APTRA seeks solution amid proposed slashing of Indian DF liquor allowance

By Andrew Pentol |

Grant-Fleming-new

Grant Fleming, President, APTRA is hoping of reaching a ‘favourable solution’ to the proposed Indian duty free liquor allowance cut.

The Asia-Pacific Travel Retail Association (APTRA) is working closely with the Indian government and duty free operators in the country to ‘better understand’ the proposal to halve the arrivals duty free liquor allowance.

Currently, the allowance is two litres of duty free alcohol and 100 sticks of cigarettes, but the government plans to restrict the purchase of tax-free alcohol at airport arrival duty-free shops to one litre and the purchase of cigarette cartons altogether.

Grant Fleming, President, APTRA, who revealed the organisation is seeking a ‘favourable solution’ to the duty free liquor allowance issue in India commented: “With concerns also raised from other industry bodies such as ACI Asia-Pacific, the government is actively considering the views raised. This is an important first step in how we hope to reach a resolution.”

He added: “The fast-moving dynamics of Asia Pacific mean that regulation changes can spring out of nowhere at incredible speed and APTRA is now gearing up to support our members quickly and robustly in situations like this.

“Our ambition is to be ahead of the curve and advocacy is a key cornerstone of our mission. We are actively working on the situation in India to support our members, ensuring we all have a voice at the table.”

CONCERN OVER LIQUOR ALLOWANCE CUT

As mentioned, industry bodies including ACI Asia-Pacific have expressed concern over the proposed allowance cut. The industry body has actually gone as far as calling on the Ministry of Commerce and Industry of the Government of India to maintain the status quo of the existing per passenger duty free liquor allowance.

ACI Asia-Pacific believes the Ministry’s proposal is inconsistent with the Government’s ‘fruitful efforts’ to incentivise private capital in the public sector and will damage the growth trajectory of Indian airports and duty free providers.

Stefano-Baronci-newStefano Baronci, Director General, ACI Asia-Pacific (left) said: “We urge the authorities to reject this proposal. Not only is it inconsistent with the latest attempts by the Government to incentivise private capital to invest in the airport industry, but it undermines the growth opportunity for Indian airports and duty-free providers who are a driving force in the local airport economy.”

Duty-free operators must be able to count on the expansion of airport infrastructure, along with new retail space and a regulatory framework that incentivises the market to grow, according to Baronci, who added: “Unfortunately, the Ministry’s proposal will limit this objective if airports cannot generate non-aeronautical revenues to cover aeronautical cost.”

The latest airport privatisation processes carry significant capital expenditure risk on the part of investors. This requires them to diversify and increase non-aeronautical revenue streams. ACI Asia-Pacific pointed out: “The latest privatisation bids were set on the grounds that investors could enjoy full freedom to generate commercial revenues at the airport. The Ministry’s proposal to reduce the import of duty-free goods runs the risk of having the opposite effect, because it neglects the potential adverse impact it may have on the growth of commercial business.”

ACI Asia-Pacific also highlights the tremendous growth potential of Indian airports in terms of duty free and travel retail. Delhi Duty Free Services, for example, unveiled its new premium shopping experience for arriving and departing passengers in 2019. The year before it experienced a record year with turnover growing 15% year-on-year. Last year, however, was understood to be more challenging with concerns over penetration rates and average transaction values, but the grown potential remains for all to see.

Wine and spirits is the top duty free segment in India and according to the 2018 World Air Traffic Report published by ACI, passenger traffic in the country will grow by 6.1% annually until 2040. “Within an unconstrained scenario, it is forecasted that the spending in duty-free and travel retail will grow 20% to US$2.1 billion in 2022*.”

*Data from Global Data (January 2019) Duty Free Retail Insights — Market Size Asia and Australasia Regions by InterVISTAS analysis.

COMMENT: ANDREW PENTOL, SENIOR EDITOR

Should the Indian government be successful in its proposal to halve the Indian arrivals duty free liquor allowance, Indian travel retailers will be hit hard. Unsurprisingly, operators such as Delhi Duty Free Services (DDFS) declined to discuss the issue when contacted by TRBusiness, which is understandable given the circumstances.

In the 2018/2019 financial year, DDFS experienced a 28% surge in arrivals duty free liquor duty free sales, despite the new arrivals store not opening until June 2018. With 86% of liquor purchasers utilising their full arrivals allowance during the period, halving the limit would be a major blow.

Elsewhere, Hyderabad Duty Free, a division of GMR Hospitality and Retail Limited, would also suffer should the allowance be slashed.

As reported, HDF is growing at 20% year-on-year and aiming to be the ‘largest and most preferred’ duty free business in South India by 2022. Currently, liquor is the retailer’s top-selling category and with 100 liquor brands on offer, the segment is crucial to HDF’s growth aspirations.

A GMR Hyderabad International Airport Limited Spokesperson said: “Based on research and surveys on passenger preference, HDF has found that Hyderabad is a majorly liquor-driven market, where customers seek better deals and offers. This insight has prompted HDF to enhance its product range in the category, keeping prices competitive and on par with duty free outlets at other airports.”

Currently, high-value/premium liquor contributes to 25% of total sales in the category and over the past three years, the liquor category has grown rapidly (70% +CAGR in volumes).

The importance of the segment must not be underestimated across Indian duty free — arrivals in particular. The likes of APTRA and ACI are fully aware of its significance and acting accordingly, much to the relief of Indian operators and travel retailers worldwide selling to travellers bound for India.

Arrivals-Delhi-spirits

According to Delhi Duty Free Services, 86% of liquor purchasers utilised their full allowance when purchasing on arrival at Delhi Indira Gandhi International Airport Terminal 3 during the 2018/2019 financial year.

 

International

"Growing appetite for sustainable & local products"

With international passenger traffic rebounding, consumers are demonstrating a craving for...

International

Hodges & Newbould take new roles at Harding+

Cruise retailer Harding+ has named former WHSmith senior executive Peter Newbould as Chief...

International

BREAKING: AsPac Travel Retail Awards finalists

TRBusiness and m1nd-set are pleased to announce today (19 February) the finalists in the...

image description

In the Magazine

TRBusiness Magazine is free to access. Read the latest issue now.

E-mail this link to a friend