DUTY-FREE REELS AFTER THE DISASTER
Byline: Brid Costello
PARIS — Turbulence ahead.
The terrorist bombings of Sept. 11 shook the world and left the travel-retail business floundering with a sharp drop in transactions and a steep falloff in tourist travel, resulting in huge declines in American duty-free volume.
“I think it is obvious that [recent events] will touch yearend sales,” said Juliette Rapinat-Freudiger, managing director of Escada Beaute, referring to the travel-retail industry. “They will slow down sales in the U.S. zone and probably Asia.”
Some say travel-retail sales have been halved over the past month.
“We’re talking about a sales decrease of 40 percent to 50 percent in some U.S. airports,” explained Richard Beardsley, vice president of international at Beaute Prestige International (BPI), Shiseido’s prestige beauty division.
“If we had to rewrite our budget we would forecast a flat year compared to last year,” added Harry Diehl, managing director at German airport and distributor Gebr. Heinemann. “Previously, we had forecast an increase of 15 to 20 percent.”
“In September, there was zero growth for the market,” concurred Florian Chanet, managing director of travel retail Europe at L’Oreal, who added that beforehand, the industry was on a growth path of about 7 percent to 8 percent.
But there seems to be a silver lining. While the U.S. travel-retail industry continues to suffer, Europe, seemingly, is bouncing back.
“It is mainly the terminals that deal with U.S. flights that are affected,” said Christelle Noyer, category manager for fragrances and cosmetics at French airport operator Duty Free Associates. “We had a downturn in the first five or six days following the attacks but the business came back.”
“The first results from September for L’Oreal brands are coming in and our sell-out figures seem to be OK,” said Chanet. “They’re not as dramatic as after the Gulf War or the abolition of [intra-European Union] duty free [two years ago].”
Most beauty brands and related industries say they are — for the present — sticking to their plans.
DFA will introduce a new perfumery concept over the next two years, called Beauty Unlimited, said Noyer. It includes five distinct retail areas, such as men’s and women’s fragrances, skin care, makeup and niche brands. It was tested last year in Charles de Gaulle airport’s Terminal C and will be rolled out to French airports and the Eurotunnel’s Calais terminal.
Lancome, meanwhile, will push ahead with its plans to host airport lounge events for the travel-retail launch of its latest men’s scent, Miracle Homme.
“Consumers want us to put a smile on their face to make them feel good,” agreed BPI’s Beardsley. “The cosmetics industry is perfectly adapted to do the job.”
The Tax Free World Association (TFWA) is also remaining bullish. The group released an announcement this week that it is “business as usual” for its TFWA World Exhibition, scheduled for Oct. 22-26, in Cannes.
However, the mood is expected to be cautious, with a number of companies making a scaled-back appearance.
Estee Lauder Cos. is sending a five-man squad, compared with last year’s platoon of 15. Philip Shearer, group president of the international, will lead the group, followed by Fabrice Weber, vice president and general manager of travel retail worldwide. They will be joined by three vice presidents and travel retail general managers: Stefan Herzog for Asia Pacific; Stephane Beraud for Europe, the Mideast and Africa, and Javier Simon for the Americas.
According to Weber, Lauder remains firmly committed to travel retailing and “we look forward to a productive TFWA meeting.” He added, “we made a decision this year to focus our resources on supporting the needs of retailers during these challenging times and will therefore be meeting in a more one-to-one format instead of the more lavish style of prior years.”
U.K. airport operator BAA PLC said Thursday it has sold its subsidiary World Duty Free Americas to Florida-based Duty Free Acquisition Corp. in a deal worth $121.1 million, according to the company in a statement. Dollar figures are converted from the pound at current exchange rates.
The firm said it had announced two years ago that World Duty Free was a non-core business and, since then, it had closed the loss-making World Duty Free Americas in-flight division and sold the export division and other assets.
Last year, World Duty Free Americas made an operating profit after amortization of goodwill of $10 million on sales of $464.5 million at current exchange rates, in the fiscal year ended March 31.