BW Confidential - Issue #5 - March/April 2011 - (Page 50)

Travel retail Interview Brazil: Dufry’s honey pot Travel retailer Dufry South America chief operating officer José Carlos Rosa talks about the potential of beauty in Brazil’s duty-free market by Kevin Rozario ufry’s South American operations, which are chiefly comprised of airport stores in Brazil, are the best performing among the Swiss parent company Dufry Group’s regional divisions. In the nine months to September 2010, sales in South America grew by 44%, almost four times the rate of North America (see table). It is beauty that continues to drive sales and has the biggest share. The growth in Brazil is all the more remarkable given the fact that, as a percentage of Dufry Group retail space expansion last year, the South America region took just 5%; only Africa saw less new space at 2% (see table). This limited share of retail investment is partly due to Brazil’s space-constrained D cosmetics products has been growing despite beauty already being a very mature category. Currently, the most popular brands are Carolina Herrera, Victoria’s Secret and MAC. What has been driving growth and how are Brazilian travelers impacting sales? The Brazilian economy is experiencing a demographic movement; a new class ‘C’ consumer is emerging with greater purchasing power that is enabling them to travel for the first time. As our main clients in South America are Brazilians, this new environment will bring more customers to our shops. What changes are you making to these shops to enhance penetration? Dufry is constantly remodelling and refurbishing its shops and varying the product assortment to improve sales. Dufry Group opened more than 12,000m2 (129,166ft2) of new retail space split among its six regions, of which South America accounted for 600m2 (6,458ft2). High domestic taxes have made dutyfree beauty a ‘must-have’ for Brazilians. Will there be any tax changes? As far as we know, there are no tax changes in sight in South America. With respect to arrivals shopping we believe that this trend in Brazil will continue and our focus will therefore be to go on as before. Beauty will continue to have the same performance. What about expansion outside Brazil? Our strategy has not changed. The focus is on growth mainly in emerging markets. Referring back to our third quarter 2010 results, we have a project pipeline of over 45,000m2 (484,375ft2) within 12 to 18 months with most destined for emerging markets. South America represents 5% of the total. n March-April 2011 - N°5 - BW Confidential Dufry sales growth by region first nine months 2010 Region Europe Africa Eurasia Central America & Caribbean South America North America Source: Dufry Growth at constant exchange +7% +3.8% +4.2% +11.1% +44% +12.1% In the South American region, the share of perfume and cosmetics products has been growing despite beauty already being a very mature category Dufry South America coo José Carlos Rosa “ Dufry new retail space first nine months 2010 and plans First nine months ‘10 Region Europe Africa Eurasia Central America & Caribbean North America Total Sq. meters 803 300 3,924 1,834 First nine Next 12-18 months ‘10 months* % of total 7% 2% 33% 15% 5% 38% 100% % of total 7% 1% 44% 21% 5% 22% 100% South America 603 4,541 12,005 airports, but is also an indicator perhaps that Brazil is regarded by Dufry as a strong market that does not urgently need further infrastructure development. The retail plan for this year and into early 2012 (see table) is also modest: South America’s share of projects is again just 5%, compared with 22% in North America for example, yet beauty is predicted to keep growing faster than competing categories. Beauty made up 37% of Dufry’s Brazilian sales in 2009. Has this changed? In South America, the share of perfume and ” Source: Dufry *From October 2010 onwards 50

Table of Contents for the Digital Edition of BW Confidential - Issue #5 - March/April 2011

Cover
Comment
Contents
Update
- Brand & retail news recap
- Digital digest
- Companies on the move
Take note
- Market facts, figures & trends
Best of BW
- Highlights from our e-publication
Launches
- The latest in fragrance, skincare & make-up
Interview
- Marionnaud CEO William Koeberlé
Insight: Make-up
- Category overview
- The latest trends
- Retailing strategy
Wellness
- Retail Sales
- Spa case studies
Retail
- New store concepts
Travel retail
- Market analysis: Americas
- Interview: Dufry's José Carlos Rosa
Radar
- Six up-and-coming beauty brands
Market watch: Brazil
- Country overview
- Industry roundtable
- Prestige retailing
Packaging
- Trends in secondary pack
Last word
- The Doneger's Group's Jamie Ross

BW Confidential - Issue #5 - March/April 2011

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