Flemingo Diplomatic - TFWA Asia Pacific conference

May 2013 | THE MOODIE REPORT | 13
Inside The Moodie Report
128 Power player: We visit Hong Kong-
based King Power Group, and hear about a
planned new era of regional expansion
136 Taking flight: Flemingo Duty Free’s
rise from controversial peripheral retailer to
mainstream global force
152 Grand vision: Spotlight on
China Duty Free Group’s hugely ambitious
Haitang Bay project
158 Mission to greatness: How
Hainan Provincial Duty Free Co and DFS
plan to create a high-quality visitor
experience in Haikou
162 Putting people first: The
remarkable story of Ever Rich Duty Free
Shop’s rise, through the eyes of group
Chairman Simon Chiang
170 A new landmark: Profiling the
new Ever Rich Shopping Mall & Hotel in
Kinmen, close to the Chinese Mainland
176 Pride in progress: Ever Rich
Duty Free Plaza at Neihu, Taipei is one of
Asia’s great travel retail stores; we pay a visit
182 Russian travellers in profile:
Exclusive consumer research on one of the
world’s highest spending travelling nationalities
188 Tracking the global shopper:
L’Oréal Luxe on the challenge of China and
the strategic role of travel retail
199 Nagoya’s new face: On location
at Central Japan International Airport, where
a commercial transformation is taking place
152
136
162
(Right) Atul Ahuja; (centre) The
planned Haitang Bay complex
(bottom) Ever Rich Duty Free in
downtown Taipei

Martin Moodie The Moodie View
to survive in a world of corporate giants; and
much, much more besides.
In a proud and defiant clarion call for
independent enterprises, Benny Fattedad says
memorably: “How big you are is just about
money. Our company is different. It’s not for
sale. We have the creativity, we have the brains.
We have the technology. We have the will and
the dedicated staff. Mergers, conglomerates
– so what? With these big conglomerates, the
boss doesn’t know what is going on down in
the shop. And the shop doesn’t know what the
management’s intentions are.”
Simon Chiang is, of course, another great
entrepreneurial character, a self-made man
whose rags-to-riches story (see page 162) is
the stuff of legend. My interview with him is
one of my favourites of recent times, a tale
that I was privileged to hear as we prepared a
special publication dedicated to Ever Rich’s
history. “We’re very different from other
companies,” he says.
“We are always thinking about how to help
the children and the poor. It’s not only about
making money. One day you are going to die,
so money is nothing.”
Simon Chiang has made plenty of money. But
the real story is what he has spent it on. If you
want a role model for Corporate Social
Responsibility, he’s your man.
The independent spirit looms large in one of
my other favourite articles in this magazine.
Caviar House & Prunier Chairman Peter
Rebeiz (page 227) is a man I have huge
admiration for. A purist in every sense, he
despises the concept of compromise when it
comes to food or service quality.
He’s also, like Benny Fattedad, a hands-on
entrepreneur, someone who insists on
putting his personal e-mail at the foot of
every one of his restaurants’ menus, so that
customers can tell him what they think –
good, bad or ugly.
Like all good entrepreneurs he’s also obsessed
with innovation. Just as he pioneered one of
the seminal breakthroughs of airport food &
beverage back in 1984 with the opening of
Heathrow Airport’s first Caviar House Seafood
Bar, now he’s doing something equally radical
with the hitherto humble (and often awful)
airport sandwich. Move over ham and cheese:
here come caviar, Balik salmon and even
oyster sandwiches, each carefully hand-
prepared for the travelling consumer. In both
taste and price-point (€20–25) these won’t be
for everybody, but in ambition and sheer
fearlessness they represent a culinary
Matterhorn compared to the great mediocrity
plateau of so much airport ‘grab and go’ food.
Atul Ahuja (page 136) is another successful
entrepreneur – but of a very different type.
Branded “habitual litigants”, his company
(Flemingo) broke down the long-standing
Indian duty free monopoly of state-owned
ITDC and opened the gates through which
a number of international rivals have since
passed. It’s fair to say that as a result of its
many legal actions, Flemingo is not the most
popular retailer in the industry – but its
accomplishments are testament to the
powers of determination, and the ability to
spot a niche.
Here’s a company, remember, that started
with little more than a retail kiosk in
Trivandrum in 2003 and which has since
expanded to 120-plus operations in more
than 25 countries, which will generate
around US$400 million in revenues in 2013,
and which is poised to be listed on the New
York Stock Exchange late next year. It’s one
of the industry’s most unlikely success
stories – and simultaneously one of its
most real.
There you have it, four very different tales
of men who carried the courage of their
convictions. Four men who, in Twain’s words,
dreamed, explored, discovered. Four men
who we get to know much more about than
we did before as a result of their candid
interviews in this issue.
I hope you’ll enjoy reading their stories as
much as I enjoyed writing them.
(Left) Caviar House & Prunier
Chairman Peter Rebeiz; (Right)
Flemingo CEO Atul Ahuja

136 | THE MOODIE REPORT | May 2013
Atul Ahuja is the driving force behind the remarkable rise
of Flemingo in recent years from a controversial, peripheral
player to an increasingly mainstream, global and successful
retail force. Martin Moodie met him recently for an update
on the company’s planned IPO, its 2020 vision and its
determination to become a diverse travel retailer with
interests spanning duty free, food & beverage, convenience
shopping and even foreign exchange.
Flemingo
gears for growth
Publisher’s introduction: Back in August 2008 I took a trip to Flemingo CEO Atul Ahuja’s ranch, an hour or
so from the sprawling metropolis of Mumbai. Back then Flemingo was an enterprise virtually synonymous
with court action (“We are branded habitual litigants,” Ahuja told me) but as a fascinating interview took
shape it was clear that there was more to this company than first met the eye. Flemingo was going places fast
and little, it seemed, would hold it, or Ahuja, back.
Back then it was a story of an entrepreneurial business that had begun with a single store in Trivandrum,
Kerala in 2003 and within five years had become the operator of 45 airport shops, seven seaport stores and
two land border outlets. By using the force of the law to challenge many of the impediments to private
enterprise duty free retailing in India, Flemingo broke down the long-standing monopoly of state-owned
ITDC and opened the gates through which a number of international rivals, including The Nuance Group,
Alpha Retail (now World Duty Free Group) and Aer Rianta International, subsequently entered the country’s
travel retail channel. In the process it became an unexpected bedfellow with industry giant DFS Group, a rival
with whom it had previously locked horns. Now they are long-term partners in Mumbai and elsewhere.
Nearly five years on, Flemingo remains no stranger to controversy – it is currently involved in legal action in a
number of locations including India, South Africa and Poland – but it has been transformed in terms of scale,
professionalism and ambition. Today it operates more than 120 operations in over 25 countries and will
generate around US$400 million in revenues in 2013, with a well-documented vision of reaching US$2 billion
by 2020. And next year it plans a long-awaited IPO, almost certainly on the New York Stock Exchange.
Five years after that landmark interview, it was time to catch up with Atul Ahuja – not this time in India but
in London, where the self-confessed workaholic was taking a rare holiday with his family.

Interview Flemingo
“F
or us, small is big,” says Atul Ahuja. The
Flemingo CEO is referring to the company’s
long-term strategy of picking off relatively
small concessions in difficult markets in
order to grow a large and thriving global
enterprise specialising in emergent countries.
At the TFWA World Exhibition in Cannes last year
Ahuja announced that the company was targeting US$2
billion in revenues by 2020, driven mainly by organic
growth, including the creation of several new business
channels such as food & beverage, and a probable
IPO. It will hit around US$400 million this year.
So how is the game plan developing? “We
crystallised the vision which we announced in
Cannes last year, and then we set about identifying
any gaps,” Ahuja replies. “We wanted to build a great
team first, and we have made a lot of progress – in
fact half of our top management have joined us in
the past 18 months.”
High-profile recent appointments include long-time
Alpha Retail Asia boss Paul Topping and well-known
Nuance executive Carlo Bernasconi. “And over the
next two months we have another seven or eight
additions joining that list – all great guys from the
industry with a lot of experience,” says Ahuja.
“We also went about some significant fundraising.
We closed two deals: with Albright Capital
Management for US$30 million last year, and with
China Development International Bank (CDIB) in
the first quarter of this year we raised US$20 million.
This year we will raise another US$50 million with
another fund. All this is coming into the company as
growth capital.”
But where – in a tough global market marked by
white-hot competition, feverish competition for
concessions and a scarcity of potential acquisitions
– is the growth?
“We are adept at finding niches,” says Ahuja. “We
have just secured a very nice contract in Morocco.
It’s a unique project – it was tendered by Tanger
(Tangier) Med Port [a cargo and passenger port
located about 40km east of the Moroccan city, one of
Flemingo’s duty free
operation at Colombo
Bandaranaike
International Airport
is thriving

Interview Flemingo
the largest ports in the Mediterranean and in Africa
–Ed] to build, operate and transfer two terminal
buildings on the seaport. It currently handles two
million passengers annually, but is expected to grow
to five million within three years.
“They wanted a concessionaire to build and operate
the terminal. It’s got duty free, convenience retail,
souvenirs, a travel goods store, foreign exchange, and
food & beverage including a bar and a fast food café.
“We pick out such niche opportunities, which are not
subject to the crazy bidding that you see elsewhere.”
To spot and then land such opportunities, Flemingo
has a business development team of 15 people. “It’s
a pretty large team, with very good skills,” says
Ahuja. “And it’s regional, rather than centrally
controlled. We have separate teams in several places
– for example even in Latin America, where we
don’t have any business, we already have a team
in place. So we have knowledge of everything
happening in these emerging markets. Morocco
is one such example.”
Another recent contract success is Poznan Airport in
Poland where, once again, Flemingo has been
appointed master concessionaire. It’s the company’s
third master concession in Poland and includes F&B,
a channel into which Flemingo is pouring
considerable investment.
“There are synergies between retail and F&B, and it
helps make economic sense when we bid on small
airport duty free contracts,” Ahuja explains.
Developing a masterly
approach
As part of its drive to become a master concessionaire with a full suite of
products to offer airports, Flemingo has developed a number of new
retail and food & beverage concepts.
These include Starter (pictured), a convenience food to go offer; Coffee
Express and Coffee Corner.
“We are capable of bringing a complete master concession to airports
that offers duty free, convenience retail and F&B, including full-service
restaurants,” notes CEO Atul Ahuja.
“We’ve identiﬁed over 300 airports where this kind of master concession
can work. We’ve engaged quite a few of them, and many of them are
keen on working with us.”
Starter, one of
Flemingo’s promising
new concepts, designed
as part of its master
concessionaire approach

“There are many airports where the duty free is
US$3–5 million, which normally don’t show on the
radar of the big boys. But if you add the F&B and
the convenience retail, it can make a package of
US$10–15 million. So we have decided to pursue
this avenue pretty aggressively.
“Last year we won Gdansk Airport, which is a very
successful contract. Then we got Modlin – the
second Warsaw airport – where we didn’t win the
duty free but we got the F&B. And it’s more lucrative
than the duty free.
“Morocco is our fourth success in taking the entire
master concession, though there we have gone one
step further and actually taken the ownership of the
terminal building.”
Passage from India
Back in 2008 Flemingo was very focused
geographically on India, but today Ahuja’s native
country accounts for less than 15% of the business.
The company’s net is now spread far and wide with
what appears at first to be some odd pockets of
isolated businesses, for example in Europe.
But Ahuja insists there is sound rationale behind
Flemingo’s business development.
Travel Chef is proving a
winning concept in Poland
as Flemingo extends its
food & beverage skills

Interview Flemingo
“Our focus is emerging markets,” he says. “From
Warsaw, for example, we expanded into Romania
and Ukraine – where last year we got a big contract
and are upgrading to a very large store in the new
airport this month. We’re all over Africa – that’s our
strong point. We’re very strong in South Asia, and
have expanded from India into Sri Lanka; we are
now going into other neighbouring countries.
“We’ve also been looking at Latin America for the
past year, and we’ve completed mapping out the
opportunities and what we’re going to go for. Brazil
is the next big step for us – we expect to win
something there.”
Such a strategy would appear to put Flemingo on a
converging course – potentially a collision course
– with a rather larger emerging markets specialist,
Dufry.
“Yes, there would be competition. They are very
strong in Latin America, very strong in Northern
Africa; we are strong in the rest of Africa – East,
West, South. We’re strong in South Asia, where they
only have small pockets.”
Putting the structures in place
How is Flemingo managing the structural transition
into becoming a global player, albeit one focused on
emergent markets? “We have divided our
geographies into regions,” Ahuja explains. “We have
South Asia. We have Africa, which is not a country,
it’s a continent. Since we have so many projects
already there, we are splitting Africa into two. We
have the East and the South as one region. And we
have North and West, what we call French Africa,
where we now have three projects.
“We’re creating a new region, the Middle East, and
putting in some projects like Georgia, Iraq and
Yemen. We have the Latin American region on the
drawing board, which we will be rolling out soon,
when we announce a new project. We also have
Central Eastern Europe which is headquartered in
Warsaw, which is growing year-on-year.”
That performance comes in spite of the company’s
well-documented problems at Warsaw Frederic
Chopin Airport, where Baltona (of which it acquired
an 86% stake for US$9 million in 2010) was forced to
vacate the stores after the termination of its contract
in February 2012 – a decision Flemingo is contesting
in the courts.
“Despite losing I would say 30% of its revenue last
year, we were still able to grow year-on-year in that
region – and that’s because we added a lot of new
projects there,” Ahuja says.
Does he still consider Flemingo a family company?
“No, not at all now,” he replies candidly. “It’s
completely professionalised. We have a big Board,
including two independent directors, Paul and Carlo.
Then we have two observers from our private equity
funds, Albright Capital and CDIB. And we have one
private equity member on the Board. So it’s very
balanced. We have a very easy Board to work with,
and they love what’s happening.”
Both private equity partners are “completely aligned”
with Flemingo strategy, he says – with both
committed to at least six years of sustained
investment.

Interview Flemingo
Flemingo Group factfile
Flemingo Group has a diversified geographical presence with more than
120 duty free retail outlets across 25 countries in Asia, Africa and Europe.
The group handles the duty free operations at 11 out of the 18
international airports in India, including Chennai, Ahmedabad, Calicut,
Goa, Trivandrum, Amritsar, Kolkata, Mangalore, Trichy, Jaipur and
Lucknow. It also runs seaport stores in Mumbai, Chennai, Goa, Paradip,
Haldia and Mundra.
Aside from the successful joint venture with DFS at Mumbai Chhatrapati
Shivaji International Airport (in which it holds a 30% stake), Chennai,
Kolkata and Calicut are the major revenue-generating Indian airports for
Flemingo.
In April 2010 Flemingo Group acquired an 86% stake in Polish travel
retailer Baltona. Flemingo also holds 95% of the Turkey based inflight
duty free company Iris Ekspres.
Source: ICRA Credit Perspective
Inflight and diplomatic opportunities
Inflight is another prime focus for this increasingly
broad-based group. In 2011 Flemingo concluded a
joint-venture agreement with Turkish inflight
specialist Iris Ekspres, taking a majority shareholding
in a newly formed company. Since then plans to
create a wider inflight division have been stalled by
the bankruptcy of airline clients in Bahrain and
Ukraine, but Ahuja says it’s a matter of when, not if,
the operation really takes off. To that end the
company is currently seeking a highly experienced
duty free executive to head the division.
Generally organic growth is Flemingo’s chosen route
to market, though acquisitions will be considered if
they accelerate the route to entry in a sensible way.
“Acquisitions are not the driver for us, because they
take a lot of capital, and we’d rather spread it across our
operations where the return on capital is much higher.
Baltona was one acquisition which got us into Eastern
Europe. It was strategic and small ticket. Similarly
Iris Ekspres in Turkey was our route into inflight.”
Food & beverage, by contrast, is such a localised,
contract-driven business that acquisitions don’t
figure. “We don’t need them, and we’ve been pretty
successful in bringing in contracts anyway.”
Coffee Express: a new
concept within the
expanding food &
beverage portfolio

Ahuja laughs as he recalls how he and fellow
directors started off the F&B business “on the back of
a cigarette pack” when Flemingo was planning to bid
in Poland. But things got serious very quickly. “We
developed a great team in Poland, and now we are
adding a central team,” he says, adding that the
company is also seeking a high-profile head for its
global F&B business.
Yet another string to the Flemingo bow comes with
the diplomatic business, a key area of focus. In Africa
it has a 10,000sq ft, five-storey outlet in Pretoria,
South Africa as well as Nairobi, Kenya. It has also
opened a diplomatic store in Accra, Ghana and
another in Bujumbura, the capital of Burundi. Two
more are under construction, one in Abidjan, Ivory
Coast and another in Dakar, Senegal.
“The beauty of these stores is that they are perpetual
duty free businesses,” says Ahuja. “So we don’t really
get into concession wars, and the market is pretty
immune to any economic ups and downs. We are
also experimenting with the online diplomatic
business, and will go full-fledged with this model
during this quarter.”
Was he disappointed that Flemingo failed to secure
any of the spoils in the recent Mumbai tenders in
India, the company’s original heartland?
“Not really, because at the costs which they went for
it just doesn’t make economic sense to us,” he says.
“India’s now less than 15% of our global business.
And for the last contract in Mumbai, I’m still amazed
as to how somebody could bid those kinds of
numbers.
“Currently we (and DFS) are doing US$44 million in
revenue, and it’s difficult to grow that by more than
about +10% year-on-year. The competition [Aer
Rianta International and Buddy Retail –Ed] bid
+60% higher than us. Our NPV [net present value]
was US$230 million; ARI’s was US$390 million. We
think they will need a US$115 million turnover in
year one, and I just don’t know how they’re going to
do it.
“Similarly in the case of fashion [The Nuance
Group], they bid at three times what we did, and we
were very hesitant to bid at all.”
But Flemingo hasn’t given up on India. It has duty free
operations in around a dozen of India’s 18 international
airports with 22 shops, and its partnership with DFS
is continuing steady and profitable progress at Delhi
Indira Gandhi International – where the alliance has
opened three luxury boutiques and is soon to open a
fourth with Ferragamo.

Interview Flemingo
Brewing up a new approach:
Coffee Corner blends in well with
Flemingo’s multi-channel philosophy

Interview Flemingo
Ahuja describes Flemingo’s relationship with DFS as
“amazing”, noting that the two companies work on a
complementary basis rather than competing. “For
example, although we qualified in Bali we withdrew
from bidding as DFS was there,” he says. “It’s a great
relationship. And we’re not getting in each other’s
way. It gives us a lot of opportunity to do things
which I really would not do under normal
conditions. The beauty is that there are no set
guidelines in these markets.”
Ahuja’s view of a fast-changing global travel retail
landscape is an interesting one. He claims that
retailer desperation to retain airport concessions – or
compensate for lost ones – is driving a series of
increasingly unrealistic bids by some players. “That
means certain operators will be under huge pressure,
and you will see complete margin erosion in the
contracts… which works to the benefit of the airport.
And by now most of the larger airports have an idea
about what the concession fees and MAGs being
paid elsewhere are, so they are no longer willing to
compromise. So the days of 20% and 25% concession
fees are over. It’s all about 30% and more. This in turn
puts pressure on the brands.
“The brands always found the airport business to
be the most interesting part of the duty free
business, but now they are getting squeezed more
and more. They’re going to look at alternative duty
free channels, and we’re already seeing that
happening now. A company like Philip Morris is
very keen on looking at non-airport business as
much as airport business.
“The days of double-digit EBITDA for a contract
are gone. If you can make a high single-digit
EBITDA it would be great in an airport business. So
we are carving out a niche. For us small is big. We
don’t want to go in for very large projects, because
we don’t want to do anything where we’re going to
make no money, or take risks. We’re looking at
master concessions, which is a niche which we
have created.”
Preparing to go public
Flemingo is getting ready for its long-touted IPO,
possibly as soon as the third quarter of 2014, though
that will depend on many external factors –
including the state of the markets, Ahuja admits.
The timing isn’t certain, but the venue is – New York.
“The reason why we have selected New York is that
our company is now a multinational rather than an
Indian company, and it’s not wise for us to list in
India,” Ahuja explains. “In the US market we’ve seen a
scarcity of growth stories and a hunger for emerging
markets, and we represent both. The pockets are also

Interview Flemingo
really deep in the USA, so that’s the right choice for
us. It’s the most difficult market to get listed in, but
we’re prepared to go through the pain.”
The company is now in the right shape to take the
public plunge, he says. It has the appropriate IT,
financial and warehousing platforms, and has taken a
quantum leap in management terms. “Having so
many top people onboard is big for us. We’ve also
taken a quantum leap in terms of our
professionalism.
“Getting the right funding in place was also key. We
had multiple funding options, but we selected
strategic partners. There’s a huge value-add from
both companies – Albright is focused on the
emerging markets and CDIB is focused on the East.
“The first quarter of 2013 was very positive and
encouraging, and this quarter is also looking very
good. Hopefully there will be a major contract this
week, which I can’t speak about yet as it’s not closed,
but it would be another hundred million dollars-
plus revenue.”
All these years on from that single store start-up in
Kerala, Ahuja says he still loves every minute of
what is now a very different role. “Do you still
sleep well at night?” I ask, noting his apparent
permanent air of calm in the face of what must be
constant stress.
“Well, I sleep little,” he replies. “I start my day at 4.30
in the morning.” Finishing when? “When I fall
asleep. When your work becomes your recreation, it
doesn’t tire you.”
Where does he want Flemingo to be in five years
time? He points to a copy of an article in The Moodie
Report headlined ‘Flemingo’s US$2 billion’. “There,”
he says with a chuckle.
“We are looking at growth of about 25% year-on-
year to achieve our vision. And to get there, the next
one or two quarters are very important. They can
completely jump start us.”
The jump start, in fact, happened long ago. This
Flemingo is now set to take full flight.
Flemingo is also
developing a news and
books proposition for
selected airports

Flemingo Diplomatic - TFWA Asia Pacific conference

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