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Dufry sells duty free items (64% of revenue) and duty paid items (36% of revenue) under several different retail flags.

Dufry bids for multi-year concession rights from airport operators, and typically has exclusive rights to retail a particular category – said differently, Dufry operates a monopoly in each of its categories in a particular airport terminal.

The key risks to the business model are weak passenger traffic and increased competition for concessions.

However, the average age of a Dufry concession is six years, mitigating the risk of worsening contract terms or losing a key location (for example, Heathrow, the largest concession, represents ~10% of revenue of pro forma revenue yet does not expire until November 2026).

WHY DUFRY IS WINNING Dufry’s stated goal is to generate 12-15% IRRs on concessions and acquisitions.

The company has been quite consistent in meeting this threshold, and in integrating complicated acquisitions.

COMPANY SUMMARY Dufry AG is the world’s largest travel retail operator, with 24% market share (3x the size of its nearest competitor) in the airport channel following its recent acquisition of competitor World Duty Free (WDF).

Furthermore, as consolidation is a continual process, the benefits are on long-term basis.The business and operating models are highly aligned because Dufry does an excellent job of marketing its products to travelers with specific needs.For example, a Chinese tourist visiting London will buy Estee Lauder skin cream from Heathrow’s World Duty Free store because i) it is significantly less expensive than the local price, and ii) she knows it is legitimate and has not been sold beyond its shelf life.Those marketers will emerge in a stronger competitive position when the economy recovers and travel ramps back up, he says."As business travelers are traveling less for the short term, marketers can really focus on these customers and focus on the retention of these fliers," Ferguson tells Marketing Daily.

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