[Update] Heinemann joins Lotte and Shilla in SIN liquor and tobacco bid

By Andrew Pentol |

Lotte-Liquor-and-Tobacco-T1-Incheon

A Lotte Duty Free liquor and tobacco shop at Seoul Incheon Terminal 1.

Korean duty free powerhouses Lotte Duty Free and Shilla have submitted bids for the Singapore Changi liquor and tobacco (L&T) contract, which will be vacated by DFS Group next year.

In addition to the Korean duo, TRBusiness can confirm Gebr. Heinemann, which has a strong Asia Pacific footprint at airports such as Hong KongSydney and Kuala Lumpur International (KLIA2) has participated in the tender.

As reported yesterday (26 August), long-standing incumbent DFS Group, which has held the concession since 1980, did not participate in the 18-store Changi Airport Group (CAG) six-year liquor and tobacco tender, which is now closed.

Having agreed a two-month contract extension with CAG earlier this year (the tenancy now expires on 8 June 2020) after going back on a two-year extension announced in 2018, the retailer was expected to participate in the tender, perhaps in the hope of negotiating more favourable terms.

DFS TO EXIT ANOTHER ASIAN HUB

This, however, did not materialise meaning DFS will soon no longer operate core duty free contracts in another major Asian hub having exited its Hong Kong concessions at the end of 2017.

Moving forward, it will be interesting to see if DFS participates in more high-profile airport tenders or focuses on its downtown business.

Whatever the future holds, its pending departure from Singapore Changi has opened the door for the likes of Lotte, Shilla and Gebr. Heinemann.

From a Shilla perspective, securing the SIN liquor and tobacco contract would certainly prove its versatility. This would demonstrate the retailer’s capacity to operate further high-profile liquor and tobacco concessions in the same way it runs prominent beauty concessions in airports such as Hong Kong and Singapore Changi. Shilla already runs liquor and tobacco stores at Seoul Gimpo, where it secured the five-year contract in 2018, Seoul Incheon (Terminal 1), Macau and Jeju International Airports.

Shilla-Gimpo

Shilla already operates four liquor and tobacco stores at locations such as Seoul Gimpo, where it secured the five-year contract in 2018.

A Shilla spokesperson told TRBusiness: “The Shilla Duty Free has actively evaluated our options to participate in various concessions where there are good business opportunities. This would be a good opportunity for us to be recognised as one of the top global travel retailers and to show our competency in operating other categories besides perfume and cosmetics.”

Should Shilla be successful, it can draw on its experience of operating the four-terminal beauty concession at SIN since 2014. Its strong and burgeoning partnership with CAG might also be a factor in the evaluation process.

The spokesperson added: “We believe we have a distinct advantage in operating our duty free business in Changi Airport as we have operated the perfumes and cosmetics category since 2014.”

Meanwhile, Lotte Duty Free says the capture of the SIN liquor and tobacco contract would form a key part of its overseas expansion plan.

Acknowledging the strong sales potential associated with the concession, a Lotte spokesperson told TRBusiness: “We will be able to get one step closer to our ambition of being the world’s best travel retailer.”

Currently operating 12 airport shops worldwide, including a liquor and tobacco shop at Seoul Incheon Airport Terminal 1, the retailer is hoping its strong online business, will tip the balance during the evaluation process. In H1 2019, Lotte’s online sales grew 49% to KRW1.4tn ($1.1bn).

ONLINE EMPHASIS

Singapore Changi itself, also takes its online business extremely seriously. In 2017, for example, over 57 million transactions were registered through its iShop Changi portal, an average of 158,000 per day.

Teo Chew Hoon, Group Senior Vice President, Airside Concessions, Changi Airport Group told TRBusiness earlier this year. “In October 2018, we introduced a new website interface that is inbuilt with social and experiential shopping capabilities to enhance the overall online shopping experience.

“We have also recently reduced the order lead time from 18 hours to 12 hours to provide passengers with a longer browsing and shopping window pre-flight. This means travellers now have between 12 hours to 30 days prior to their flight to shop on iShopChangi.

“The number of brands on the platform has also steadily increased over the year. It currently houses over 800 brands.”

Lotte Duty Free is certainly aware of the strong emphasis Singapore Changi Airport places on online, technology and creative solutions to enhance the retail experience.

“Since Changi Airport is said to be interested in omnichannel, we hope our reputation as the world’s leading operator in the online duty free market will help bring a positive result.”

Offering a Heinemann perspective, Marvin von Plato, CEO, Heinemann Asia Pacific told TRBusiness: “Heinemann Asia Pacific is participating in the tender for Changi Airport’s liquor and tobacco concession. As a subsidiary of Gebr. Heinemann, Singapore is our home ground and we are a well-established Singapore company with a German heritage.

“We already operate liquor and tobacco concessions across numerous airports around the world and the liquor and tobacco concession at Changi Airport —which is one of the top airports in the region — would be a natural next step for Gebr. Heinemann on the way to expanding even further in the Asia Pacific region.”

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