Andrew Ford, President, APTRA.

In an in-depth Q&A, Andrew Ford updates TRBusiness on a busy period for the Asia Pacific Travel Retail Association (APTRA) since he assumed the Presidency in May last year.

The continued boom in passenger traffic and DF&TR sales continues to open up new opportunities in the region. In protecting these, the association is confronting an ever-widening spectrum of challenges, from the World Health Organization (WHO) Illicit Trade Protocol (ITP) on tobacco, to retail display bans, plain packaging and labelling regulations.

Ford also sheds light on plans for the latest tranche of APTRA Insights Seminars and explains why there is still work to do to foster greater engagement with the Responsible Retail Training Programme (RRTP).

How are you settling into your new role at APTRA a little over one year in?

I am settling in well – I was on the board before when I represented DFS and I wanted to continue contributing to the industry. Now, I actively represent Chabot Armagnac. I enjoy the role and like to think I am adding value to the association and want to grow it.

It’s a different role following your experience with DFS and other supplier, association and consultancy positions in the industry. What has been the biggest challenge since you became APTRA President?

There are a number of challenges. First of all, when I ran TFWA for seven years as CEO much of it was about the management of the exhibitions and conferences; a lot of the lobbying – while I was still involved – was left up to the European Travel Retail Confederation (ETRC) to a great extent.

APTRA is very much an association centred around research, advocacy, events and training, so it is different from the association I ran before. Being the President of the Association is not day-to-day – whereas at TFWA it was. Michael (Barrett) runs very well the day-to-day management and I help where I can. There is a terrific board that get involved in a number of areas to help Michael and I.

We’ve seen some strong performances again in Asia Pacific in the past year with growth of +11.6% across the region. However, there have been a number of significant challenges, particularly in South Korea. In general, how do you assess the current climate, do you feel it is stabilising, and can we expect to see conditions improve?

I compare Asia Pacific’s travel retail market to a locomotive that has been cruising and now is picking up steam – you can feel it just about throughout the whole region and it’s really impressive. The reduction in the value of the dollar compared to other countries has made Hong Kong far more attractive, you have luxury retail sales up and the airports are picking up.

Japan is privatising its airports and when you see the shopping there it is incredible. You go through Kansai Airport and the average spend per person is above $45 – that’s massive. Bangkok is doing really well, Singapore, Korea and Malaysia are picking up and Taiwan and China are doing well.

[Click here to view an ACI Asia-Pacific video showcasing some of the region’s most exciting airport and commercial development projects].

How do you survey the current landscape in China – one that is changing irrevocably due to the expansion of CDFG and others – and do you see a real seachange taking place in the way travellers are shopping and spending on brands?

There are some interesting statistics from Airbus on the evolution of the middle classes; there are more and more middle class passengers making up a large proportion of total travellers. Particularly in China, they travel to airports to buy. Some of it is for gifts, some of it is for trading but they are still duty free purchases. We are seeing a continued and sustained demand among Chinese travellers for unique and exclusive products in duty free shops so retailers and brands that meet this demand are certain to reap the benefits.

Ford addresses delegates during the TFWA Asia Pacific Exhibition & Conference in May.

Daigou (shuttle traders) have become quite prevalent in the last year due in part to the THAAD impact in South Korea. Is this a healthy phenomenon for the industry?

The risk is if you depend on it too much as a duty free operator. Daigou traders can move from one market to the next dependent on currencies and deals in the retail environment or operation. If you depend on that, it can be somewhat dangerous if all of a sudden the traders move somewhere else.

The WHO ITP on tobacco remains a threat to the duty free category in the region, as indeed it does for the global trade. Can you say a few words on the significance of the ITP challenge and what APTRA is doing to address it?

The WHO has lumped in legitimate duty free tobacco sales as ‘illicit’ and it is not right or fair. By doing so, they are insinuating that customs are leaking product into the domestic market and aren’t doing a good job. I don’t think that is a fair thing for the WHO to say or insinuate.

The other issue is if tobacco in the end is banned from duty free shops, it will mean a loss of income for airports to keep them up-to-date and to reinvest in new terminals… the airports will have to find that money from somewhere else or increase landing fees. I think that is probably a danger as the airline industry goes through highs and lows and I don’t think it wants additional landing fees. Unfortunately, I think there are a lot of airports and governments that do not realise what ITP will do to them if a ban on duty free tobacco is carried through.

The key thing for our industry is to communicate with the airport CEOs so they can communicate with their governments. We are writing to all of the airport CEOs in the region to bring them up to speed and point out what they will be losing. There are a lot of airports where the CEOs do not know (about the issue). We are working with ACI as well to communicate this message and are doing it as quickly as we can.

“The major concern and root of all the challenges we face is the lack of understanding among legislators of the unique nature of duty free and its importance to airport revenues and to the local economy.”

APTRA has faced and successfully addressed challenges such as the taxation of duty free goods in countries such as India, Sri Lanka and Taiwan over the last 12 months. Can you highlight a few other examples and flag any challenges you
are encountering?

While much of our focus in recent months has been on the industry ITP campaign, there have been a number of issues which we have been monitoring and addressing. These range from domestic legislation spilling over into the duty free retail sector where we have been seeking exemptions to other measures specifically targeting the duty free industry.

Domestic legislation and regulation is increasingly being imposed on the duty free channel. These include retail display bans, plain packaging and labelling requirements. In Macau and Thailand for example, retail display bans on tobacco products in airports have been introduced despite the industry’s best efforts to secure an exemption.

We are also seeing increasing regulatory scrutiny on duty free as a sales channel, particularly on labelling and marketing. In Taiwan we successfully managed to offset a proposal to impose a health surcharge tax on duty free tobacco sales as part of an amendment bill to the Tobacco Hazards Prevention and Control Act, with the strong support of the local retailers and airport authority.

In Mongolia, there is a proposal to ban duty free tobacco sales included in an amendment bill to the national tobacco control legislation. We have been actively working with stakeholders in the industry there, even taking part in a roundtable organised by the Chamber of Commerce and Industry in Ulaanbaatar. In Korea we are monitoring the situation there as there is a legal opinion among government departments that all domestic regulations should apply to duty free tobacco.

We faced a very serious issue in recent months that was creating considerable customer dissatisfaction where passengers heading through Beijing to domestic flights were seeing their liquids, aerosols and gels (LAGs) purchases from their origin airport confiscated. As we do for all issues we face today, we collaborated closely with ACI Asia Pacific and the airport authority to resolve the problem and the necessary measures are now in place to reduce customer confusion and ensure the regulations and solutions are understood clearly by the passengers.

In Singapore, where we have the fortunate position of having a strong supportive local partner on all advocacy issues with Changi Airport, which is also on the board of APTRA, there are ongoing issues. APTRA has worked diligently with Changi Airport on preparing a response arguing for a duty free exemption from plain packaging as part of a public consultation there. We are still awaiting the outcome of the deliberation. We also addressed the challenge of securing an exemption for the domestic display ban, which went into effect in August last year. Formal exemptions were granted both to Changi Airport and tobacco display areas in the ferry terminals.

It is not always the case that governments consult with industry on legislation that will affect us, so we are focusing on building the association and industry profile to ensure our voice is better heard. The major concern and root of all the challenges we face is the lack of understanding among legislators of the unique nature of duty free and its importance to airport revenues and to the local economy. This is why we are working with the Duty Free World Council on the next Economic Impact Report, which will focus on the Asia Pacific region.

During your address at TFWA Singapore you made a point about the changing nature of travel retail and the fact that consumers don’t want luxury boutiques and products stacked on shelves anymore. Are you seeing genuine desire and appetite for change beyond the typical markets we speak about all the time such as China, South Korea, and the
Indian subcontinent?

Very much so, I work with other airports outside Asia and I see it there as well. It is the younger generation who are travelling, hooked into social media and they need to nourish that platform. It is a huge luxury to be travelling and when they go into a shop they gravitate towards the one-off special editions they cannot get back home or their followers can’t get back home. They want pictures and to learn and see how things work so they can pass on that information.

APTRA organised the inaugural Airports Forum last year and you staged the second earlier this year during TFWA Singapore. How did that play out and build on the results of the
first year?

I wasn’t there last year [Ford was named APTRA President shortly after the first forum took place during TFWA Singapore 2017 – Ed] but I was there this year and I thought it was fantastic. It wasn’t a paid-for conference, it was hosted by Changi Airport and we had in attendance around 12 airports, 25 people and the regional Directors of IATA and ACI Asia Pacific.

Two main takeaways are that APTRA is trying to provide more services for the airport community and we’d really like to get more [people] to join to be part of the membership. Secondly, this is a forum to meet in a small group to discuss airport commercial issues and I don’t know of any other meeting like this that takes place in Asia. It was interesting to hear the airports talk about what they are doing in each market and what is successful so they can all learn from each other.

Bring us up to date on APTRA’s Insight Seminars and what the industry can expect moving forward?

We continue to put these in place. They work well as they are small, allowing people to join them easily. I think there will be three or four others during the year with KPMG and m1nd-set. There will be industry, geopolitical and technological analysis and the key results of our research reports.

We work closely with our partners at KPMG on the seminars to identify the locations where we host these each year and put together the content. The KPMG partnership has been excellent from the outset, with strong support on the hosting as well as input on the content each year. We are expecting to confirm the dates soon for the locations we will be taking the seminars to later this year. These will include Tokyo, Hong Kong and no doubt Singapore.

Asia Pacific continues to outpace its regional counterparts with DF&TR sales of $30.6bn in 2017. Source: Generation Research/TFWA.

Last year you took on Hume Brophy to assist with your advocacy efforts. How is that relationship playing out?

We are working with them closely. It was becoming a lot for the APTRA team to handle as they have many other things to look after – and they do those well – so we decided to get some external help to manage the complex nature of advocacy. Hume Brophy has done a really good job in outlining where the issues are, keeping that advocacy issue monitoring matrix constantly updated and informing the board of where they need help to speak to people.

They have provided a toolkit with a policy statement for each of the key issues, plus things that can be done around it. We are very pleased.

What about the Responsible Retail Training Programme?

We now have over 1,200 frontline staff and ambassadors who are trained so far, which is small given the number of people selling wines & spirits in the travel retail theatre of Asia, but it is progressing quickly.

DFS has committed to training all of its staff who sell alcohol and a fair few other retailers and alcohol producers are using it. It is now available in a Chinese version too and we have developed a mobile-friendly version so staff can easily access the training programme on their phones. It has been adopted by the Duty Free World Council for worldwide use – and it is free. It helps our whole industry.

Are there plans to widen the RRTP to other categories?

It is good idea. We have to be careful about tobacco and any beauty areas, but we could look to include those in the programme.

Barring any significant economic and geopolitical issues, how do you see the remainder of 2018 shaping up for the region – and the industry?

It is great. The region is now over 50% of travel retail sales. It’s go-go-go out here. I am very enthusiastic about 2018.