Changi Airport’s oldest and biggest tenant is withdrawing from its liquor and tobacco concession on June 2020, when its lease expires.
DFS Group has been selling liquor and tobacco at Singapore’s airport for 38 years now but the company has decided not to compete for a new concession, letting its lease expire. The closing date of which was Monday 26 August – which was extended from 6 August to allow retailers time to present ‘robust and compelling proposals’. This leaves the space open for new operators.
TRBusiness quoted a statement by DFS Group in which the Chairman and Chief Executive Officer Ed Brennan said that the decision to not participate in the bid was based on the company’s unique understanding of the business environment 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,” said Mr Brennan.
He added, “Although this decision is the right one for our business, it was not taken lightly. DFS has held the concession at Changi Airport since 1980 and 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 then thanked Changi Airport Group (CAG) for their support and wished them the best in their partnership with a new operator for liquor and tobacco concessions.
The changing regulations mentioned are the tightening of rules regarding liquor and tobacco consumption. For example in July, the Ministry of Health announced the use of standardised packaging and enlarged health warning on tobacco products which will begin July 2020. These new rules will apply to all tobacco products from cigarettes to cigars, and roll-your-own-tobacco.
In February 2019, Finance Ministry Heng Swee Keat announced during the Budget 2019 presentation that alcohol duty-free concessions would be reduced to 2 litres from 3 litres, a move that came in effects on 1 April.
These changes are likely to have impacted companies like DFS.
In December 2018, CAG had announced that DFS would be extending its concession for two years beginning 2020. The agreement covered about 8,000 sq m of retail space in four terminals. However, DFS later, in May 2019, decided not to go through with the extension, instead only extending their tenancy by two months to June 2020 and letting the submission deadline for the new six-year contract from June 2020 to June 2026 slip by.
As a result, hundreds of staff are expected to lose their jobs, says Straits Times.
Speaking to ST, CAG’s spokesman Ivan Tan said “DFS Group is a valued partner whom we have worked with at Changi Airport for the past 38 years.
“We are disappointed that they have opted not to participate in this tender but we will work closely with them to ensure a smooth transition to the new operator for the liquor and tobacco concession.”
In the statement, it was reported that while the liquor and tobacco concessions will not be renewed, DFS will continue its luxury concessions at Singapore Changi and T Galleria as well as its Singapore Cruise Centre Business.
Speaking to TRBusiness, Group Senior Vice President of Airside Concessions at CAG, Teo Chew Hoon said, “Changi Airport Group has received several submissions and will begin the process of evaluating proposals. We expect to award the tender by the end of 2019.”