Dufry Group is predicting a bright future across its Brazilian DF&TR business following the opening of its inaugural Brazilian border duty free store in Uruguaiana and the increased airport duty free allowance in the country from $500-$1,000 (effective 1 January 2020).

As reported, Dufry finally opened its inaugural 850sq m Brazilian border duty free shop on 22 August 2019.

The opening followed 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.

Prestige international brands are available in the border store, similar to those stocked in its global airport outlets. Labels include MAC, Carolina Herrera, Victoria’s Secret, Shiseido, Lindt, Godiva, Johnnie Walker, Chivas, Absolut, Tanqueray, JBL, Lacoste and Desigual.

Speaking during a recent full-year 2019 results and earnings call with analysts and media, Julián Díaz CEO, Dufry Group said: “We are testing the border shop with a view to adding further stores in the 32 locations in the identified twin cities.”

ADAPTING THE PRODUCT ASSORTMENT

René Riedi, CEO for Division Central and South America, suggests the company is no rush to expand its Brazilian land border duty free portfolio. He told TRBusiness: “Since our first Brazilian border store opened, we have been on a learning curve to further improve the operations in this new channel.

“One of our main goals is to adapt the product assortment to this new type of customers, so we can offer an even better world class retail experience.”

The opening of the Dufry border shop was an important milestone. This is because the approval of the required regulation was several years in the making.

Riedi commented: “The border shop represents a new and important channel. It is a new retail experience where shoppers can find the best world known brands, from the most important categories, that weren’t available in the local market.”

Meanwhile, Dufry, which has a strong Brazilian airport DF&TR presence in locations such as RIOgaleão Tom Jobin and São Paulo-Guarulhos International Airports, has welcomed the aforementioned doubling of the arrivals duty free purchasing limit.

As reported, duty free purchase limits at Brazilian airports have been lifted to $1,000 in accordance with a planned customs regime revision for ports and airports.

In October, shortly after the Brazilian Federal Government announced the planned lifting of the duty free purchase threshold for Brazilians returning from overseas travel, TRBusiness canvassed various Brazilian airport stakeholders. The reaction was unsurprisingly extremely positive.

Díaz said: “We are now able to display products above $500 [in our Brazilian arrivals stores] which we were unable to do previously due to the limitation.

“Imagine only being able to sell products to a maximum value of $500 in travel retail and duty free. In Brazil, sales in arrivals generate 55% of our travel retail business. The lifting of the allowance will drive continued development.”

SPEND-PER HEAD UP

Assessing the short-term impact of the new Brazilian arrival duty free purchasing limit, Díaz added: “Spend per ticket has increased 8% [following the implementation of the raised allowance] which is obviously a positive sign as it will mitigate whatever situation we face in Brazil.”

Last year, the Brazilian real reduced by 15% in value (Source: Dufry Group) making trading conditions far from ideal in DF&TR. But with the approval of pension reforms in Brazil last October— around the same time the raised arrivals allowance was ratified — there is growing belief that the Brazilian economy will return to growth in 2020. Riedi said: “Brazil is already facing lower inflation and a decrease in the interest rate. This  helps support the growth of the economy moving forward.”

“As far as Dufry is concerned, we are confident about country development and believe 2020 will be a better year. The [Brazilian] economy is expected to recover modestly in light of possible external headwinds and domestic policy uncertainties.

“There are a couple of initiatives such as the increased arrival allowance in Brazil which will have a positive impact on our business.”