Breaking news in Brazil… and Basel

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Martin Moodie
Martin Moodie is the Founder & Chairman of The Moodie Report.

Dufry arrivals basle

This Blog comes to you from the very temporary Moodie Report EuroAirport BaselMulhouseFreiburg  bureau, where I’ve set up residence in the  lounge following the delay of my flight back to London.

I have been in Basel for a long-planned meeting with Dufry CEO Julián Díaz (below) at the company’s splendid new headquarters in the centre of the city. Little did I (or he) know that my arrival would coincide with one of the biggest announcements in Dufry’s glittering recent history.

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Waking very early this morning to get a couple of stories online before taking the 08.50 from Heathrow to Basel, any sense of slumber was eradicated as a note dropped into my in-box headed ‘Dufry reinforces its presence in Brazil and signs contracts in São Paulo, Brasilia, Viracopos, Natal and Goiânia’.

This was, as we say in the publishing business, big breaking news. Anyone who tracks the Brazilian duty free industry would understand its immense significance.

But with a plane to catch in just under 90 minutes, it was news I could have done without. Fortunately my trusty Senior Editor (and Latin America specialist) Peter Dowling was on hand in New Zealand to break the story, while Asia Pacific Bureau Chief Melody Ng embellished it with images and charts. As a result we were ‘live’ on our website within 10 minutes of the original release and I made my plane. Such are the joys (and relentless pressures) of modern-day digital publishing.

Despite Julián having to host a conference call with analysts and media at 3p.m he graciously took me to lunch where we talked about the importance of the Brazilian deal and the future of Dufry (you can read my impressions in next month’s Cannes issue of The Moodie Report Print Edition).

Julián is a modest and good man (during my serious illness a couple of years back, he phoned me every month without fail to check on my progress), someone who prefers to let his deeds (and there have been plenty) do the talking, rather than through constant proclamations to the press. I have known him for many years as a man of integrity but equally one of intense drive and ambition. He has been relentless in his pursuit of (profitable) growth for the company and I got the sense today that he is far from finished.

Dufry’s rise and rise has been, in fact, the great story of 21st century travel retail, and today’s announcement is of acute importance. Analysts, rivals and (some) journalists alike have long considered Dufry’s overwhelming strength in Brazil (in 2012 the country generated around 27% of group sales and nearly one-third of EBITDA – those percentages have since been subsequently lowered by further acquisitions) to also be its Achilles heel.

If Dufry was to lose (or retain but with a significantly heightened cost of entry) any of its key Brazilian airport contracts in the crucial, privatisation-dominated 2013-2015 contract window, its position would be fundamentally weakened, ran a popular theory. Many an analyst or investment banker told me that.

Today’s announcement puts both theories to bed. As Julián was quick to point out in today’s conference call, Dufry’s groupwide EBITDA will not be eroded by the cost of the new contracts (absolute EBITDA will increase in 2014 and group EBITDA margin will be maintained at 14-15% after a full year of operations, he pledged).

Not only that, but the government is poised to announce that the  duty free allowance for those buying in Brazilian Arrivals shops will increase from US$500 to US$1,200. With some two-thirds of Dufry’s Brazilian business being done on arrival, and with much enhanced space to play with in the channel, it’s a simple matter of ‘doing the math’ to see what importance today’s announcement holds.

Julián kindly lent me the use of a nearby office while he conducted today’s conference call, one connected to by over 300 people, underlining the degree of investment community interest in the Dufry story. I listened as he calmly took questions ranging from the obscure to the deeply searching in his stride. This is a man and a company moving with confidence and speed.  The Dufry and Díaz success story rolls on and on.

And so to my late afternoon set-up at EuroAirport BaselMulhouseFreiburg (surely the longest name of any airport in the world?). Time, as I blog, for a fabulously bone-dry glass of Alsace Cave de Turckheim Pinot Blanc (which reminds me of the old joke that still makes me chuckle… how do you make an Alsation wine? Pull its tail, of course…) and to take a quick tour of the modest Dufry shop here at the airport.

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Despite being a bit of an obstacle course, it’s not a bad little store and I always love the friendliness of the staff. I noted perhaps one of the tardiest fragrances displays I have seen in a long while (from Burberry, (pictured below – look at the decaying base to the main signeage) and a disappointingly weak array of Swiss wine but the Lindt fixture (below) was excellent as were the (walk-in) cigars, cigarettes and souvenirs offers, and parts of the beauty department.

Time to close the Basel bureau, my plane is finally taking off. One day back in London and it’s on to Hawaii. A mad, completely mad, September, almost all of it on the road, has begun.

dufry dp burberry

dufry dp lindt

dufry dp souvenirs

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