Memoirs.....Musings of a sales guy at heart.....

Episode 30...

I wrote about the issues and also the tasks ahead....in my last episode.

I looked at DxB airport to start with. 

Folks, DDF is the best run duty free, as per me, in the world....I say this because they are not the typical DF operators like some of the global players and do not squeeze the suppliers. They are friendly and always there to help. 

I looked at the numbers of DDF. The perception in HO was that JW Black was the leader there but it was not so.....DDF had a policy (though I was totally against that) which allows either Johnny Walker or Chivas on promo...the promo in departures were a trolley for every two bottles of Black and Chivas also operated similar stuff. But the difference was in quality....ours was a poor second to what was given on Chivas. We had promoters-they are DDF employees but seconded to us) and their major complaint was the poor quality of ours vis a vis given by competition especially Chivas. This I changed immediately by changing the supplier and brining in new ones. Also I requested DDF to allow both of us on promo at the same time to figure out whats the consumers choice which was turned down by them citing the difficulties in managing both. But I convinced them to allow us to operate during Xmas time at least and I succeeded. I built a good rapport with the DF staff and also the floor managers....Went on a full offensive as due to the issues with the domestic and RTM, I felt I have to make up the volumes from DF. 

Also in the Gulf the arrival allowance of spirit was 4 lits and no one bothered to promote there as it was taken for granted consumers would lift the 4 lits. Yes consumers lifted but they bought assorted stuff...Unlike the departures where the consumers spend some time to browse thru in arrivals they are in a hurry as they have to exit asap to reach their destinations....so one has to do something which attracts their eyes the moment they step inside. Also the arrival shops are not all that spacious compared to the departures. Always cramped....And DDF was dead against any free bottles in arrival as it would affect their revenues....and there was no 'one month for you and one month for Chivas' conditions...so we came out with stunning promos at arrivals and one of them being JW 4 lits packed in one without any discounts. This was an instant success and our depletions started going northwards....

Due to space constraints DDF was very clear that the supplies have to come from our local distributor only (for all the volume brands-companies) and hence the local distributor has to manage the inventories well and keep meeting the demand 24x7. They were given a service charge for this but there were always stocks outs.... and I made it a point to reach the airport with an extra grace time of an hour to spend time with the staff and also address issues and most of the times it was stock outs and shelf space....this was also addressed by getting one exclusive person to look after the logistics of DDF from AnE....

Dubai Duty Free was the major contributor followed by Abu Dhabi (ADDF), Sharjah, Qatar, Bahrain and Muscat. Abu Dhabi was in tie up with DFS and Qatar, Bahrain and Muscat with Aer Rienta....But DFS role in managing the ADDF was limited to only procurements. Diageo stand was that Gulf/Middle East to be left alone and didnt give in to any pressure from the global DF operators on pricing. This has helped us in terms of profitability.

The allowance across UAE was the same (4 lits of alcohol or wines or 4 boxes of Beer). In Qatar both the DF and domestic were managed by the Qatar airways and hence the allowance was just a lit. Same in Bahrain and in Muscat it was 2 lit. All these allowances were in arrival only but in departures you can take as much as you want provided the airlines didnt have any objections. In Muscat and Bahrain during the month of Eid, the alcohol section in arrival were covered for religious reasons. 

One has to first take a note of the local and religious sensitivities before getting in to any strategic thinking. 

So the priority for me was to build relationship with the key stake holders across the DF and also domestic. Domestic business across Gulf was different.

UAE....

DxB..circa 2005. The off trade was managed by African and Eastern and MMI....they were the only two given license to run retail of their own and also supply to local bars and restaurants (the permitted ones)...total monopoly. There was also some local tax and coupled with restrictions of who can buy and how much...hence the retail business was not a very attractive one in DxB local. The on trade were doing great business - across categories....The bar in Emirates towers....I think it was on the 24th floor....what a place it was and Black Label was just 24 AED those days for a peg....Budha Bar another happening place.....the bar on the 32nd floor of Grovenor's house... and every five star hotel....plus the dance bars where the max business was coming from. And these outlets were divided between AnE and MMI....this means that if the outlet had tied up with MMI, it would be Chivas all the way and if it was of AnE it would be JW Black....and Chivas was growing silently as the travellers from other gulf countries were going for Chivas....and the team of both AnE and MMI were focussing on discounts for pouring and major promo was some snacks free....nothing major.....I went around, figured out that the volumes were nothing great and left it to the AnE team to manage the activities well and just focus on the market share.....

Abu Dhabi....better than DxB....we had ADMMI as our distributor and the difference in this market was that there were more retail outlets than DxB....there was also no local tax....there were primarily ADMMI, Spinney's, Abu Dhabi National Hotels, AnE and one more....these distributors also had their own outlets.....but there was restrictions on locals buying from these outlets....but the off trade business was much better than that of DxB....

My first visit to ADNH was a miserable one....they were very upset with Diageo as just before my arrival they had removed the distribution of Guinness beer from them and handed over the same to ADMMI to consolidate the distribution. This didnt go well with ADNH and I was given a complete dressing down by their boss...Mr. Khoory....and Mr.Mani a fellow Indian who was heading their purchase, was very kind to me. They stopped promoting Diageo totally including the spirits. I spoke to the bosses at ADMMI and transferred back Guinness to ADNH....that paved the way for a fantastic relationship with them and that helped me later....I still enjoy a great relationship with this outlet.

Northern Emirates....

Sharjah is a dry state....RAK, Fujairah, Um-al-Quain and Ajman were open.....and the business was majorly by the Indian community....Diageo used to supply directly to these customers but just a year before I got shifted they stopped it citing some vague and stupid reasons....and they directed AnE to supply to them. This upset them much more and they vented their frustration and anger by buying Diageo spirits from the parallel traders. Diageo, sadly that time, kept changing things-the one which were going right and without any complications-very often. This is one such major change. The reason by the legal team of Diageo was these customers were not authorised customers and were in bootlegging. It took some time for me to understand the nuances of this trade in Northern Emirates. And am summarising my understanding here...1) Most of the traders are Indian businessmen. 2) They are licensed by the local governments (I took the copy of the license of one of the customers which was in Arabic and got it vetted by a recognised and senior lawyer in Dubai and sent to my HO and legal team but they didnt bother to respond to me)....3) They all have huge retail stores and also do trading in majorly African and middle eastern customers. Customers from Africa were dependant on this NE channel as the prices were attractive and the genueinity of the goods. Also the customs in UAE were customer friendly, professional and quick. Alcohol, food, spices, dry fruits and nuts et al. Alcohol used to go to places where it was banned but the UAE dealers were only providing goods and service. Where it goes and how it is transported was not their concern. 4) And they were servicing to license holders only. 5) And payments were never an issue as Diageo, when they were servicing them directly were getting the money either in advance or against LCs. 6) By denying direct supplies and telling them to buy only from AnE at an increased price, they completely alienated the trade. Since there was demand for Diageo brands the customers started buying from parallel traders but the loss was of Dubai hub of Diageo where I was the boss and tasked to deliver the numbers. The RTM channels numbers were almost like 30% of the volumes and highly profitable...This became a major challenge for me. Also despite representing the genueinity of the customers, the legal department of Diageo, not only refused to entertain direct supplies but told me very clearly to stay away from NE customers. I got a directive that I should not visit their shops and the customers as it would be construed as facilitating illegal trading. I felt it was illogical as Diageo was okay for AnE, the authorised distributor to supply them where as the GM of the market should refrain from transacting business with them. They should have ideally taken off the targets set for this channel but the targets were kept as same....look at the irony. So I have to think differently and get the business....and with AnE's poor understanding of the channel (they looked at NE customers as their competitors and also they were new as Diageo distributor)...it made things worse. Meanwhile Pernod Ricard, the makers of Chivas, exploited this situation and started pumping in....to every single customer in NE directly....I sat down with AnE, made them to realise how important this channel for us and cut down their margins and announced some incentives - thru their GM - for the dealers in NE and with my continuous follow ups and interactions with AnE team,  the channel started contributing. But we lost some business in the process. And this channel is known for cut throat competition. While DxB Duty Free was selling JW Black at around 130 AED, some customers in Northern Emirates were selling at 110 AED and this irked DDF.....and it came as a blessing for me and I pressed the accelerator and made DDF to agree for aggressive promos in arrivals (this price issue was affecting their arrival only)...this is a bit complex situation and hence so much of detailing. 

I need to also put a disclaimer here....The legal department of Diageo went with their own understanding of this channel and I felt my predecessor failed in his job in convincing them on the genueinity of the customers in NE....some of them specialised in consumer friendly retail stores....the retail space in some of the shops was just mind blowing. Consumers from DxB on weekends visit these shops and pick up their requirements as 1) it served them as a good get away trip and b) the savings compared to buying from DxB retails of AnE and MMI. (As am writing this I heard the DxB government has removed the local tax on alcohol paving way for lower prices in these shops in DxB). I convinced AnE to go for major branding activations in NE as some of the pubs and bars there were doing phenomenal business during week ends. Lots of work went in to this channel which was never done before I arrived. I am not stating this to tom tom what I had done but to make you to realise how sometimes the biggies goof up on big bucks and waste time on brand building in insignificant channels....and both MMI and AnE were masters in painting the NE as 'untouchables'.....

Sharjah Duty Free:

Though Sharjah was a dry state, this never hindered the DF operations - except during the month of Ramadan.....they used to cover the arrival DF with some kind of 

Qatar...

Smaller in terms of size. Qatar Duty Free, run by Qatar Airways-procurement by Aer Rienta - Qatar Distribution Company (QDC) run by Aer Rienta....There was a lady of Indian origin was the GM of the Duty Free....a real terror and she never bothered about Aer Rienta and ran the DF on her own terms.....we jelled well from day 1. Aer Rienta tried to control the promos and slots but she just sidelined them which made my live easier. Her team was great - Jude was the incharge of procurements and the shop floor).  Qatar Airways in flight service and DF was also brought under control.

The domestic sale..just one retail stores but a huge one....QDC...all the companies wish to sell in Qatar need to go thru only QDC....there was also on trade but limited-attached to the 5 stars-almost 90% of the business was from retail only. The retail business was on some kind of quota based on the income of the consumers...for the local Qatari's no entry in to the shop....established great rapport with the GM of the operations-Colin Boother - a Brit....

Customary visit once a quarter to review the stocks-promos and displays.....

QDF was new compared to DDF and learning the tricks...the big boss of QDF and QDC - ambitious a Qatari -who was also heading the Qatar Airways - knew well how to run the business.....never met though....Also carrying alcohol in to Qatar was prohibited and hence no booze in the arrivals.

Bahrain:

Compared to Qatar and Oman this was bigger in terms of volumes and also was very pragmatic with their alcohol policy. There were stand alone bars serving alcohol apart from retail stores-the stores were few only as only the importers-around 5 or 6-were allowed to set up retail and run. So these importers, in their retail stores gave preference to the brands which they were distributing but the over all business of domestic was good. But things changed a bit after the 2005 Ramadan....

BMMI was our distributor and like any other gulf distributor were just managing the distribution. Thursday evening to Saturday the bars would be abuzz with lots of cross border traffic. The retail stores were huge and churning out good volumes....

The Bahrain Duty Free was run by the BDF, a government arm but the procurements and promotions were managed by Aer Rienta...Initially all the gulf operators wanted some big foreign operators to get best deals from the suppliers but later developed understanding and skills but still continued with their logistics partners.

The allowance in Bahrain was just 2 lits of alcohol or 12 cans of beer....so the arrival was not a great attraction. Gulf Air was their national carrier and it was not doing great then. The departure shop was contributing almost 80% of the overall business.

Oman-Muscat...

This is the smallest of all the Gulf markets. Duty free and Domestic. DF was known as Muscat Duty Free and run by the local businessman with great guys taking care of the shop floor. The procurement and logistics were managed by Aer Rienta....Allowance for arrival were two lits and hence around 25% of the volumes were from the arrival shop. The departure was catering to overseas and transit passengers.

The domestic business was small due to the local taxes and small populace. We had AnE managing our business and also the licensees were importing from UAE due to its proximity and also cheaper prices....

Saudi and Kuwait also had their duty free shops in the international airports but sans alcohol.

The format across Gulf was the same. Also how the business is transacted. The distributors and the DF played major role and one has to take care of 1) great rapport with the operators 2) Attractive offers and perfect executions 3) Managing logistics....The DF shops are so important to get the volumes and hence great understanding with the shop floor staff.

Once the above is understood easier to manage business and deliver the KRAs....

But Diageo is different right.......

We will talk about this and more in the next episode.....