Lagardere Strikes Landmark Deal In Cambodia Using Profit-Sharing Model

France’s Lagardère Travel Retail has wrapped up a significant deal in Cambodia where, for the first time in Asia-Pacific, the company will operate its three core business lines—duty-free and fashion, food service, and travel essentials—using a profit-sharing model.

Lagardère Travel Retail, part of media giant Lagardère Group, and a local partner HSC Group, the operator of Burger King and Paris Baguette franchises in Cambodia (among others), have signed a 12-year contract with Cambodia Airport Investment Company (CAIC) to manage the retail and dining operations at the Techo International Airport, around 15 miles south of Phnom Penh, the capital city.

Techo is a 2,600-hectare greenfield site, whose main terminal infrastructure is being designed by British architects Foster + Partners. It is scheduled to open in 2025 and will eventually replace the existing Phnom Penh International Airport which processed almost four million passengers in 2023 according to its operator France’s Vinci Airports.

Techo International is being developed by CAIC, a joint venture between Overseas Cambodian Investment Corporation (OCIC) Group, a diversified conglomerate, and the country’s State Secretariat of Civil Aviation. OCIC awarded the retail and dining concession in January.

While the contract means Lagardère Travel Retail will get to run its first direct duty-free operation in Asia, the profit-share agreement is a major milestone in its development plans for the region. According to the retailer, this model “creates a true partnership between operator and airport demonstrating CAIC’s innovative mindset as the first landlord in the region to implement it.”

A better model for brand testing?

Importantly, such a model is more flexible than typical minimum annual guarantee (MAG) contracts, which can encourage airports to simply ‘take the money and run.’ A profit share should facilitate testing of new brand and product offers, plus technologies over the 12-year term, with the airport taking a more active role.

Lagardère believes the profit-sharing model can reshape “the codes of the travel retail industry.” Séverine Lanthier, the company’s Asia COO and chief strategy and development officer, considers the deal to be a new chapter for the retailer. “This agreement opens new horizons to our operations in Asia,” she said. “Through a profit-sharing model, we will take the retail and food services for South Asian and international travelers to the next level.”

In 2025, Lagardère Travel Retail and HSC Group will operate 34 outlets in Techo International Airport covering 70,000 square feet. The array of outlets will include a high-end Aelia Duty Free store, and a Marché food hall, plus hybrid concepts, including an EL&N café—a lifestyle venue with trendy pop-ups, and ‘Le Connoisseur’, a destination for fine dining, liquor, and tobacco.

Global brands, Relay and Discover, will be operated in partnership with Monument Books. In addition to physical stores, Lagardère will implement an e-commerce strategy and “digital immersive experiences” in line with CAIC’s ambitions.

CAIC director Oknha Charles Vann said that he expected the tie-up between Lagardère and HSC Group would generate “significant added value for frequent flyers traveling to and from Phnom Penh.”

Elsewhere in Asia, Lagardère Travel Retail runs over 500 stores in Asian travel retail locations, a small share of the over 5,120 stores it handles in airports, railway stations, and other concessions in over 40 countries. Last year, the company generated €6.6 billion in sales (including 100% of JV operations).

The retail business is becoming a more prominent part of parent Lagardère Group due to sell-offs in the media/publishing arm. In May, the group’s board announced it supported continuing exclusive negotiations with LVMH Moët Hennessy Louis Vuitton for the sale of Paris Match magazine after receiving an offer from the luxury conglomerate at the end of February. A deal is expected by the end of July.

In Q1 2024, Lagardère Travel Retail grew by 13.6% versus Lagardère Publishing’s 0.8% with the retail arm’s sales now more than double that of the media business.