DFS Singapore pulls out of Changi Airport, stores to close by June 2020

[UPDATE 5.30PM] A DFS spokesman told The Straits Times that about 500 people are directly employed under their liquor and tobacco concession operations at Changi Airport. She said DFS Group will work closely with the new operator — expected to be announced in November — to ensure a smooth handover. 

"As with all airport concession handovers, a number of options are available to staff. These include working with the new operator depending on its aspirations and needs, and working with other operators in the airport community," she said, adding that staff may also be offered deployment at other DFS locations.

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[ORIGINAL]

In a shock move, Duty Free Singapore Group - Changi Airport's biggest and oldest tenant - is closing all its airport stores by June 2020 when its current lease expires.

The Straits Times revealed DFS did not take part in the latest alcohol and tobacco concession bid which closed on Monday, 26 August.

In a statement issued to media, DFS group chairman and chief executive officer Ed Brennan said: "After careful consideration, DFS has decided not to bid to retain the liquor and tobacco concession operations at Changi Airport.

"Our decision not to bid was 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."

According to industry publication Moodie Davitt Report, three industry heavyweights, Lotte Duty Free and The Shilla Duty Free of South Korea and Gebr Heinemann of Germany have tabled proposals.

The report estimates DFS Changi generated around $590 million in sales last year, around US$400 million (S$555 million) of that in departures, the balance from arrivals duty free.

Spirits represented around 61 per cent of departures sales, tobacco 32 per cent and wines & Champagne about 7 per cent.

In arrivals, spirits accounted for about 74 per cent, the balance coming from wines & Champagne.

COST OF ENTRY

The Changi Airport liquor & tobacco concession is a coveted prize in one of the world's top airports but the cost of entry does not come cheap.

The same report said apart from a $28 million initial deposit (and related bank guarantees) and a monthly basic rental, bidders had to table a 'Base Offer' for 'Monthly Additional Rental'. This varies by category as follows:

• Spirits: No less than 46 per cent

• Wines and Champagnes: No less than 35 per cent

• Tobacco: No less than 40 per cent

The retailer must pay either those amounts OR

• A minimum monthly guarantee per passenger of $4.15 based on total traffic movements for terminals 1, 2, 3 and 4 for the relevant month.

Tenderers must propose a step-up in Monthly Additional Rental for each year of the concession.

DFS Singapore will maintain downtown operations at T Galleria by DFS on Scotts Road as well as its Singapore Cruise Centre business.

This article was first published in SingSaver.