Duty Free Trade Industry Opportunities and

Challenges

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Duty Free Trade Industry Worth

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Generation Research

DF/TR Industry Worth in $US billions

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Comparison with Other Industries

• In 2007 the worldwide bottled water market was worth US$ 40 billion and is expected to reach $65.9 billion by 2012 (Boreal Water Inc.)

• The Airline Industry’s global economic impact is estimated at US$ 2,960 billion or 8% of the world’s GDP in 2009 (ATAG)

• Car Rental Market Revenues to Reach US$ 52.6 Billion in 2012 (Global Industry Analysts, Inc.)

• In 2009 corporate travel industry was worth US$ 85 billion (PhoCus Wright’s U.S. Corporate Travel Distribution Fourth Edition)

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Which Products are Performing Best?

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Spirits Tobacco LuxuryGoods

Percentages for Product Groups that increased the most from 2009 to 2010

Cosmetics Food

Generation Research

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Which Regions are Performing Best?

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30Sales rate % from 2009 to June 30,

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AmericasAfrica Middle

EastGeneration Research

EuropeAsia Pacific

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DF/TR sales 2009

Best and Most from Generation Research

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DF&TR Makeup for the Americas• In 2009, The Caribbean was worth US$ 3.1 billion and was

down -6.3% from 2008

• South America’s 2009 worth was US$ 2.2 billion, a -7.3% difference from 2008

• North America was worth US$ 2.5 billion a decrease of -16% from 2008

• Sales in the USA fell by -19.8%, Canada fell by -8.7%, and Mexico fell by -19.5%

• Altogether, the Americas were down 10%

• In the US Virgin Islands sales dropped by -4.8%

• Brazil registered a +6.5% increase

• Sales in Puerto Rico decreased by -5.9%

• Panama’s sales decreased by -19.6%

• Argentina experienced a -7.5% decrease

Generation Research

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How is the Duty Free Industry Performing in the Americas?

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Traveler Statistics by Region

• Worldwide air passenger traffic rose by 7.6% in March 2010 compared with March 2009

• In Mexico, passenger traffic at Grupo Aeroportuario del Sureste (ASUR) airports increased by 85.8% in May 2010 compared with May 2009 due to the H1N1 virus, which diminished traffic

• In US, visitor volumes are expected to increase by 5% in 2010. A couple of the largest countries to post increases are Brazil at 22% and Argentina at 13%

• Leading the growth in airport traffic is South America with a total increase of 11% in 2010, the highest rate of any region. This growth is expected to continue to 2014 with a 58% increase compared to 2009

• Meanwhile, North America traffic fell 5.9% in 2009 and cargo decreased 11.3%

Trend News and the Moodie Report

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Which Travelers are coming to the US?

• Travel by U.S. residents increased about 11% from 1984 to 1994, but over the same period, the number of foreign visitors to the United States increased by 60%. Over half of the visitors from foreign countries are from Canada and Mexico. Travelers from Japan account for about 9% of foreign visitors, those from the United Kingdom 7%, and those from Germany 4%

Federal Reserve Bank of Philadelphia

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Infrastructure Challenges

• Inadequate air transport infrastructure costs the world economy billions of dollars each year due to:

Airlines having higher operating costs

Delays mean less productivity

In Tourist Industry – loss of revenue because of curtailed growth

Fewer jobs in Travel Industry

ATAG

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Infrastructure Challenges Continued

• The airport industry is facing growing difficulties to fully meet the demands of today's traveling public and shippers of air freight

• If future capacity does not match demand, not only will delays increase - so will the costs of using the system

• Needed changes include the following: the building of new runways infrastructure developments in terminals and

aprons improved public transport access, such as rail

links

ATAG

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Threats/Concerns

• The next crisis (SARS, terrorist threat, economic recovery, swine flu)

• Duty Free as a target (WHO, tobacco, alcohol, EU Abolition)

• Consumer confusion (who are we, duty free, travel retail, travel value, airport shopping mall? What’s our value proposition?)

• Global harmonization of tariffs

• Lack of airport infrastructure development, restricts growth and opportunity to showcase our products

• Security concerns, impact on dwell time

• Rising costs of add-on/special charges (luggage, special seats, country taxes, extra fees) negatively impacts discretionary spending by passengers