Singapore’s Duty-Free Operator DFS Exiting as Korean Rivals Bid

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Hotel Lotte Co. and Hotel Shilla Co., South Korea’s two largest duty-free companies, are among bidders for the rights to take over the liquor and tobacco business at Singapore’s Changi Airport, after longtime operator DFS Group Ltd. unexpectedly didn’t bid for the rights again.

Lotte and Shilla were joined by Germany’s Gebr Heinemann in a tender exercise that closed on Monday, Yonhap reported, citing sources. Spokespeople for Lotte Duty Free and Shilla, which already sells cosmetics at Changi, confirmed their bids in separate statements to Bloomberg.

The winner is expected to be chosen by the end of the year, according to Changi Airport. They’ll take over alcohol and tobacco selling rights for all four Changi terminals for six years, starting in mid-2020.

The exit of Singapore Changi Airport’s largest tenant came as a surprise. DFS, in addition to being the airport’s largest tenant, is also its oldest, according to the Straits Times. DFS has sold alcohol and tobacco at Changi for nearly 40 years, and is estimated to have generated S$590 million (US$425 million) in sales last year, according to the Moodie Davitt Report.

DFS Chairman and CEO Ed Brennan cited regulatory changes combined with geopolitical uncertainty for the exit, in a statement to the Straits Times. He added that staying at the Singapore airport was “not a financially viable option.”

More Restrictions
Singapore’s government announced in February that it would reduce the alcohol duty-free allowance to two liters from three liters. The Ministry of Health said last month that starting July 1 next year, all tobacco products sold in Singapore must be in standardized packaging and contain large graphic health warnings.

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DFS did not return multiple calls seeking additional comment. DFS’s luxury concessions at Changi, as well as operations in Singapore’s T Galleria by DFS and the cruise centre would operate as usual, Brennan told the Straits Times.

Changi is Asia’s third-busiest for international passengers, handling a record 65.6 million passengers in 2018. The aerodome is currently building a fifth terminal and a third runway as it anticipates travel demand to grow.

Yet the escalating U.S-China trade war has dampened the region’s most trade-reliant economies. Singapore earlier this month cut its forecast for economic growth this year to almost zero.

Hundreds of staff are expected to lose their jobs when DFS pulls out, the Straits Times reported. However, many of them could be hired by the new operator, who will likely need to staff up ahead of the handover.

Credit : https://www.bloomberg.com/news/articles/2019-08-27/lotte-bids-for-singapore-duty-free-dfs-to-exit-changi-next-year?srnd=premium-asia

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