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. An estimated 500 staff are expected to be impacted as the 38-year-old tenancy agreement ends.
DFS currently manages 18 liquor and tobacco stores at Changi, occupying more than 8,000 sq m of retail space across the four terminals.
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 to replace DFS. A new operator will be announced in November.
The report estimates DFS Changi generated around S$590 million (US$430 million) in sales last year, around US$400 million of that in departures, the balance from arrivals duty free.
Spirits represented around 61% of departures sales, tobacco 32% and wines & Champagne about 7%.
In arrivals, spirits accounted for about 74%, 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 S$28 million (US$20.5 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%
• Wines and Champagnes: No less than 35%
• Tobacco: No less than 40%
The retailer must pay either those amounts OR
• A minimum monthly guarantee per passenger of S$4.15 (US$3.04) 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.
Huge tax savings on wine and spirits
Below, we compared the prices of a random selection of spirits and wines on Lazada and the iShopChangi website (sold by DFS Group). Cost savings were between 17% cheaper for a Chita Suntory Whiskey through DFS all the way to 183% cheaper for an Absolut Vodka Citron.
|DFS Singapore||Lazada||Cost savings|
|Absolut Vodka Citron (1 litre)||$28.20||$80||183%|
|Cloudy Bay Sauvignon Blanc (750ml)||$35||$45.24||29%|
|Chita Suntory Whisky (700ml)||$81||$95||17%|
In case you’re wondering, one of the reasons why shopping for wines and spirits at DFS is so much cheaper is because, for a start, everything is 7 per cent cheaper, thanks to GST savings. Another reason why prices are considerably lower at DFS Changi is because of the heavy excise duty imposed on various types of alcohol sold in the city. For example, an excise duty of $60 per litre is imposed on beer, while for heavier spirits like whisky, the excise duty goes up to $88 per litre.
Watch this space to see which of the three final bidders Lotte Duty Free and The Shilla Duty Free of South Korea and Gebr Heinemann of Germany will take over as the main tenant at Changi, with an announcement expected in November. It’s worth noting The Shilla is already present at Changi Airport and currently operates the perfume and cosmetics stores.
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