ISRAEL. One of the world’s most important duty free contracts – Tel Aviv Ben Gurion airport terminal three – has been won by long-time Ben Gurion retailer James Richardson.
The Ben Gurion 2000 project is set to open next June. Some 3,000 square metres of shopping space is designated for the sale of tobacco, perfume, cosmetics, confectionery and drugstore (LTPCCD) products, which James Richardson will handle.
James Richardson chairman Garry Stock told The Moodie Report: “We are looking forward to another ten interesting years [at Ben Gurion]. We’re very pleased; the family has been very supportive of duty free here in Israel – they started in 1988 – and after putting those 15 years in it’s very pleasing to have the opportunity of more. It’s not easy here; it’s a difficult theatre in every respect, and you end up paying aggressive sums which you have to deliver on. But we’d far rather be the winner.”
He added: “We see a lot of work ahead of us. We’ve got two jobs to do in the coming 12 months. The first is to continue running the business in the existing terminal. The second is to plan the new shop in the new terminal – and plan it to the very highest standard to accommodate the needs of the customer. And we have to start that process very quickly to meet the time-table of the airport authority. We’ve got a lot of work ahead of us, and it’s going to be a very challenging period, but we’re looking forward to it.”
According to local reports, James Richardson offered to pay the Israel Airports Authority (IAA) US$88.4 million per year compared to only rival Sakal Bros’ bid of US$87.8 million. James Richardson’s bid was more than US$20 million higher than the US$68 million minimum the authority had set.
“These bids unequivocally demonstrate that these two companies, which are the largest duty free companies in Israel, have full confidence in the commercial potential of the new terminal,” said Airports Authority director-general Gabi Ophir.
He said that each passenger who travels through Ben Gurion currently buys an average of US$85 to US$90 worth of duty-free goods.
Local media Haaretz reported that the cosmetics and perfume shop alone, which is considered the most profitable branch of the duty free business, is expected to generate hundreds of millions of dollars in revenues over the concession term. According to data included in a failed lawsuit filed by Sakal against the tender, the current perfume and cosmetics shop at Ben Gurion generated revenues of US$200 million in 2000, a peak tourism year until the intifada broke out at the end of September.
“The LTPCCD tender is one of the most prestigious of its kind for commercial areas in the world, and it includes the leading global brands,” IAA’s business development director Yoram Shapira told The Moodie Report earlier this year.
As reported earlier, the tender is worth approximately US$1.5 billion, and includes providing services for the building, sale and storage of duty-free and duty paid LTPC products in the two main commercial areas of BG 2000:
• The “Sh’hakim – Buy and Bye” Centre, located in the Public Hall of the terminal, which is 10,000 square meters in size.
• The “Duty-free Buy and Bye” which is 14,000 square metres in size, of which 2,500 square metres will be dedicated to LTPC sales, including last minute shops, and is targeted to serve departing passengers.
The tender included the operation of the Pick-Up Service, one of the most popular services used by Israeli passengers travelling abroad. In T3, 800 square metres have been allocated for the operation of this service – three times the size of the space in the current terminal.
“The sales of LTPC goods at Ben Gurion Airport currently stand at hundreds of millions of dollars annually, and it is considered the most profitable area of the duty-free operation,” Shapira said at the time of the tender.
Ben Gurion 2000 is one of the largest and most complex national infrastructure projects in Israel. The project consists of an Airside Terminal, a Landside Terminal, vast commercial areas, supporting areas and a convenient transportation system.
Background: James Richardson and Sakal both play a major role in the duty-free business at Ben Gurion’s current terminals. Sakal handles electronic and sporting goods and James Richardson operates the perfume & cosmetics, tobacco and liquor stores. Another Ben Gurion 2000 tender – to run the duty-free electronics shop at the new terminal – will now be contested between Sakal and Elco. James Richardson is now out of the running, since it cannot be granted both duty free contracts.
