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“Although WDF already generates a from their stores. Others comment that the costs and more consistent pricing in each gross margin of 59%, €40-50m of consolidation trend will result in airport market. Indeed, many brands are hopeful synergies are targeted from gross margin stores all beginning to look alike with that the addition of Nuance and WDF improvements,” stated a Vontobel report. the same brands and the same groups, will result in more professionalism and and that there is a risk of the shopping better effciency. Ferragamo Parfums ceo The impact on brands experience becoming boring. Luciano Bertinelli remarks: “The most However, Dufry’s growing purchasing Some of the larger brands say that important improvement we hope to see power is a worry for brands. Clearly beauty consolidation and the creation of a giant is that the reorganization accelerates the suppliers will have fewer, but bigger clients, such as Dufry was inevitable, and that decision-making process, responding to the which will put pressure on their margins. they need to look at how they can better market and business needs in real time.” Smaller or lesser-known brands may face partner with the new behemoths that are He adds: “For beauty brands, having an tougher negotiations, with the formation being created. They add that there could account with such an important market of travel-retail powerhouses making it be many advantages, such as creating a share in Europe and worldwide, becomes more diffcult for them to gain shelf space stronger channel in terms of logistics and an incredible platform to test and present in new markets. One supplier comments: a more effcient supply chain, and there is new projects and marketing tools to all a possibility that players such as Dufry will nationalities and consumers.” “ increase penetration in-store and grow the more travel-retail operators look to A bigger Dufry is also likely to see be motivated to better work with brands to make acquisitions of their own to remain average basket size. My concern is the kind of At least for the larger beauty houses, pressure that can result having fewer, but bigger clients will competitive (see box), as well as step up their game, which can only be good for from these very high entail larger orders and fewer meetings the market and the consumer in the acquisition prices. We are plus logistics savings, reduced transport long term. n not in the fnancial business, our goals are consumer- oriented and the focus More consolidation on its way should be on the consumer The recent wave of consolidation is one that is set to continue, as Dufry’s rivals look and proper execution to build their critical mass and bolster their position on a global scale. Lagardère Travel Retail, which was reportedly in the running to buy WDF, announced this summer that it had signed a deal to acquire North American airport travel retailer ” Paradies for $530m in cash from Freeman Spogli & Co, the Paradies family and other shareholders. Paradies currently operates in more than 76 airports in North America. Brand executive In its fscal year ended June 28, 2015, Paradies generated sales of $515m. Combining the activities of Lagardère Travel Retail in North America and Paradies would create the second-largest player in North America. The newly combined “My concern is the kind of pressure that company would have sales close to $800m and a presence in around 100 airports. can result from these very high acquisition Lagardère said the deal would result in signifcant savings, which could reach $15m prices. We are not in the fnancial business, per year from the fourth year after the acquisition. Gregg Paradies, president and ceo, our goals are consumer-oriented and the would remain at the helm of the new company. focus should be on the consumer and Similarly, just a week before the Dufry-WDF deal was announced, Korea-based The proper execution.” Although on the other Shilla Duty Free took a 44% stake in US-based DFASS in a bid to build its position hand, the growth in consumer demand and grow its international footprint. for niche brands in travel retail has given In addition, as DFS stretches its reach into Europe, South Korean players The smaller brands more elbow power in the Shilla Duty Free and Lotte Duty Free are gathering momentum by continuing to past few years. add to their portfolio of contracts outside their home territory in line with global Some players are worried that it will expansion strategies. be simply too complicated for such a big Meanwhile, Gebr Heinemann has scored a number of key concessions including the player as Dufry to deal with a wide range Istanbul New airport (with partner Unifree Duty Free). The pressure for all players to of smaller brands with small volumes, and secure further concessions and collaborations is well and truly on. that a number of suppliers will be delisted November-December 2015 - N°24 - BW Confidential 99