Hotel Shilla confirms purchase of 19.9% stake in Dongwha Duty Free

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Hotel Shilla confirms purchase of 19.9% stake in Dongwha Duty Free Published: 05/05/13 Source: ©The Moodie Report By Martin Moodie Print Email Dongwha Duty Free's central Seoul location drove sales of US$217 million last year SOUTH KOREA. Hotel Shilla, the luxury hotel and resort operator and parent company of The Shilla Duty Free, announced on Friday that it has signed an agreement to purchase a 19.9% stake in Dongwha Duty Free.  The Shilla Duty Free Executive Vice President Head of Duty Free Division Jason Cha confirmed the news to The Moodie Report, first reported in the local Yonhap News, telling us: "The Shilla took a 19.9% stake of Dongwha and both companies will cooperate in merchandising and marketing."  The company said it wished to forge stronger business ties with its travel retail rival.  Shilla said in a regulatory filing that it will purchase shares worth KW60 billion (US$55 million) in Dongwha Duty Free, the news agency reported.  Dongwha Duty Free registered a +9.5% year-on-year sales increase in 2012, to US$217 million. The company has an approximate 2% share of the Korean duty free market (excluding inflight).  Speaking to The Moodie Report recently in Seoul, Managing Director Min Jung Lee said he forecast slower growth, in the region of +8%, for calendar 2013, because of decreasing Japanese numbers and spending power, and weaker consumer confidence in Korea.  Dongwha is the pioneer of Korean downtown duty free retailing. In 1979 the Korean government authorised the downtown duty free business and Dongwha took the lead, setting up the first store under the new regime in December 1979, a month before Lotte Duty Free followed suit.  Until 1990 Dongwha had four branches (in Seoul, Jeju, Gyeonju and Busan) but with increasing competition from chaebol-controlled companies and slowing sales, the company closed the branches outside the capital.  In 1991 Dongwha moved its Seoul branch to Sejong-ro in central Seoul, where it is located to this day.  “Of course we would like to have more branches, but right now there are big competitors like Lotte and Shilla, and the rivalry is very intensive,” said Lee in an interview to be published this month with The Moodie Report. “In the beginning of the 1980s there were 20 or so downtown duty free shops in Seoul, but now they are almost all operated by the big Korean conglomerates. Dongwha is the only independent, family-owned company that has survived.”  That, it seems, has just changed.