The Advent of a new era? - The Moodie Report

Travel Retail business analysis
ISSUE ONE MARCH 2004
Business analyis on key
developments in the global
duty free and travel retail
industry for readers of
The Moodie Report
The Moodie Report © is published in
co-operation between Generation
Group and Moodie International.
Please direct your news, opinions
and comments to
martin@moodie-international.com
inside this issue
Editor’s introduction ..............................1
Dufry and Weitnauer 1865–2004......2
Profiling the main players ....................3
A chronology of events.........................5
Interview: Julian Diaz...........................6
Interview: Frédéric Gauchet................8
The acquisition list?...............................9
The Advent
of a new era?
Editor’s introduction: Welcome
to the Moodie Report PLUS, an
occasional series of in-depth features
dedicated to individual retailers
or retail locations which are in
the spotlight.
We begin the service with an
analysis of the events and players
involved in the big story of the year
to date – the sale of Swiss travel
retailer Dufry to Sintres, a consortium
headed by US venture capital
group Advent International. It's a
story that we believe signals the
arrival of a new superforce in the
travel retail-to-food and beverage
sectors.
When the deal was first announced
to the industry (via The Moodie
Report.com on 9 February), neither
the event nor the identity of the
acquisitor came as a particular
shock. It had been popular knowledge
among many in the business
that Boston-based Advent
International had for months been
circling the former Weitnauer,
recently reincarnated as Dufry.
Advent had not been alone, Spain’s
Aldeasa had also taken a close
interest in a business that had been
flagged for sale by its chief shareholder
Patrick Laurent, but only if
the price was right.
To ensure that the price was right,
the Weitnauer shareholders had
brought in an astute new CEO,
Frédéric Gauchet in 2001, with a
mission to turn the ailing company
around. An expert in concession
management, Gauchet’s mission
was to restore value to the shareholders
by cutting the losses, cleaning
the business up and giving it a
sense of direction.
It was not an easy task. Negative
net earnings in 2001 led to a crisis
of confidence in the investment
community. As Gauchet recalled
last week to The Moodie Report:
“We had to reduce the debt of the
company very strongly because
without this debt improvement we
would have lost the confidence
and support of our banks. It was a
very tense year as regards the
financing of the company.”
Unknown to the trade, the former
Weitnauer was teetering on the
brink of bankruptcy. Through the
summer of 2002, the company had
to find a new bank to support its
operations, something it was unable
to do until early 2003. During the
difficult intervening months,
Gauchet and his increasingly closeknit
management team focused on
reducing debt, exiting loss-making
businesses and, crucially, separating
a quality retail operation out of a
convoluted global structure that
included Weitnauer’s long-standing
distribution business.
By the end of the first half-year of
2003, it was clear the Gauchet
medicine was working. Results had

History of Dufry and Weitnauer
• In 1865 the Weitnauer family opened a
tobacco shop in Basel, Switzerland.
• By 1900 Weitnauer had become a major
importer and distributor of tobacco products
throughout Switzerland.
• Following the creation of the first duty
free airport shop in Shannon, Ireland, in
1947 Weitnauer entered duty free, initially
as a pure wholesaler.
• In 1952 Weitnauer became a retailer,
opening its first store at Le Bourget airport
in Paris. The store at Bâsle-Mulhouse airport
was launched in 1962 and in 1969, its
Italian operations started with a local partner
at Linate airport in Milan.
• In 1960, Weitnauer launched an original
duty paid business of cigarette vending
machines in Switzerland under the brand
Restomat. Later, entertainment machines
were added to Restomat’s assortment.
Today, Restomat is the leader of the Swiss
domestic market for cigarette vending
machines [it was excluded from the Sintres
deal – Ed].
• From 1969 to the turn of the century,
Weitnauer became a leading international
organisation offering duty free marketing
services, sales and distribution resources to
major brand owners.
• Weitnauer decided to divest its distribution
activities in 2002 and to focus on the
vending machine retail business in
Switzerland and on the travel retail sector
worldwide.
• Through 2002 and 2003 the group’s corporate
structures and its executive committee
were reorganised.
• In 2003 the group changed its name to
Dufry and the property of the name
Weitnauer was transferred to the new
owner of the divested distribution business
which continues to operate under the name
Weitnauer Distribution. The Dufry headquarters
were relocated to a new building in
Basel during the first half of 2003.
• In February 2004 Dufry was sold to a
group (Sintres) headed by private equity
group Advent International.
The Moodie Report PLUS
turned for the better despite war in Iraq
and the impact of SARS on Asian travel.
“It was only then that the banks were
convinced we had the right management
for the company,” Gauchet recalls.
The figures confirmed the group was
headed in the right direction. A first half
loss in 2002 was translated into solid
first half net earnings with consolidated
EBITDA reaching CHF26.9 (US$19.4
million at the conversion rates of the
time) despite a -8% drop in like-for-like
sales. The exiting or renegotiating of
marginal businesses,
allied to a -42%
reduction in headcount
at the headquarters
in Basel
and the decentralising
of regional head
offices were all paying
dividends.
Having divested the
distribution business
earlier in 2003, the
transition became complete in the village
of Pfaffikon on the shores of Lake
Zürich last October, when Weitnauer
brought its worldwide management
team together to announce a new focus,
new logo and new name – Dufry.
It was an historic meeting. Many of
Weitnauer’s team had been
with the company for years.
The new name spelled the
end of a duty free story that
dated back half a century
and a corporate one that ran
even deeper. Founded in
1865 as a tobacconist,
Weitnauer had entered the
duty free retail industry in
1952 when it opened its first
store at Le Bourget airport in
Paris. In the intervening
years, it had become a major
force around the world, and
by the turn of the 21st century
was the travel retail industry’s
most geographically
diversified retailer, with operations
in Africa, Europe, Asia,
Eurasia, Latin America, the
Caribbean and the US.
After a rollercoaster few
years, a new chapter in the
2
“It was only then
that the banks
were convinced
we had the right
management for
the company.”
story of one of the industry’s pioneers
beckoned. The company was clearly in
better shape but it was unclear how the
chapter would turn out. Would the existing
shareholders, impressed by the turnaround
in the company’s fortunes, stay
the course, or would they be swayed by
an outside offer from an investment community
that was once again beginning to
identify opportunities in the travel retail
sector?
The answer wasn’t long in coming.
Within weeks, a group headed by private
equity group
Advent
International had
renewed earlier
interest in Dufry.
And negotiations
moved swiftly,
culminating in
last month’s
announcement that
a group headed by
Advent International
was procuring
an approximate 75% shareholding
in Dufry.
The deal was quickly consummated.
That new chapter is beginning. This
report examines the players behind the
new-look Dufry and asks whether a new
industry giant is in the making. ■

Advent
International
Advent International is a
diverse global force with
17 locations spread across
North America, Latin
America, Western Europe,
Central Europe and Asia/Pacific.
It is the lead stakeholder in the holding
company Sintres, which has acquired
75% of Dufry from the latter’s main
shareholder Patrick Laurent.
Recent retail investments include ILVA,
Denmark's second-largest furniture
retailer; and Poundland, the UK's leading
single-price discount retailer. Recent
IPOs are HMV Group (UK) and
Kirkland's (US).
Founded in 1984, Advent International
describes itself as ‘the oldest global private
equity firm’. Last year it spent over
US$800 million on 26 investments
across 12 countries. And its recent public
statements make it clear that the
spending spree will continue.
Advent is no newcomer to duty free. In
the second half of 1996 it was part of
an alliance that acquired a majority
shareholding in Aeroboutiques de
Mexico. Later that year it created
Latinoamericana de Duty Free, which
was subsequently listed on the Mexican
stock market in 1997.
Latinoamericana de Duty Free, the leading
operator of duty free concessions in
Mexico (its main rival is Dufry), was in
turn acquired by Áreas (see separate
factfile). Advent maintains close links
The Moodie Report PLUS
Profiling the
major players
in the Sintres purchase of Dufry
with Áreas through the latter’s shareholder
Elior. Advent remains a shareholder
in Elior.
Spain’s Áreas specialises in supplying
services – retail and food & beverage –
to travellers at airports, motorway service
stations and railway stations. It has
multiplied its revenues five times in the
past five years to €500 million.
The alliance, established in 2001 with the
French food and beverage operator Elior,
has helped the group to promote the
growth of the business. Today its network
of services targeting travellers includes
roadside convenience shops,
railway stations and airport
duty free shops – with an
increasing focus on expansion
in Latin America and North
Africa, with the Caribbean
flagged for the future.
Áreas plans to invest €33
million during the course of
2004 in existing stores. It
operates in Spain, Portugal,
Morocco, Chile, Argentina,
Mexico and the Dominican
Republic. The business is
60% owned by Elior (directly
and indirectly) and by
Emilio Cuatrecasas’s company
Emesa. Áreas owns
Latinoamericana de Duty
Free, the parent of Operadora
de Aeroboutiques,
and other Mexican subsidiaries,
such as duty paid
specialist Deor.
3
In the Dominican
Republic Áreas
recently acquired
the gift stores
business in five of
the most important
hotels of the RIU chain. Áreas’
Mexican subsidiary is called Geresa
México.
With operations in
France and Spain,
Elior is a powerful
force in concession
catering, notably in
airports, motorways and rail stations. In

ecent years the company has developed
complementary retail services. It
intends to expand globally around this
twin-pronged approach as travel-related
catering has logical synergies with duty
free and travel retail.
In 2002 Dufry
ranked seventh in
Generation’s league
of world duty free
retailers. At that
time it had shops at
59 airports in 31
countries, making it the most internationally
diverse duty free retailer in the world.
Over the past two years former CEO
Frédéric Gauchet introduced a series of
sweeping changes, spinning off the distribution
arm, reorganising management
and procurement, decentralising regional
head offices, exiting or renegotiating
contracts and reducing headcount at
Group 2002
results
The Moodie Report PLUS
the Basel headquarters (subsequently
relocated) by around -42%.
The recipe worked. For the nine months
to September 2003, EBITDA reached
CHF48 million (US$38.6 million) and
EBIT CHF28 million (US$22.5 million),
despite a -8% fall in like-for-like sales in
the SARS and a war-hit first half. EBIT is
expected to exceed well over CHF40 million
(US$32.2 million) for the full year.
Key management include chief procurement
officer Liz Woodland, regional
chief operating officers Dante Marro
(Italy & Brands), René Riedi (Eurasia &
Asia), Antoine d’Oiron (Western Europe
& Africa) and José González (Americas).
Woodland is widely credited for improving
supplier relationships and bringing a
more structured approach to buying.
The others are some of the trade’s most
experienced and respected executives. ■
Group 2003
results
(nine months to
September)
■ Sales: CHF 1,019 million (US$820 million) ■ Sales: CHF637 million (US$513 million)
■ EBITA: CHF61 million (US$49 million) ■ EBITA: CHF48 million (US$39 million)
■ EBIT: CHF32 million (US$26 million) ■ EBIT: CHF28 million (US$23 million)
4
Dufry’s top
management
Liz Woodland
René Riedi
Antoine d’Oiron
Dante Marro
José González
Key Dufry travel retail locations
Africa
• Ghana
• Ivory Coast
• Morocco
• Tunisia
Europe
• Baltic Sea
• Belarus
• France
• Greece
• Italy
• Netherlands
• Russian Federation
• Switzerland
• Ukraine
Asia and Eurasia
• Cambodia
• Georgia
• Israel
• Singapore
• UAE
Americas and Caribbean
• Aruba
• Barbados
• Bahamas
• Bolivia
• Grenada
• Mexico
• Nicaragua
• US

9 February
SWITZERLAND. Dufry, one of the world’s
leading duty free retailers, is to be sold to a
group headed by venture capital company
Advent International for an undisclosed sum.
A Dufry statement said: “Due to the joining of
a new majority partner, the shareholders have
asked CEO Frédéric Gauchet, to free himself as
of today in order to assist them in the successful
conclusion of the transaction and to take
care of their other interests.”
The General Assembly of the shareholders and
the Board of Directors paid tribute to Gauchet
“who has achieved and exceeded the objectives
defined by the shareholders”. 2003 is understood
to have been Dufry’s best ever as it generated
significant net profits, an impressive
turnaround from the net deficit and near-bankruptcy
Gauchet faced when he assumed the
reins in 2001.
1 March
SWITZERLAND. Advent International and its
partners in the acquisition of Dufry have
appointed Julian Diaz as CEO of the Swiss
travel retailer, replacing Frédéric Gauchet.
Diaz, an experienced industry executive, has
run Operadora de Aeroboutiques in Mexico
and before that was a senior executive with
Spanish travel retailer Aldeasa.
The completion of the deal was confirmed
today. Advent International, one of the world's
largest private equity firms, with US$6 billion
in cumulative capital raised and offices in 13
countries across North America, Europe, Latin
America and Asia Pacific, heads the acquisition.
Its partners in the holding company
include Áreas of Spain, a member of the listed
French catering group Elior and Nivada, the
Mexico-based Holzer family-run watches business.
Until recent years, Holzer had the Swatch
Group distribution in Mexico.
Juan Carlos Torres, a senior partner in
Advent's Latin American deal group and the
newly-appointed president of Dufry, said:
“Dufry has a strong position in the travel retail
market through its global coverage, attractive
airport locations, presence in emerging markets,
long-term concession agreements and
exclusive partnership arrangements with
selected airports – all of which made it an
appealing investment for us.”
2 March
FRANCE. Elior – the French catering services
group – through its Spanish subsidiary Áreas,
has acquired a 15% stake in the company
Sintres. Sintres, mainly owned by investment
funds managed by Advent International, has
taken control of 75% of Dufry. The other
shareholder in Sintres is Nivada, owned by
Andre Holzer.
The private equity firm Advent International
has been Elior's partner for some years. In
1997, Advent International took an active part
The Moodie Report PLUS
Key developments around the Dufry deal as reported by The Moodie Report.com
in building up the Elior group, and in the latter's
IPO in 2000. It is still today a significant
shareholder in Elior (see profiles of the
players, pages 3/4). Following this stake in
Sintres, Elior/Áreas and Advent International
have decided under a common agreement to
study methodologies which could be implemented
later for a “progressively reinforced
partnership”.
Elior said: “Should no agreement be found by
this date, thus Áreas can sell its stake (put
option) to Advent International, who will benefit
as well from a call option on the same conditions.”
Elior co-chairman Robert Zolade commented:
“In France and in Spain, Elior is the leader in
concession catering markets, notably in airports,
motorways and rail stations. For a few
years Elior has also developed complementary
activities in shops, which are dedicated to
answering the needs of both customers and
concession authorities.
“By strengthening its means and know-how,
this operation will allow Elior to enlarge and
progressively complete its commercial offer in
concession markets.”
4 March
SWITZERLAND. The acquisition of a majority
share (around 75%) in Swiss duty free retailer
Dufry by a group headed by Advent
International has been valued at around
US$200 million. Ernest Bachrach, who heads
Advent's Latin American operations, told Dow
Jones International News the approximate
price, saying the company had generated sales
of CHF 660 million (US$516.8 million) last year.
Further duty free acquisitions look
certain. Advent's Mexico Citybased
managing director Juan
Carlos Torres told Dow Jones: “We
have two areas of strategy. One is
to improve company operations,
by cost-cutting and improving
margins. There are things we can
do there [Dufry] like centralising.
[Secondly] it's also a good platform
from which to buy other
duty free companies.”
Torres said Advent was already in
talks with other companies, but
gave no details. The group said it
plans to launch fund raising for a
new US$300 million Latin
American private equity fund during
the second or third quarter of
this year to capitalise on growing
investor interest.
8 March 2004
ARGENTINA. Eduardo Eurnekian,
the Argentinean businessman who
holds a 63% stake in Aeropuertos
Argentina 2000 (AA2000), has
finalised the sale of Food Port,
which runs AA2000's food &
5
beverage business, to Spanish group Áreas.
The price was not disclosed. Food Port
records a monthly turnover of ARS8 million
(US2.7 million) across the 32 airports in the
AA2000 network.
Áreas, which already operates the Pizza Box,
Cafe Cafe and La Strada restaurant chains in
Argentina, will expand its food outlets in the
country from 30 to 46.
Eurnekian's company, Corporacion American
Sudamericana (CAS), has recently paid US$30
million for the 28% stake in AA2000 held by
the US group Covanta Energy Corporation.
This share transfer increased the CAS holding
in AA2000 to 63%.
9 March
FRANCE/SPAIN. Áreas’ parent company,
French catering-to-retail group Elior, plans to
step up its international development in both
sectors following the acquisition of a stake in
Dufry, according to co-president and cofounder
Robert Zolade. He made the comments
during an interview with the Spanish
business daily Expansión.
Zolade said the role of Elior International managing
director Gilles Cojan is to create a ‘group
leader’ in duty free. “As Áreas has experience
in airport retailing, we have been pragmatists
and we have carried out the operation through
our managing partner in Spain, Áreas.”
Zolade said the group sees a growing travelrelated
market and is also encouraged by
increased limitations in the service of inflight
food, which is set to boost the expenditure of
the one-in-four passengers who spend on
either food or merchandise in airports.

Julian Diaz
Julian Diaz has embarked on a
whirlwind tour of duty free to
get an insider’s view of the
diverse global company he
now heads. Talking to The
Moodie Report in early March, just
before he boards a plane to one of
Swiss travel retailer Dufry’s key locations
– Moscow Domodedovo Airport –
Diaz is keen to get to grips with the
organisation quickly.
“I am very busy as I have to get to
know things as soon as possible,” he
says. “One of my key concerns is to
understand the company and identify
the most urgent things to deal with.
Over the next few weeks I plan to be
travelling a lot.”
That’s going to mean a lot of air miles.
Dufry is arguably the world’s most geographically
diverse travel retailer, with
operations in Africa, Europe, Asia,
Eurasia, Latin America, the Caribbean
and the US. Was that diversity one of
the attractions to the new buyer? “It’s
impressive, but at the same time difficult,”
Diaz replies. “Today, five or six of
the operations contribute most of the
profit. We call them Management
Priority (MP) companies and we will
focus on these from the beginning.”
How does Diaz, a youthful veteran of
over ten years in the business, perceive
the opportunity, both for Dufry’s new
The Moodie Report PLUS
Julian Diaz
targets acquisitional and
organic growth at Dufry
Julian Diaz is one of duty free’s most experienced retail executives, and he sits in
one of the industry’s most powerful positions. The former Aldeasa and
Latinoamericana de Duty Free chief was named CEO of Swiss travel retailer Dufry
this month, following the latter’s acquisition by Advent International-headed
Sintres. Shortly afterwards he discussed his vision and strategy with Martin Moodie.
This is an edited version of an interview published in full in the forthcoming print
edition of The Moodie Report, out next week.
owners and for himself? “I’ve worked in
the past for Aldeasa and then as general
manager of Latinoamericana in
Mexico, and for me it’s a great personal
opportunity now to try to develop in
this company all the knowledge I have
acquired over the past ten years.”
While Mexico specifically and Latin
America in general are key commercial
backgrounds for Advent and its fellow
partners in Sintres, Áreas and Nivada
(earlier this month Areas
acquired Argentinean airport
authority AA2000's F&B
business), Diaz says he has
no regional priority.
“Latin America will not be
the only focus,” he says. “We
have the philosophy to make
Dufry the most important
travel retail company. We
have two opportunities. One
is organic growth, something
we mainly have to achieve in
Asia, Europe and Latin
America. The other possibility
is to acquire companies.
Any acquisition that is viable
will be studied.”
Despite the bullish statements
made by Advent's
Mexico City-based managing
director Juan Carlos Torres
recently about further duty
6
By Martin Moodie
free targets being in the pipeline, Diaz is
understandably reluctant to be drawn
on acquisitions. “I don’t want to confuse
anyone in this business. It’s not a matter
of arriving here and then saying I’m
also looking at other opportunities.
Personally my main concern is control
of this company [Dufry]. I cannot speak
for the shareholders.”
While declining to comment further
on Advent International’s acquisition

Dufry product
groups 2003
■ P&C 27% ■ SPIRITS 19%
■ TOBACCO 18% ■ ELECTRONICS 8%
■ FOOD 10% ■ WATCHES 9%
■ TOYS 1% ■ FASHION 8%
strategy, he believes the travel retail market
offers excellent buying and growth
opportunities. “I will always recommend
that these types of companies [Advent,
Áreas] should be involved in travel retail.
It is a much more exciting and profitable
business than high street retail.
“We know from our previous experience
that today people have more spare time
and more leisure time. In years to come
that will develop even more. The future
of this business is fantastic.”
What are Diaz’s immediate priorities?
“Firstly to understand and learn about
the company as soon as possible.
Secondly I want to introduce a few
changes in the organisation. But the
existing people will remain. I want to
reorganise in the sense that the main
decisions will be decentralised, but the
control will be centralised.
“I want to focus the retail aspect of this
company with control from top to bottom.
The second step, and I am talking
about six to twelve months, is to rank
the MP operations… which contribute
most to EBITDA.
“We want to implement our business
plan. We have a plan for every company
in the [Advent International] group. First
of all we’ll introduce it to the MP companies
[within Dufry] and then to the other
operations. We have to evaluate and rank
all these operations in terms of the value
they offer in EBITDA.”
When Diaz says he wants Dufry to be
the ‘most important’ in travel retail,
The Moodie Report PLUS
does that mean the biggest? “I don’t
think so,” he replies thoughtfully.
“Sometimes profitability is not regarded
[in this industry] with enough priority.
We want to be a profitable company for
our partners and our shareholders, but
at the same time we have to be the
right size. I don’t see size as the main
target – the target is to be profitable.”
“I want to
categorise our
suppliers not by
region, not by
country… but in
terms of the [profit]
margin they are
giving my company.”
Dufry has spent much time and effort
refocusing its business over the past
two years, and has made a distinct policy
of exiting or avoiding excessive concession
fees. Will that philosophy continue
under Diaz?
“It’s part of the plan to bid for concessions,
but my concern is that these big
open tenders are always dangerous
for the companies
involved,” he comments.
“When you have to compete
with three or four big corporations
for one tender in a
specific part of the world, the
offers made can be very dangerous.
Instead, I want to
give this company the oppor-
tunity to make a speciality
offer, or a specific offer for
a specific place. I want to
develop a team of people to
address just that.”
Diaz inherits a solid management
line-up and structure.
Is he planning to build the
team further? “We have a
good team already in existence
, and within the next
two to three months the full
team will be in place,” he
replies. “The main positions in
7
the company today are covered, and I
will respect that.”
Purchasing, currently run by chief procurement
officer Liz Woodland, is the
subject of close strategic examination.
“I have a lot of confidence in Liz,” says
Diaz. “She’s a very good professional,
and the right person for the situation.”
Diaz says that his thinking on products
and suppliers is based around one key
factor – managing by category. “I want to
categorise our suppliers not by region, not
by country… but in terms of the [profit]
margin they are giving to my company.
For me, the most important thing is the
profit margin and the EBITDA they deliver
to us, whether they [the products]
are located in 100 locations or just two.
“We will evaluate every important supplier
through this system, which I call
Category Management Supplier. The
negotiations will be controlled centrally,
but the supply chain and the rest of the
decisions will be decentralised.”
Diaz’s plane is boarding – there’s work
to be done and knowledge to be
gleaned. Is he enjoying the challenge? “I
am excited – and tired,” he laughs. Next
stop Moscow. But neither Diaz nor
Dufry are likely to be stopping in any
one place for any length of time. ■
The Moodie Report PLUS, published
eight times a year, covers the
industry’s biggest stories.
It is free of charge to readers of
The Moodie Report.
For editorial and advertising details
contact
martin@moodie-international.com

Frédéric
Gauchet
Frédéric Gauchet’s job at
Weitnauer was always to put
himself out of a job. When he
assumed the reins as CEO of
the Swiss travel retailer and
distributor in 2001, the company was
in dire shape, and its shareholders
becoming more restless by the day.
In 2001, Weitnauer generated an EBIT
of CHF 11 million and negative net earnings.
In 2002, he recalls, “We had to
reduce the debt of the company very
strongly because without this debt
improvement we would have lost the
confidence and support of our banks. So
it was a very tense year as regards the
financing of the company.”
A difficult period from the summer of
2002 ensued. “We had to find a new
bank to support the company and that
was not possible before the beginning of
2003,” Gauchet recalls. “And that made
my life very difficult because we could
not show immediately the results of our
new strategy. As you know, it takes
time to reduce debt; it takes time to
prove that you have reduced the debt; it
takes time to prove that you have
divested the business of its negative
drivers; and it also takes time to show
that you will have a great future.”
The Moodie Report PLUS
Gauchet says ‘Mission
accomplished’
amid personal sadness
For the past two years, Frédéric Gauchet has been a man with a mission – a mission
to restore shareholder value to one of the duty free channel’s oldest companies,
Weitnauer (now Dufry). In unexpectedly short time, and against a difficult trading
climate, he achieved just that, culminating in last month’s sale to the Sintres group
headed by Advent International. As a result, Gauchet has moved on to a new set of
challenges. Fresh from a post-sale vacation, a re-charged Gauchet spoke frankly
about his experience at Dufry and his future aspirations. An extended version of this
interview is published in the print edition of The Moodie Report, out next week.
Time was not an asset in great supply.
But when the 2003 first half-year
results were published, things had
changed for the better. Against a
depressing background of war in Iraq
and the worsening SARS crisis in Asia,
Gauchet delivered positive earnings for
the period. “It was only then that the
banks were convinced we had the right
management for the company,” he
recalls.
Fast forward a year and Weitnauer not
only has a new name (Dufry) but new
ownership. The acquisition in February
by the Sintres consortium (headed by
Advent International) completes the
transformation of the company. And it
leaves it well placed for the future,
Gauchet believes.
“Weitnauer was [in 2001] in a very
stretched financial situation,” he says.
“The beauty of having Advent
International and [co-shareholder]
Áreas involved in the ownership of the
company is that the company is now on
the safe side financially speaking. That’s
very important.”
The highlight of his tenure as CEO was
“the pleasure of the construction of a
very good and dedicated team”, he says.
8
“When you look back on what you
achieve in a role, it is not about the
business itself, it’s not about the products,
it’s always about the human
beings.
“What I miss the most is my team. We
had really difficult times together but
nobody tried to escape. We were all in
the same boat and in the end we succeeded
together. I miss all of them… we
were very different people, from different
nationalities, that was our strength.”
With duty free under a cloud partly due
to external geo-political pressures but
also to structural pressures with taxes
and duties falling all around the world,
how does Gauchet, perhaps the most
analytical mind of any leading duty free
retailer in the business, assess the
industry’s prospects?
“The best comparison you can make is
with the share market. You cannot
invest in this business for the short
term, because you will have ups and
downs according to unexpected events,
which will happen from time to time.
But if you take a long-term approach
to the business, it’s a business that will
deliver steady growth over the next
20 years.”

But Gauchet says one should avoid
sweeping generalisations about the
‘industry’. “It is not homogenous,” he
points out, “you have some airports
which are very customer-oriented and
others which are not. And they do not
all have the same business model. When
you look at the travel retail industry and
you look at the ratios of concession fee
to turnover, you will see very different
approaches.
“It ranges from Madrid, which is only collecting
6%, to Paris which is collecting
28.3% [based on Ivo Favotto’s Airport
Retail Study] – so definitely the view of
what the contribution of the business
should be is not the same. It’s interesting
to note that with the same proportion of
international passengers and with a yield
limited to 21.8%,
London Heathrow
sells three times
more per passenger
than Charles
de Gaulle (CDG)
and it collects
more than twice
CDG’s revenue per
passenger.”
Gauchet has taken
a close interest in
the ongoing
‘Trinity’ debate of
the past 12
months. He is an articulate critic of the
weaknesses of the Minimum Annual
Guarantee (MAG) concession model and
led Weitnauer/Dufry away from any
excessive rental commitments. And he
is a strong fan of the stakeholder-based,
risk/reward sharing model championed
by BAA group retail director Brian Collie.
“I feel very close to Brian’s position. I
feel we need to have a partnership.
There is not one single form of partnership,
there are many. But it must be a
genuine partnership, meaning that we
have to take into consideration the
interests of all the parties. If it’s not a
fair deal it isn’t going to work as well as
a balanced partnership.”
Gauchet inherited a company that was
going through great pain and great
change. And it certainly wasn’t viewed
as being in great shape. By the time he
left, it was. Common industry percep-
“When I accepted
my job, the priority
was to revitalise the
company and turn it
around and clarify
its strategy… It was
not a piece of cake.”
The Moodie Report PLUS
tion is that Dufry is now a revitalised
entity, one that is more transparent –
and most of all, is performing strongly
financially. How proud is the former
CEO of that turnaround?
“It’s not really for me to answer that,”
replies Gauchet. “It’s up to my shareholders.
They wanted me to give value
back to their shares and frankly speaking,
when we started the venture two
years ago we did not expect to be able
to do it in two years. The time frame
was closer to five years than to two. So
just on this criteria, we can be pleased
at the performance of my team.”
So was his mission all along to position
the group for sale? “When I accepted
my job, the priority was to revitalise the
company and turn it
around and clarify
its strategy,” he
replies. “It was not
a piece of cake. As
you know, the company
had been
involved in the distribution
business
for almost a century
and to change a culture
and a strategy
required a lot of
energy.
“Because we implemented
this change of strategy very
quickly – if you remember, at the end of
2002 we divested the distribution business
and we were clearly focusing on
travel retail – that helped us a lot. That’s
the reason, I believe, that we were able
to engineer the change so quickly.”
I ask Gauchet about his future. Is he
lost to the travel retail industry or having
had a taste for its opportunities, will
he re-enter at some point?
“That is a touchy question Martin!” he
laughs. “My first priority – and you can
trust me that I’m working on that very
hard – is to stay in the airport industry.
I use the term airport industry because
I don’t want to limit the scope to travel
retail. And I don’t want to act in any
way that the buyer of Dufry would see
it as a hostile move against them. But
yes, I’m actively trying to stay in the
airport industry.” ■
9
Possible duty free acquisitions for
Advent International and partners
Given its Latin focus – the group, through
inter-related partners such as Áreas, now
effectively controls most of Mexico’s airport
duty free – other regional players will come
under the microscope. So will some of the
big international companies. Candidates
include:
Brasif: Brazil’s leading duty free retailer. A
powerful family company which was
rumoured to be close to being sold in the
late 1990s to DFS Group. The company has
recently overhauled its retail operations
under the respected leadership of Gustavo
Fagundes and remains highly committed to
the business. Brazilian businessman Jonas
Barcelos is the primary shareholder. If –
and it is a big if – the company was ever to
be sold, a key question mark for any buyer
would concern whether the highly-influential
Barcelos would remain involved.
InterBaires: The resurgent Argentinean
duty free retailer with close links to
Eduardo Eurnekian, the Argentinean businessman
and majority owner of airport
authority Aeropuertos Argentina 2000
(AA2000). Advent has previously showed
interest in acquiring InterBaires, through
former owner Exxel. Notably, Eurnekian has
just finalised the sale of Food Port, which
runs AA2000's food & beverage business.
Who to? To Áreas – 15% shareholder in
new Dufry majority owner Sintres.
DFS Group: Still officially ‘non-core’ to luxury
goods giant LVMH and impressively back to
profit after a horrible 2002 and early 2003.
Radical cost-cutting and renegotiation of
high concession fees has helped. So has a
high Yen to US Dollar ratio, lifting Japanese
sales in key DFS locations such as Honolulu.
LVMH chairman Bernard Arnault has
always said he will only sell when the time
and price are right. If results continue to
improve, the timing is more favourable. The
price? All it takes is an acquisitive player
with investment clout and real interest in
the travel retail sector.
The Nuance Group: Sold by troubled carrier
Swissair Group in 2002, The Nuance
Group is the world’s largest airport retailer.
Revenues of CHF1,683 million in 2003
almost matched the previous year’s despite
chronic conditions in early to mid-2003.
Nuance is jointly owned by the Italian
shareholders GECOS/Gruppo PAM and
Stefanel. Much internal discussion has centered
on an IPO, but a sale or break-up is
still a strong possibility.