Top Travel Retailers Report (continued)
Dufry Group
2021 Sales (million)
€3,776
2021 Rank
4
As the great driver of consolidation in the travel retail industry, Dufry has helped to transform the sector landscape over the past 17 years. Now it is preparing to build on that track record with one of its biggest deals yet, a combination with global food & beverage leader Autogrill Group to create a multi-channel, multi-category superforce in the channel.
The agreement, announced on 10 July, will give Dufry instant leadership in the travel food & beverage sector, an even more diversified portfolio in terms of geography and the ability to drive new solutions for its airport partners.
As CEO Xavier Rossinyol said on the day of the announcement, opportunities arise in four key areas.
“First, we are redefining the traditional boundaries of our industry,” he said. “We already see in many parts of the world a convergence between the different formats and we want to lead that process. We are putting the focus on the consumer in an uncompromising way. We are expanding our offer from retail to retail and F&B, and also giving a big push to the digital platform.
“Number two, this deal allows us to diversify. We will be able to increase our presence in the highly attractive and very resilient market of the US while increasing business development opportunities in the rest of the world.” Alongside the big push to accelerate growth in the US market will come a dedicated strategy for Asia Pacific, China and the Chinese traveller.
Third, he said, the combined group will “differentiate ourselves from the competition” with its “two strong management teams, high-quality concession portfolio and the relationship with brands”.
Fourth, added Rossinyol, is that the group will be significantly larger – CHF13.6 billion in revenues and CHF1.4 billion in EBITDA based on 2019 pro forma figures – and more diversified, will be less leveraged and generate synergies of CHF85 million per year.
On the makeup of the new entity, 81% of sales will come from airports. Geographically the sales portfolio will comprise 43% from Europe, 32% from North America and 25% from the rest of the world.
Convergence of categories: Dufry at London Heathrow Airport (above) and Autogrill at London Stansted Airport
Rossinyol said that the size of the market “increases our business development opportunities and also allows us to be more selective on geography and on concession portfolio management”. Dufry said that the “addressable market” in which the combined force will now operate is valued at US$115 billion a year, based on the combination of duty free, other airport retail and F&B sales (2019 figures). Dufry puts the size of the travel F&B channel at US$28 billion a year (2019).
Crucially, Rossinyol added, the combination offers the chance to create new commercial opportunities.
“Of course there will be dedicated duty free stores or branded stores and there will be food courts but there is part of the business that will converge to hybrid forms.”
A message Dufry has consistently highlighted – and doubled down on with the Autogrill announcement – is its ambition to grow in Asia Pacific. That pledge has taken further shape with its strategic partnership with Alibaba Group to operate offline and online travel retail in China, and with its cooperation agreement with Hainan Development Holdings to collaborate at the Global Premium Duty Free (GDF) Plaza, Mova Mall in Hainan’s capital Haikou (open since 31 January 2021).
Dufry & Autogrill: An integrated global player across travel retail and travel F&B
(Combined sales profile* as of 2019)
Source: Dufry
Note: Historical CHF/EUR exchange rate of 1.09 applied to Autogrillreported financials * Pro-forma for disposed Autogrillassets (Motorways business North America, Spain and Czech Republic) ** RoW= Rest of the World *** Comprises cruise lines & seaports, borders, downtown & hotel shops and railway stations & other
These moves, alongside its investment in digitalisation across its business, represent significant plays that will help define the longer-term future.
Having been the long-time market leader (€8.1 billion in 2019, down to €2.4 billion in 2020 and €3.8 billion in 2021), Dufry Group remains a top five player after coming through a difficult period, when even its advantages of scale and wide geographic diversity offered little defence against a global pandemic.
That geographic diversity has been matched with a drive to enter new channels, balancing duty free (52% of sales in 2021) with duty paid, and openings in recent years into rail, border stores (a big focus in South America), cruise and downtown locations such as hotels, casinos, leisure resorts and shopping plazas.
The combination with Autogrill is one of its biggest plays yet, but with ambitions to grow further in emerging markets and channels (such as duty paid) the great consolidator of our industry is unlikely to be finished with M&A activity yet.
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The Moodie Davitt eZine Issue 313 | 28 July 2022
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