LS Travel Retail, the duty free and travel retail arm of Lagardère Services, is looking to expand in the Middle East and, last week, presented its view on the market and its potential ahead of the MEDFA conference next Monday.

 

At the DFNI Global Conference in Malta, LSTR gave attendees insights into the spending patterns of both Middle Eastern and North African (MENA) passengers at its existing stores and outlined the strategy it might put in place were it to gain contracts in the region.

 

On MENA concession opportunities, Philippe Hautrive, LSTR’s Executive Vice President International Development for the EMEA region, says: “We won’t be looking at everything… but tenders of a significant size that would justify entry.” He also ruled in tie-ups with local partners, for example in Egypt in locations, such as the tourist hubs of Hurghada and Sharm el-Sheikh, with sales of more than US$40m.

 

Referring to MENA travellers Hautrive (left) says: “The passenger profile is very diverse ranging from immigrant workers to wealthy nationals. There is a big cultural mix and a massive transit opportunity – this is both challenging and appealing.”

 

He says that locations in the region, whose duty free and travel retail sales were US$3.5bn last year, can target both ends of this consumer spectrum, selling supermarket products at one end to luxury brands at the other by stocking tailored products to maximise sales from each consumer segment. “One size fits all, never works and it works even less in this region,” comments Hautrive.

 

PLENTY OF POTENTIAL

At LSTR’s existing shops, MENA travellers account for 12% of passengers but 20% of turnover with sales to nationals from Gulf Cooperation Council (GCC) states up by +150% in the past four years.

 

According to the company, GCC and Levant (the far eastern Mediterranean) travellers spend +15% above average, but not as much as the Chinese. They like novelties and exclusives, and premium luxury in categories like confectionery fashion and beauty. Saudi, Kuwaiti and Lebanese nationals have spends of more than $150.

 

Baskets from North Africans are lower but they have a high stop ratio with a strong preference for tobacco, then beauty and confectionery. Hautrive says demand is highest for mid-range brands such as Marlboro, Philip Morris, perfumes like Paco Rabanne and Boss, and confectionery such as Lindt, Nestlé Swiss and Milka.

 

EMERGING MARKETS IN CONTEXT

Regional expansion in upcoming/promising markets is a priority for LSTR. The company’s revenue from emerging markets has risen from €506m in 2007 to €768m in 2011, a CAGR of +11%, resulting in a share of total sales rising from 26% to 28% (see chart left).

 

LSTR’s strategic objective is to achieve +10% annual sales growth from 2011 to 2016, with two thirds coming from organic growth and the rest through small/medium acquisitions. If the company can produce growth of that order, it expects to become the world’s number two DF&TR player by 2016.