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DFS to quit liquor, tobacco business at Changi Airport

It opts out of latest tender and will close operations there in June 2020 when its concession ends

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The DFS flagship store at Terminal 3. DFS Group will be exiting the operations in June 2020 at Changi Airport after 40 years, to make way for a new operator.

Singapore

AFTER 40 years, DFS Group is bowing out of the duty-free liquor and tobacco business at Changi Airport.

The longtime tenant at Singapore's renowned airport will be exiting the operations in June 2020 to make way for a new operator.

It will shutter the stores across all four terminals once its concession expires. A DFS spokesperson told The Business Times (BT) on Tuesday that earlier reports of impending widespread layoffs resulting from its pullout was incorrect. About 500 people are directly employed to service DFS's liquor and tobacco operations at the airport, and the company will "work closely" with these staff to ensure a smooth handover after the new operator is announced around November, the spokesperson said.

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"As with all airport concession handovers, a number of options are available to staff. These include working with the new operator depending on their aspirations and needs, and with other operators in the airport community," the spokesperson told BT.

The company may also offer to deploy these employees at DFS's luxury concessions at Changi Airport, its downtown operations at T Galleria by DFS, Singapore, or the Singapore Cruise Centre business - all of which will operate as usual and are unaffected by DFS's withdrawal from the liquor and tobacco concession. DFS's airport luxury business consists of two watch stores at Terminal 2 retailing brands like Tag Heuer and Seiko.

In a surprising turn of events, DFS had declined to bid in Changi Airport Group's (CAG) tender exercise for the new liquor and tobacco concession, amid tighter regulations and geopolitical uncertainty. The tender closed on Monday.

The new tenancy is for six years from June 9, 2020, to June 8, 2026, covering 18 stores spanning over 8,000 sq m of retail space across the four terminals.

CAG is currently evaluating the proposals and expects to award the tender by the end of this year, Teo Chew Hoon, group senior vice-president for airside concessions at CAG, told BT on Tuesday.

"We are disappointed that DFS has opted not to participate in this tender, but we will work closely with them to ensure a smooth transition to the new operator," Mr Teo said.

For the tender, bids were submitted from three retailers - Lotte Duty Free and The Shilla Duty Free of South Korea, and Gebr Heinemann of Germany - according to a report on Monday by travel retail industry publication The Moodie Davitt Report.

In a statement obtained by BT, DFS chairman and chief executive Ed Brennan said that staying in Changi "was not a financially viable option" because of changing regulations concerning the sale of liquor and tobacco, against a global context of geopolitical uncertainty.

"Although this decision is the right one for our business, it was not taken lightly," Mr Brennan said.

Singapore has recently tightened its rules on booze and tobacco. The duty-free allowance for spirits, wine and beer was lowered to two litres on April 1, from three litres previously. In July, the Ministry of Health also announced that tobacco products sold in Singapore must have standardised packaging and enlarged graphic health warnings from July 1, 2020.

Mr Teo said CAG will continue to work with DFS to grow its luxury concession businesses at the airport.

In his statement, Mr Brennan noted that DFS has held the liquor and tobacco concession at Changi Airport since 1980. "During this time we have exceeded all expectations for what travel retail can offer in an airport environment. We are proud of our achievements and deeply appreciative of the efforts of many talented people who have contributed to our success," he said.