Lotte Duty Free wins tender to replace DFS Group at Changi Airport’s tobacco and liquor stores

Lotte will be taking over from the DFS Group, which announced in August that it had decided not to retain its duty-free liquor and tobacco concession at Changi Airport when its lease expires. — TODAY pic
Lotte will be taking over from the DFS Group, which announced in August that it had decided not to retain its duty-free liquor and tobacco concession at Changi Airport when its lease expires. — TODAY pic

SINGAPORE, Oct 24 — Changi Airport Group (CAG) has awarded its duty-free liquor and tobacco concession to Lotte Duty Free which will start operations in June next year. 

Lotte will be taking over from the DFS Group, which announced in August that it had decided not to retain its duty-free liquor and tobacco concession at Changi Airport when its lease expires. 

In a press statement today, CAG said the proposal from Lotte “stood out with its strong omni-channel and marketing ideas which will propel CAG’s travel retail strategy forward”.

The contract awarded to Lotte — part of South Korean retail conglomerate Lotte Group — is for a six-year term commencing on June 9, 2020. The tenancy contract covers all 18 liquor and tobacco stores across Changi’s four terminals, spanning more than 8,000 sqm of retail space, CAG said. 

Gebr Heinemann and The Shilla Duty Free were among those which reportedly submitted bids for the tender, which closed on August 26.

CAG executive vice president (commercial) Lim Peck Hoon said the liquor and tobacco concession is “one of the largest at Changi Airport and it presents unique opportunities for marketing innovation and customer engagement”.

“We were deeply impressed with the high quality of the tender proposals received and it was not an easy decision to make. We thank all the parties for their participation,” said Lim. “Lotte put forth the strongest and most compelling proposal overall. It is aligned with CAG’s vision to offer passengers a seamless omni-channel retail experience and new retail-tainment initiatives leveraging smart technologies.

DFS chairman and chief executive officer Ed Brennan had said that the company took the decision not to bid “based on our unique understanding of the business environment as the current operator of this concession at Changi”. 

“Specifically, changing regulations concerning the sale of liquor and tobacco, against a global context of geopolitical uncertainty, meant that staying in Changi was not a financially viable option,” he said. 

It was announced in this year’s national Budget speech that duty-free alcohol allowance would be reduced to 2L from the current 3L. And from July 2020, all tobacco products in Singapore will be required to be sold in plain packaging with graphic health warnings covering at least 75 per cent of the packet. 

In today’s press release, Lim said that Lotte “also demonstrated a keen understanding of the market environment with a sound business plan supported by a competitive financial bid and backed up by solid business fundamentals”. 

CAG noted that Lotte is the world’s second largest travel retailer in terms of sales turnover, and possesses extensive experience in the travel retail industry including in the liquor and tobacco segment. 

“With concession experience in markets like Australia, Japan, New Zealand, South Korea and Vietnam, it has a proven track record of operating at a scale similar to that at Changi Airport and possesses deep consumer understanding,” CAG said. 

When Lotte takes over operations, Changi Airport’s 18 liquor and tobacco stores will be rejuvenated with fresh designs to appeal to millennial consumers and other new consumer segments, CAG said.  

It added that all stores will be “infused with lifestyle elements” and experiential activities such as customised whiskey-blending. There will also be specially curated zones featuring “the latest and trendiest products in the market”.

“All these, together with a host of annual large-scale consumer events, will raise the shopping experience at Changi Airport to new levels,” CAG added.

Before its pull-out, DFS had been operating at Changi Airport since it opened in 1981. The award of the tender to Lotte “marks the start of an exciting new chapter in Changi Airport’s retail history, as it would be the first time a new operator would be taking the helm of this key concession”, CAG said.

Following DFS’ announcement that it is pulling out from Changi Airport, the operator reportedly retrenched 60 staff members earlier this month from its T Galleria shop on Scotts Road and at Changi Airport, as well as its shared services centre in Chai Chee. The layoffs triggered some unhappiness among the affected staff, and the authorities are currently looking into the manner in which the retrenchment exercise was carried out. —  TODAY

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