KUWAIT. Editor’s introduction: Aldeasa’s recent victory in the Kuwait Airport duty free tender was one of the industry’s most contentious contract successes in many years. Rival bidders lambasted the offer of Aldeasa and its local partner ThatEs Salasil as excessive and damaging to the Middle East’s travel retail industry.
But Aldeasa has declined to get drawn into any slanging match. It simply insists its bid was valid and that successful days lie ahead. For the first time since the result was announced, the company has gone on the record to talk about its new regional foothold. And instead of worrying about criticism, it’s highly excited about the potential. Aldeasa Jordan Chief Operating Officer Pedro Castro spoke to Martin Moodie.
Kuwait was Aldeasa’s second contract gain in the Middle East. The first, Jordan, has been a big success. How important a gain was Kuwait for the company?
It is a crucial milestone for Aldeasa’s development in the Middle East. I can compare it with winning Chile in 1995 after we won Peru in 1994. A decade later we are successfully operating in six Latin American countries.
Another important point is the logistic synergies and other synergies created with our operation in Jordan. Jordan is for us a successful operation with sales growth of +35% year-to- date coming off a +41% increase last year. So you can understand that we should be confident about the possibilities for the new Kuwaiti business.
What attracted Aldeasa to this location?
First of all there was an open tender process, something that doesn’t happen often in the region. Second the country’s growth and its potential – we are delighted with the huge investments taking place in Kuwait, involving billions of dollars to develop tourism and the country’s infrastructure.
The Government of Kuwait is investing US$3,500 million in a plan to boost tourism. This includes the construction of communication infrastructures as well as a 43sq km artificial island dedicated exclusively to tourism.
Kuwait will also be broadening its five star hotel offer by building nine additional hotel complexes, in addition to the twelve that previously obtained construction permits in 2004. Third, we saw the possibilities for development of the duty free operations as we did in Jordan, taking into consideration that Kuwait International Airport handles twice as many passengers as Amman.
What can you tell us about your partnership with ThatEs Salasil? How did you find each other and what will
each bring to the party?
We have been working with ThatEs Salasil for the last two years on this project. Now we are firmly committed to working for many years together, so we are very happy working in partnership. To our international expertise as one of the biggest worldwide travel retail operators we are adding their local experience and reliability. The most important thing is that both of us speak the same language, – they are also retailers, not sleeping partners, handling more than 30 shops in the main Kuwaiti hotels and malls, including the airport landside.
There has been significant criticism suggesting that Aldeasa cannot make money out of its contract in Kuwait. What is your reaction to that – can you make money?
The attitude of the company to open tenders is always to make a fair bid, where we will make money and the airport authority also gets a fair deal. If we don’t see such potential and we cannot therefore offer a winning bid, then we simply wouldn’t have submitted a proposal.
That’s what happened, for example, in Oman in 2002. We have studied the market and we have submitted the most convenient bid for our interest.
But your offer was obviously a lot higher than the secondbid. Why did Aldeasa see so much potential that others did not?
We have our own commercial strategy, synergies and plans for Kuwait. If we measure the bids just by comparing the distance between the first and the second one only, then there is obviously something wrong. But keep in mind that under this fee system, you pay exactly the same fixed amount from the first year, 2006, to the last one 2011, and this has to be considered.
How do you react to the criticism you have attracted?
We respect all the opinions, but each company has its own strategy and we never judge someone else’s strategy. At the end of the day the numbers will say to our shareholders if we were right.
How advanced are your plans? When do you plan to open?
The people in Aldeasa’s commercial strategy and planning department in the main office have also done a great job in preparing for this new venture. We are on schedule to open on 1 February 2006. I want to highlight here the great cooperation between Aldeasa/ThatEs Salasil and [incumbent retailer] Habchi & Chalhoub for having a smooth transition.
A fantastic professional team headed by Raif Kabawat and Martin Mullen from Habchi & Chalhoub are cooperating together with us and the suppliers in order to keep serving the passengers and making the sales during this transition period. We are all trying to maximise the benefits for both parties, the Kuwait International Airport and the existing staff.
Both companies are in the industry, so we understand that sometimes you win and sometimes you lose, but you are still in the business, just in different places. I can tell you that Anthony Chalhoub was the first to congratulate us – in spite of the feelings that he could have been experiencing at that time. But he accepted professionally that there were three higher bids.
What can you tell us about your commercial strategy for Kuwait? What do you plan in order to help grow the business?
We are going to build our offer from scratch. We are going to change completely the Kuwait International Airport Duty Free operation – using the extra surface that we are getting in comparison with the existing premises.
You will keep discovering with us all the changes that we are going to make. For example we will be trying to convert some passengers that are not buying now into customers, and giving a first class customer service, as we are doing in Jordan, for example.
In our opinion there is a huge potential. We can target certain types of passengers that are not yet customers, and we will try to get the latest travel retail developments in our premises.
Can we expect a similar approach to Jordan?
You can expect that we are going to squeeze every single opportunity in order to find, in cooperation with our suppliers’ knowhow, the best available offer for this airport.
Kuwait has a different pax profile to Jordan – mainly low-income, with a low-cost carrier starting up. How will that influence your approach?
Let me disagree a little bit. Perhaps actually we have an operation in Kuwait oriented to a different customer profile from Jordan, but to us this is one of the key points for the development of the business.
What management and staff structure will you put in place in Kuwait?
We will put a very strong team in place to lead the Kuwait operation, headed by Juan Miguel Cabrera as General Manager. He has been our Commercial Manager for the past two and a half years in Jordan and we have been working together for the last six years. I cannot imagine anyone better to head this project.
He will be teaming with Soud Al Mansour as Deputy General Manager, an open minded and extraordinary retailer, and finally we continue to promote our own people sending Hassan Shishani, one of our fantastic Product Managers in Jordan as Commercial Manager in Kuwait. I will be coordinating the area based in Amman, but our idea is very simple: “To make bread, use a baker.”
Any other general observations on the business?
Put simply, we like to be – and we expect to be – judged by our work.
MORE STORIES ON KUWAIT
Kuwait duty free contract confirmed for Aldeasa and ThatEs Salasil partnership – 18/10/05
