ASUTIL President Enrique Urioste told TRBusiness today that he believes 2015 will be a year of ‘evolution’ or ‘transition’ for LatAm, but admits he’s not entirely sure what it will evolve into.

 

“This is an evolving year,” he told TRBusiness. “A transitional year…to what I don’t know, but hopefully for the better. Our industry is historically the first one to receive the hit, but it is always the first one to recover and I think that is understood well by all the operators in this region at least.

Click on any image below to enlarge.

 

“None of us have cancelled any of our CAPEX investment plans. Dufry is doing major investments in Brazil; Grupo Wisa, Neutral, InterBaires, everybody is investing heavily because we believe in the system and in the fundamentals of the system.”

 

Earlier today, at the 19^th annual ASUTIL conference José Luis Donagaray, Secretary-General, ASUTIL thanked the industry for its ongoing support of the association – during what is turning out to be a very challenging year for LatAm – whilst revealing that ASUTIL’s visitors are up by 5.1% to 347. [TRBusiness reported yesterday that the figure had grown between 4 and 5%].

 

However, he also revealed in his ‘Statement of the affairs of ASUTIL and the industry’ that travel retail sales in the first quarter of 2015 were down by -6% across South and Central America as well as the Caribbean (YOY). The figure takes into account the sales performance of 12 countries and 15 operators.

 

 

Donagaray told delegates today that next year ASUTIL’s 20th conference will be held in Santiago de Chile between 8-10 June at the Sheraton Santiago and that he next Border meeting will take place on 16-17 November in Puerto Iguazú.

 

The conference suffered from some technical difficulties at the very start of the morning – interference played havoc with the devices delegates were using to listen to the English translation of the two opening addresses. Although this was remedied later on, TRBusiness was unable to hear much of the ASUTIL President’s opening comments on the association and the industry.

 

Thankfully, Urioste was able to relay the same information privately to TRBusiness in the coffee break. “It was a rough first quarter for LatAm…I think the calm, stable and predictable years of 2011, 2012 and 2013 dramatically changed as from January.”

 

 

However, he suggested that markets and companies may have over reacted. “Basically because of the weakness of various currencies against the dollar; the drop in oil prices; the drop in commodities; the monetary, political expansions of the European Central Bank and so on, markets were really forecasting and preparing for a worse scenario, than I think actually occurred.

 

“Emerging market currencies did lose value against the dollar, but not as expected…People were expecting oil to go further beyond the $50 and it’s more or less stable in the range of $50 mark. Commodities in general have recovered prices, not to historical levels, but to kind of a mid-point. The US economy is performing, but lower than the market expected.

 

“So I think that the combination of all those things allow me to say that we have already hit the bottom part of this year’s crisis or ‘change of scenario’ and I think that we’re going to start slowly seeing a recovery. We shouldn’t expect a quick bouncing back, but I think that the markets are ready to stabilise…In the specific case of LatAm we have the component of the Brazilian political scandal, which on top of economic issues, brought a lot more instability.”

But Urioste is ever the optimist and as mentioned above, he believes that this will be an ‘evolving year’ for the travel retail market in Central and South America, hopefully for the better…

 

Peter Mohn, Owner & CEO m1nd-set followed Urioste and Donagaray this morning, presenting the insights he and his team have gathered on the shopping behaviour of Brazilian travellers. M1nd-set conducted a major study on Brazilian consumers – exclusively for ASUTIL – considering the views of 2,000 Brazilian travellers (an impressive sample size).

Mohn’s presentation was reliably data rich and left no category or travel retail channel uncovered. One of the most interesting points made by Mohn was that DF&TR shops on ferries suffer from the lowest penetration rate of any other channel, but that their conversion rate – of shoppers into buyers – is very high at 78%.

 

From the results of the study, Mohn concluded that duty free shopping is considered to be very much a part of the travel experience for Brazilian travellers. In fact, he stated that the percentage of travellers who said that they believed duty free was an important part of the travel experience, was the highest he has seen anywhere in the world.

 

Mohn also revealed that Brazilian travellers mainly buy for themselves and their partner/wife/husband (see slide above). Among the top reasons to buy were: “I found my favourite product/exactly what I was looking for”; “the price was lower than in local stores”; and finally “there was an appealing promotion”.

 

One of the biggest barriers to success in this region is the ill education of Brazilian travellers on customs regulations, said Mohn. “Too many people did not buy because they were not aware of the custom regulations,” he argued.

 

He also said that customers crave local identity at duty free shops, especially onboard ferries where 42% of travellers believe local identity is ‘very important’.

 

“Travellers want local and original and new and different things,” added Mohn in his conclusion. “Let’s give it to them.”

 

Carlos Loaiza Keel, Secretario de la Camara de Free Shops del Uruguay was next up to provide his views on border shops in Brazil.

 

He said that the ‘landing of the new duty free shops’ on the Brazilian side of the Uruguay-Brazil border presents both challenges and opportunities.

 

He pointed out that Uruguay’s internal challenges contributed to a decrease in the nation’s travel retail purchases in the first quarter of 2015. “We cannot hide it,” he said. “But the numbers are not as relevant as people think. The differences in performance yoy for March are not so harsh [as they were in January and February].”

 

Much like Urioste, Loaiza believes that we are starting to see the stabilisation of the Real and as a result Brazilians will start “to trust again and buy”.

 

Despite various internal and external challenges, Loaiza pointed out that there are some amazing travel retail projects taking place in Uruguay, namely the Rivera mall and free shops in Melancia – which boast 26,000sq m, and will open as soon as August 2015.

 

Last, but not least, were the Dufry duo comprising Rene Riedi, Regional COO LatAm & Caribbean and Gustavo Fagundes, Chief Operating Officer of Region America II.

 

Riedi made it clear early on that he would not reveal any further details on the WDFG acquisition at this time, preferring instead to talk about the state of travel and tourism in LatAm.

 

Immediately he conceded that conditions were not particularly favourable right now. Among others he mentioned that Venezuela’s GDP was set to decline this year.

 

He agreed with the speakers preceding him that currency devaluations in Mexico, Chile and Colombia had a major impact on travelling behaviour in recent months.

 

However, he highlighted that LatAm and Caribbean flights are set to double by 2031 and with major airport infrastructure development at Mexico City’s mega hub; Bogota’s El Dorado extension and Panama’s new terminal, things are looking up.

 

Unsurprisingly, he said that new airport development must allow for the fully realised potential of retail activity, although he said that airport privatisation was already helping to fund improvements.

 

Riedi moved on to talk about the cruise market, highlighting that dwell time is not measured in hours, but in days in this shopping environment and that there are many more opportunities to convert passengers into shoppers.

 

The following and final presentation by Fagundes focused heavily on exploring the inner workings and ambitions of Dufry. Fagundes made it very clear that the group wishes to fully develop its Hudson convenience store brand and to expand in duty paid.

 

 

Noting that 90% of Brazilian air traffic is domestic, he revealed that Dufry will increase its duty paid business by 6,086sq m across 41 new stores in Brazil, where he believes the segment has massive business potential.

 

Fagundes confirmed that Dufry has increased its retail space by 1,800sq m in the first quarter of 2015. It also reiterated that it estimates that the group represents a 24% share of the total DF&TR market with a pro forma 2014 turnover of CHF 7.8bn ($8.3bn).

 

Although it now trades in 20 countries across 500 stores, Spain represents 25% of its total net revenue. Towards the end of his presentation, Fagundes revealed Dufry’s ‘Excellence Programme’, which will see the group focus on shop floor management; customer service; logistics; back-office management as well as the ‘efficiency and management by objectives’ (productivity, results).

Check back for Day Two’s analysis and highlights on TRBusinesss.com tomorrow.