More details revealed on first Dufry Group Brazilian border DF shop opening

By Andrew Pentol |

Julian-Diaz-vid-interview-2018-lead

Julián Díaz, CEO, Dufry Group

TRBusiness has gleaned further information and reaction to the imminent opening of Dufry Group’s first Brazilian border duty free store in Uruguaiana, as revealed in the company’s H1 2019 results today (July 29)Uruguaiana is the second largest city on the Brazilian border with Argentina and Uruguay.

Located near the bridge to Argentina, the 850sq m outlet is easily accessible to Argentinian travellers. The eagerly anticipated opening of the first Dufry Brazilian land border duty free store follows the unveiling of the inaugural Brazilian border stores last week in Barra do Quarai and Yaguarao respectively.

The 200sq m Barra do Quarai outlet is operated by Emporio Duty Free, owned by JR Correa & Cia, while the 400sq m Yaguarao shop is run by Caraballat Free Shop. Currently, both stores offer products from Brazil along with imported items.

As extensively reported, the approval of the required regulation to operate land border duty free stores in any of Brazil’s 32 cities bordering variously with Argentina, Paraguay, Peru, Colombia, Bolivia, French Guiana, Uruguay, Guyana, Venezuela and Suriname was several years in the making.

LONG-AWAITED APPROVAL

The Brazilian Customs authorities finally approved the regulation and gave the green light for the land border duty free stores last March.

Answering a question from TRBusiness during a conference call today (30 July) following the publication of the H1 2019 results, Julián Díaz, CEO, Dufry Group said: “Regarding the Brazilian border shops, it is important to remind everyone we have really been chasing this opportunity for many years.

“We were convinced that border shops would be one of the most important growth drivers of the Brazilian travel retail business. This is because there is obviously significant border shop business on the other side.”

Pressed by TRBusiness on the company’s expectations following the opening of the Uruguaiana store, Díaz commented: “Personally, I cannot give any guidelines or expectations in terms of performance. Firstly, this is because the business is existing for the first time and secondly, because I believe it would be risky taking into account the competition in this area.

 

Brazil-border-map-2

The required regulation to operate land border duty free stores in any of Brazil’s 32 cities bordering variously with Argentina, Paraguay, Peru, Colombia, Bolivia, French Guiana, Uruguay, Guyana, Venezuela and Suriname was finally approved last March.

“What I can say it that this is a very important project which will be a very positive business alongside our existing operations in Brazil.”

José Luis Donagaray, Secretary General, ASUTIL, who has played significant role in securing approval for this new business told TRBusiness:  “I am more than satisfied this new business has started to move, but nobody can predict how things will go. This is because there are 32 cities where duty free stores can be opened and there remains numerous questions about the quantity of licenses in each city.

“At present, there is no limit on the number of licenses in each location. Currently, there can be five, 10, 20, 30, 40, or even 50 licenses in each place.”

REGSTAER VNUKOVO ACQUISITION

Meanwhile, Dufry Group has described the recent acquisition of a 60% stake in RegStaer Vnukovo as an ‘important step’. As reported back in 2012, the 51% acquisition of the RegStaer Group included an exclusive commercial and purchasing agreement for its operation at Vnukovo Airport, where RegStaer opened its first Russian arrivals store in January 2019.

One of the most important airports in Russia, Vnukovo handles around 22 million passengers per year. It has more than 30 duty free and duty paid shops across a retail space of 6,800sq m. RegStaer has a long-term concession until 2035 at the airport, where it generated sales of €58.8m ($65.6m) in FY2018.

Díaz said in his results presentation: “This allows us to considerably strengthen our position in the Moscow region (Domodedovo and Sheremetyevo) in addition to other existing operations in Saint Petersburg, Sochi and Krasnodar. Total growth will accelerate through the full consolidation of the RegStaer Vnukovo operation, which is set to be closed in the second half of 2019.”

Staying in Russia, Dufry is to open a new 900sq m store at Pulkovo International Airport in Saint Petersburg. With the company set to open 15,300sq m of space across multiple locations during the remainder of this year and in 2020, the opening in Saint Petersburg is viewed as significant.

Díaz told TRBusiness: “In Russia in general, we believe there will be a positive level of expansion. It is a completely different business to the one in Brazil, so the opening of the new store in Saint Petersburg will not have the same impact as the opening of the border duty free store in Uruguaiana.

“That said, it is among the most relevant of our upcoming openings and will facilitate growth in Russia.”

ReGstaer-front-of-store

RegStaer opened an 120sq m arrivals duty free shop at Vnukovo Airport in January.

On the prospect of further mergers and acquisitions, Díaz says the company is very active in terms of looking for opportunities. “There are two aspects which are very relevant. One is territories and the other is size. In terms of territories, we are pursuing opportunities from the Middle East to Asia. Allocating capital in Asia is a priority.

“The second element is the size. I always said that it is middle and small-sized acquisitions which can be easily integrated into our business and deliver synergies and cost efficiencies. We would like one or two of these opportunities to materialise in the second half of the year.”

Amid the increasing importance of cruise liners, which accounts for 4% of total business — the cruise business in Division Central and South America grew high double-digit from additional new ships in H1 2019 — Díaz concluded: “We are participating in the most important developments on any Caribbean cruise line.

“Next year will be a real test of how important the cruise business is for Dufry, especially in the Caribbean. This is because we are going to add 30 or 35 new ships in 2019 and 2020.”

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