Dubai Duty Free Chief Operating Officer Ramesh Cidambi offered his insights into the Indian market during the APTRA India Conference. We present edited highlights.
Indian travellers have always been pivotal to the fortunes of Dubai Duty Free, which has proved expert in understanding their needs and desires over four decades.
But the impressive rise in standards of Indian airport retailing over recent years, underpinned by an extensive and impressive arrivals shopping offer in many locations, has presented Dubai Duty Free with an increasingly stiff competitive challenge over recent years.
At the APTRA India Conference in Delhi in March, Dubai Duty Free Chief Operating Officer Ramesh Cidambi addressed that challenge during a question and answer session with Duty Free News International Editor Kapila Ireland.
Cidambi laid out the context of the discussion by hailing a record year overall for Dubai Duty Free in 2023, with sales of more than US$2 billion, but added that 2024 was proving more challenging.
“One factor is passenger numbers in Dubai, which we expect to go from 87 million last year to 89 million this year. It will in no way compare to the growth from 2022 to 2023 or in the years before COVID-19.
“Also from 2022 to 2023 we started seeing a drop in penetration and spend, and that trend continues into 2024. It is also hard to see a return to double-digit growth rates in passenger traffic. So with all of that we say to the brands to be realistic in terms of expectations.”
Addressing how the key categories have performed, Cidambi noted that cosmetics had been hit hard by the loss of Chinese travellers and not recovered to the highs of 2019.
“On the flip side, perfumes has done well and liquor has done well in value terms, and we have a big boost from fashion with so many new openings,” he said. “Looking at 2023 and 2024, the business has changed completely so 2019 is no longer a relevant benchmark.
“In the first two months of this year we are seeing better than the modest forecast in passenger numbers, which has helped us. But spend and penetration are each down, which remains a concern. We are seeing Russian spending falling and softer spend among Indian travellers.”
Homing in on the importance of the Indian business, Cidambi highlighted the challenge of competition from within India. “The quality of duty-free retailing has risen across the major airports in India, both in arrivals and departures. What we need to remind ourselves is that the Indian travel retail story is not just about alcohol in arrivals. It is now a story of perfumes & cosmetics, fashion, confectionery and more.”
India represents 13-14% of Dubai Duty Free’s business today, around the same proportion as India accounts for in passenger volume terms at Dubai International Airport.
Cidambi noted that while transaction levels to Indians at the higher end (over US$82) continue to perform well, the number of transactions has fallen compared to 2019.
Within overall sales, wines & spirits remains the dominant category among Indian shoppers at around 30%, followed by gold at 15-16% and fragrances at around 10% completing the top three. The top 25 brands also represent 40% of spend among Indian travellers.
Cidambi also presented some key insights into the vital wines & spirits business, showing that whisky generates 42% of category sales by volume (2023 figures).
He noted that whisky sales had fallen by nearly -20% from 2019 to 2023. “To anyone in the spirits category, this should be a concern. We should be thinking about penetration, about the people who go into the shop, that they are buying less, and not just about how we have driven prices up over the past few years. We had good rises in sales value but in volume terms the only categories to show volume growth in 2023 versus 2019 were tequila and Champagne.”
Crucially over 60% of liquor sales to departing passengers are to shoppers from the Indian sub-continent, led by Johnnie Walker, Chivas Regal and Glenfiddich by brand name.
Elaborating on competition from Indian airports, Cidambi said that sales to Indian travellers both in departures and arrivals had slipped in early 2024. “The airports here in India are promoting well, offering great service and are doing a very good job.”
He presented a summary of the impact of price increases on Indian spend. Dubai Duty Free attributed US$13 million (or a +15% increase) in total sales to India-bound travellers to retail price mark-ups.
To spirits brands in particular, he said: “Think of the volume drop, think of the price increase and how it is having an impact on the retailer and it is not sustainable. It will need rebalancing at some point in time.”
Closing on the big picture, Cidambi said: “If India continues to grow as it has been and if Air India improves its services, it becomes more attractive for Indian passengers to over-fly the Middle East and go directly to Asia or Europe. I’m convinced if you give an Indian pax a choice of a lower fare or a direct flight, they will take the direct flight.
“The long-term threat to the Middle East carriers is the growth and modernisation of Indian aviation. The question will then be what these developments mean for the 13-14% of Indian traffic at Dubai International?” ✈
All charts courtesy of Dubai Duty Free
*This article first appeared in The Moodie Davitt Magazine. Click here for access and turn to page 64.
