John Pearce, Head of Retail and Commercial — Terminal, Adelaide Airport.

Adelaide International Airport is looking to build on its strong partnership with incumbent Lagardère Travel Retail, which it awarded the nine-year duty free and international food and beverage concessions earlier this year.

The airport is in the midst of a $165m expansion due for completion in 2021. The result will be a larger duty free zone for international arrivals and departures and broader retail and dining options spread across 1,700sq m.

Existing space for duty free and food and beverage will double as part of the redevelopment and Lagardère Travel Retail will open Aelia Duty Free stores in arrivals and departures. The new contract begins on 1 August 2019.

The retailer will also open a flagship bar and café in departures called Hills Kitchen & Bar. The openings will be staggered over the next two years.

COMPETITIVE TENDER

John Pearce, Head of Retail and Commercial – Terminal, Adelaide Airport told TRBusiness: “We had a competitive tender process which was very much a level playing field. Our aim was to ensure the top global brands and operators were aware of it. There was keen interest from all retailers currently operating out of Australia and New New Zealand.”

He added: “We had three strong finalists, which were Heinemann Australia, Lagardère Travel Retail and Lotte/JR Duty Free. Their offers were evaluated against our assessment criteria. This was 50% financial, 30% retail concept (brand delivery and fit-out etc) and 20% corporate alignment and legal governance.”

Adelaide Airport is in the midst of a $165m international terminal expansion project.

Lagardère, which has enjoyed a successful partnership with the airport since 1997, may have won the coveted tender, but Pearce was full of praise for the two other finalists. “I can’t speak highly enough of Heinemann and Lotte/JR Duty Free in terms of their professionalism and quality of offer. Our selection process was very much governance driven and at the end of the day was undertaken on the principle of fairness.”

Regarding the contract term, Pearce reveals it is effectively split into two stages. He explained: “The first two years are under the current footprint and the next seven will be under the new footprint. We know retailers need a seven-year return on investment once they put the capital in.”

Looking ahead to the first year of trading under the new agreement with Lagardère, Pearce said: “The current business is already achieving double-digit growth so we would be very happy to still be achieving our shared growth targets.”

The current Lagardère Travel Retail duty free business is achieving double-digit growth.

CLOSE PARTNERSHIP

With the airport under construction in year-one of the agreement and a hoarding environment in place, achieving these targets will be easier said than done. “We want to work very closely with them in managing the optimal customer experience.

“By the time international customers find themselves in the current duty free space having walked through an airport under construction, hopefully they will still have a high propensity to spend.”

Part of this optimal customer experience is the domestic retail concession, which Lagardère has also been awarded. “This is basically a Southern Providore [concept] and ties in beautifully with the duty free offer. The Providore will be located in our domestic space which all international passengers are exposed to.”

Lagardère Travel Retail has also been awarded the domestic retail concession.

Hero and South Australian brands such as Haigh’s chocolates, Jurlique and Penfolds Wine will be showcased in a powerful and dominant way, according to Pearce.

“We will work with Lagardère on the domestic offer as well as complementing their duty free offer. We will deliver on the vision we have to make the retail offer in Adelaide Airport top-tier in Asia-Pacific. Our aim is to have a very united approach in terms of the e-commerce platform which we think will be integral.”

See the May edition of TRBusiness for the full interview with John Pearce, Head of Retail and Commercial — Terminal, Adelaide Airport.