In an extensive interview with TRBusiness earlier this month at the TFWA World Exhibition & Conference in Cannes, Díaz also revealed that the company has already taken precautions – such as accumulating additional inventory – to protect itself in a potentially chaotic scenario following a no-deal Brexit.
Although a no-deal Brexit is now far less likely to occur after MPs succeeded in passing anti-no-deal legislation through the Commons last month, the scenario can change from one moment to the next as we have witnessed over the past three years, making conditions almost impossible to predict.
Díaz was keen to point out that today, the number one passenger group for Dufry in duty free (excluding duty paid) is British passengers.
‘NO DEAL’ STOCK MANAGEMENT
This is why Dufry is monitoring the British Prime Minister’s talks with Brussels very closely and has prepared itself for various Brexit outcomes.
“Compared with last year, what we have done is prepared a strategic plan in case Brexit happens and in case of a ‘no-deal’,” said Díaz during the interview.
“This is for us the most challenging thing, because if for whatever reason a no-deal occurs, the situation becomes tough for us in terms of stock availability.
“We have a plan to increase the inventory levels with new warehouses that we have rented in order to maintain stock levels for some months.
“The problem is for customs clearance. When you are in a situation like this, the most difficult thing is to really despatch the merchandise, to clear the merchandise… the difference is that the merchandise is going from the European union to the UK in a different channel and depending on how the government will approach it, the situation could be chaotic.”
Díaz mentioned that adapting IT systems will also pose challenges.
“As you know, every duty free operator has to register specific information about the type of sale you are making and I think this will be a big change too. The other thing is pricing policy, how to implement the pricing policy.
“The fourth one is licences. Today maybe you have only licences for intra-European union and then you will need to have licences for third country, or whatever. Those things are already defined and we have a plan in case that happens; we are ready. But that doesn’t mean that there won’t be additional impacts that we didn’t consider. We have the inventory ready just in case.”
BRAZIL: PENSION REFORM ‘TO IMPROVE SITUATION’
On the topic of another critical region for Dufry, Díaz told TRBusiness he is confident that trading conditions in Brazil and other parts of South America will continue to improve in the final quarter of 2019, in line with a gradual uptick that initiated in the first few months of this year.
“The trend during the summer, is very positive,” he told TRBusiness. “A lot better. The trend in general in the highest quarter of the year, is better than during the first six months.
“In the third quarter of this year the recovery is very clear. I am feeling like, with all the news that we are hearing from Brazil, about the pension reform, when this is approved the situation in Brazil will improve and as a consequence the surrounding regions.”
Following an admittedly tough 12-18 months in Brazil, Dufry’s decision to open its first border duty free shop towards the end of this summer appeared to be a brave one. TRBusiness asked Díaz if he had felt anxious ahead of the opening considering the turbulent period it was only just emerging from.
STILL EARLY DAYS FOR URUGUAIANA STORE
“The right moment [to open this store] was eight years ago when we started negotiating implementation and then the legal process followed etc… Finally we got the approval and this will be a good test.
“We just opened in Uruguaiana, but the model is different from the other models, such as in Uruguay for example. In the case of Uruguaiana, we have more of a bonded area which means the shop is different.
“The product assortment, the pricing policy, everything that is related with the commercial approach is different. But we do know that we have the intention to expand these shops in the 20, 21 other locations in South America if this ‘test’ is successful.”
More from this interview, including Díaz’s thoughts on the arrivals business in Russia, adjusting to the new IFRS 16 reporting standard and the company’s acquisition ‘mood’ will appear in the November issue of TRBusiness.