDavitt Report. Described as having deepened existing relationships and created positive new partnerships, Rodenstock considers the online event a success. “The whole team was extremely impressed by the professional approach of this virtual travel retail event. We saw a lot of traffic during the week and, for us, it was a very good event with excel-

lent attendance, informative webinars and very good meetings,” shares Petra Eckhardt-Köstler, Director Global Retail, Rodenstock. The company notes that meetings were split between pre-arranged and spontaneous requests throughout the week. Alongside meetings, the team says that it was most impressed by the quality of the webinar sessions - particularly the interviews with the CEOs of Dufry and Lagardère. Despite an incredibly difficult time for the industry, Rodenstock is confident

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that the event has enabled it to gain new partners for when recovery begins, with positive conversations across all territories and channels. For example, new business has since been confirmed with Rouge Duty Free in Grenada. The Rodenstock virtual stand highlighted both Rodenstock and Porsche Design sunglasses brands with interactive content giving visitors insight into the latest collections, innovative concepts and sales and marketing initiatives to support travel retail operators.


LEGO, the LEGO logo and FRIENDS are trademarks of the LEGO Group. ©2020 the LEGO Group. 93025


Shisha Tobacco

d r a w r o f g kin

Loo

Shisha brand Mazaya’s domestic business was helped through the pandemic by consumers’ decision to stockpile; while travel retail is just beginning to return, the company is preparing to be ready for action as borders open up again

Mazaya had significant presence at the Virtual Travel Retail Expo last month

F As shisha-smoking grows in popularity in South Asia, Mazaya has decided to launch two flavors that cater to the South Asian smoker: Pan Masala and Pan Raas

36 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

or Jordan-based Mazaya shisha, recovery in global travel retail is coming slowly but steadily. In the company’s key market, which is the Middle East, restrictions are gradually easing, and Global Travel Retail Manager Rawan Elayan says people are feeling more comfortable to fly. The company is using promotions to stimulate sales to those once again traveling. “The PAX flow is still minimal, but we have decided to accelerate our recovery through an aggressive come-back: multi-purchase and price-off promotions coupled with premium gifts with purchase. As travelers and consumers in general are becoming more price sensitive, our strategy was


value-driven to accommodate the shoppers’ reduced purchasing power, and still give them access to our premium tobacco offerings,” says Elayan. Throughout the pandemic, consumers stocked up on their tobacco products for fear of lockdown or a disruption in supply, so suppliers and retailers have to keep this in mind, encouraging purchase via price-offs and promotions. “Since the start of the pandemic, we were in constant talks with our retailers and operators, and we’ve been closely monitoring the shift in shopper’s behavior and buying patterns,” says Elayan. “These observations allowed us to make sense of the new normal and adopt a dynamic approach to adapt to all possible changes. In these uncertain times, we believe flexibility and speed of adaptation are keys to speeding up recovery.”

Virtual Expo

Mazaya had significant presence at the Virtual Travel Retail Expo last month, and Elayan says the event provided the perfect platform to interact with buyers and operators in the midst of all restrictions. “Business wise, it would be unfair to compare the virtual expo outcomes to what we would normally get from Cannes or Orlando, but we had a pleasant experience checking what brands in different categories are up to with a click of a button, and we particularly enjoyed the different talks and webinars conducted by industry experts. The Travel Retail Virtual Expo resonates well with Mazaya, as we’re

a young dynamic brand with a flair for innovation, and it was very refreshing to see the travel retail community come together and innovate in these challenging times. Overall, the Travel Retail Virtual Expo experience was very nice and user friendly.” Elayan notes that Mazaya has set itself apart in travel retail. The company certainly made a splash when it entered the market, making itself known to all in the industry in short order. “Mazaya is known to have an attractive in-store presence and on-ground experiential activities to engage with our customers, and these factors have played a major role in reaching the position we currently have. That will continue but with an inevitable shift because of COVID-19. That’s one of the reasons that we have participated in the Virtual Expo; it’s a new event and we wanted to be part of this contemporary initiative.”

Preparing for anything

Those in the industry are well aware that there will be no return to previous traveler numbers anytime soon. Elayan says while she is optimistic, the company is keeping any expectations in check, and preparing for any possible outcome. “We will continue to keep a close eye on the shop floor and take this down time to see how we can strategically improve our business; we believe that each member of the travel retail community has a role to play in those critical times, and think of creative ways to support the industry, just

like we did few weeks ago throughout the virtual expo.” As with everyone in travel and tourism and many other industries the world over, Elayan feels it’s imperative for governmental bodies to be cooperative and ease up the restrictions, to allow travelers to fly again. The recent announcement of a potential vaccine offers her renewed hope. “We cannot wait to resume all our projects that were put on hold in 2020 and welcome shoppers in the duty free with outstanding on-ground activations just like we were doing in the pre-COVID era and even better! We are also super excited to travel, participate in TR events and meet with all our partners and operators to accelerate growth in 2021.” On the domestic side, Mazaya was helped by the fact that consumers stocked up during this time. Though the multiple lockdowns and a ban of shisha smoking in public hurt the HORECA channel, Elayan says there was considerable growth in inhome consumption.

New flavors

Given the importance of the South Asian demographic in the Gulf region and most notably the United Arab Emirates, and given also that is shisha growing in popularity in South Asia, Mazaya has decided to launch two flavors that cater to the South Asian smoker: Pan Masala and Pan Raas. “True to Mazaya superior quality in terms of French tobacco, pure glycerine and high-quality honey, Pan Masala and Pan Raas were blended with food-grade flavors like the rest of the Mazaya portfolio, to offer the end user a very authentic smoking experience,” says Elayan. “These two flavors will be listed in key duty free shops when the business picks up and operators are ready to expand their offerings. “Generally speaking, shisha is a social activity where people seek entertainment and relaxation. Shisha offers a wide range of flavors to cater to different tastes in comparison to other smoking devices. The trend of shisha has been growing drastically in the past years even in places where shisha is not very common. What differentiates Mazaya is our premium quality and ingredients along with our broad portfolio of flavors to meet the diverse preferences of smokers around the world.”

www.dutyfreemag.com GULF-AFRICA DUTY FREE & TRAVEL RETAILING

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International Travel Retail

Expanding horizons

Vini Tonon’s frizzante semi-sparkling wines incorporate a special closure unique to the company called the Metico click cap

Vini Tonon employs modern production systems and processes to produce its wines, including this Magia Fiore Rosso Dolce

HISTORIC WINERY VINI TONON ENTERS DUTY FREE WITH INTERNATIONAL TRAVEL RETAIL

Mariem Mersni Ben Cheikh, CEO and owner of International Travel Retail in Venice where she has opened an office

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ariem Mersni Ben Cheikh, CEO and owner of International Travel Retail, has taken on the distribution of Vini Tonon prosecco and wines globally in duty free. Established in 1936, Vini Tonon is an Italian family-owned company that respects tradition and quality. Its winery is located in the heart of the Prosecco DOCG area between the cities of Conegliano and Valdobbiadene, a UNESCO World Heritage site north of Venice. The company’s brands include the upscale Camul, the name of the first piece of land the family owned. This top-quality line of wines and prosecco is sold around the world and was awarded with the Gold medal at the prestigious Selection Mondiales des Vins Canada in Quebec. Thanks to its modern production systems and processes, Vini Tonon is one of the few wineries in the region able to produce quality wines with a modern appeal. They include the new Popi Collection, consisting of the Popi Pecorino, Passerina, Sweet White and The Prosecco sparkling wines, featuring different colored poppies on the labels. In addition, there are friz-

38 GULF-AFRICA DUTY FREE & TRAVEL RETAILING NOVEMBER 2020

zante Prosecco, Rose and White semisparkling wines, which come in sleeved bottles that incorporate a special closure unique to the company called the Metico click cap. A gift box of six Popi Collection wines made from environmentally friendly packaging is also available for travel retail. Mersni, the CEO and owner of International Travel Retail, is based in Lebanon and recently moved her offices to Paris and Venice, where she has opened showrooms to showcase all the Italian brands represented by her company, including Vini Tonon. She describes the products as “the top of the top in each category”, and will reveal more details over the coming weeks. Mersni’s background and experience is in duty free – a channel that she loves for its luxury aesthetic. She has been distributing Roberto Cavalli Vodka globally in duty free for nine years, and the brand has been generating double-digit growth yearly since the start. “My first start was from the Italian vodka, the fashion on the rocks Roberto Cavalli Vodka, and this will stay and remain my baby,” Mersni tells Gulf-Africa Duty Free magazine.


The Duty Free Industry’s

T S I L A I C E P S L REGIONA

DUTYFREEMAG

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For more details contact: hibah@dutyfreemagazine.ca; + 1-416-727-1300


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