Global travel retailer Gebr. Heinemann made an important acquisition at the end of January at Tel Aviv’s Ben Gurion Airport, named after Israel’s first prime minister. The Hamburg-based company bought the shares of James Richardson in the duty-free joint venture retail business JR/Duty Free, which was established in 2017.
From a 50:50 JV, JR/Duty Free Israel and all its businesses are now a 100% subsidiary of fifth-generation-run Gebr. Heinemann. The timing was surprising given the continuing bloody war in Gaza, triggered by a deadly Hamas attack in southern Israel on October 7.
The optics were fuzzy, which prompted Heinemann to point out that the transaction was first contemplated during Covid times and “is not connected to current events.” But what of the business case which looks questionable right now?
Ben Gurion Airport is, by far, Israel’s busiest gateway (among only three civil airports with international flights) where JR/Duty Free’s shops cover 48,440 square feet (4,500 square meters). However, traffic collapsed in the fourth quarter of 2023 as a direct consequence of the war.
Recently released figures from airports association, Airports Council International Europe, indicate that air traffic in Israel was down 62% in those three months, which has had a severe knock-on effect on JR/D Duty Free’s revenue. On the plus side, fully-year 2023 traffic at Ben Gurion was up 10%, despite the Q4 downturn, with international travelers reaching just over 21 million according to the Israel Airports Authority (IAA).
Sharing the consequences of the current dramatic fall in passengers equally with James Richardson—part of Australia’s James Richardson Group led by the Danos family—would have dulled the pain somewhat. Now that Heinemann has bought out the entire business, the travel retailer will have to shoulder further revenue shortfalls on its own.
As well as the Tel Aviv airport business, Heinemann is also taking on James Richardson’s stores at Ramon airport, the gateway to the Red Sea resort of Eilat, plus two border duty-free shops; one at the Taba crossing with Egypt at Israel’s southernmost point, and the Jordan River crossing to the north of the West Bank.
So why did Heinemann choose now to fully acquire a JV that is under pressure—and is likely to remain so while warfare persists? A lot of it appears to be bad timing.
Bernard Schlafstein, Gebr. Heinemann’s sales director for Middle East Asia, told me: “We entered the Israeli market with a long-term view, which we always have as a family-owned business. From the beginning, Tel Aviv played a key role in the development of our company; it is one of our top-selling locations and has made a significant contribution to our company’s turnover.”
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