Q&A with Neutral Free Shop CEO Marcelo Montico: Exceeding expectations in Uruguay
This is a special feature from Global Travel Retail Magazine's 2023 Summit of the Americas issue, on page 20.
Neutral by Luryx Duty Free Shop is the most recognized duty free retailer on the Uruguayan side of the border between Brazil and Uruguay
Global Travel Retail Magazine (GTRM): What challenges did you face as you took on the role of CEO at Neutral Free Shops? How are you navigating business post-pandemic?
Marcelo Montico, CEO, Neutral Free Shops: I joined the team at the beginning of 2020, when the organization was trying to get out of our own pandemic as a result of negative years and 60 days later, we found ourselves with another pandemic, but with global characteristics and with a devastating impact on the bottom line.
We had to rapidly deepen the structural changes to adapt to the new reality and thanks to the resilience of the entire organization, we were able to reverse the reality of the company to transform adversity into prosperity.
Today we all enjoy a totally different reality, even compared to 2019, which allows us to clearly visualize the path to recover leadership in this channel, which we already know how to achieve. In quantitative terms, we closed 2022 at 54% above 2019 and so far in 2023, we are 48% above 2022.
In 2022 we started to run, but now we are already flying.
GTRM: How is the general economic climate in Uruguay?
Montico: Uruguayan exports reached a record high in 2022 after exceeding US$13.4 million, which added to strong foreign investment as a result of the construction of a second pulp mill, contributed to us having a surplus of US dollar availability and therefore an appreciation of the local currency.
This generated a very encouraging business climate, but it could indirectly impact tourism and industrial production, since Uruguay is a country with high operating costs measured in US dollars. In regional terms and focusing on Brazil, the macroeconomic situation shows signs of strength, and the market has welcomed the arrival of President Lula to power. In summary, the economic climate for us is more than encouraging for 2023.
Neutral by Luryx Duty Free Shop is the most recognized duty free retailer on the Uruguayan side of the border between Brazil and Uruguay
GTRM: How is the country boosting tourism?
Montico: At border stores we are operating with a shopping allowance of US$500 and that undoubtedly helps the positive evolution of the average ticket. In terms of tourist arrivals, as a result of what was mentioned earlier, we are a country with a currency that has appreciated a lot against the US dollar, which makes us an expensive destination, which greatly segments the visitor's profile.
Historically, Uruguay was characterized by receiving many tourists from Argentina, but this situation is not going through the best moment due to the exchange difference with the neighboring country.
If this situation improves by next summer, we will be able to have a greater number of tourists from the middle socioeconomic segment, which will generate more consumer traffic.
GTRM: How did Top Brands Internacionals’ acquisition benefit Neutral’s business?
Montico: I think that if I were to list all the benefits that Neutral has received from being part of the Top Brands Group, it could take up more space in your magazine than could allocate to us. Focusing on what is most relevant and on what we define as our main competitive advantages, I believe that it allowed us to achieve an economy of scale in purchases that we could not have achieved alone and to be able to access regional alliances with strategic brands that today are pillars in our proposal of value.
Undoubtedly, the Neutral brand is synonymous with quality, credibility and trust on the part of the customers who visit us, and we are maximizing that value with exclusive brands that allow us to offer a superior shopping experience in all our stores.
GTRM: I understand the intention of the acquisition was to grow in Uruguay. What’s in the pipeline?
Montico: After the acquisition by Top Brands International in mid-2019, the Uruguayan operations were merged into a single management, that is, the seven stores with Neutral by Luryx brand and the two with the Luryx brand. Today we operate nine stores, with more than 15,000 square meters in the six cities enabled for the travel retail channel in borders and the exclusive GAP franchise, both for the local market and for borders stores.
GTRM: Can you describe key synergies since the acquisition?
Montico: I think I could highlight three fundamental aspects where we emerged strengthened as a group, in the logistics, technological and commercial fields.
In terms of logistics, we added a new consolidation hub in Panama and another in Miami to our distribution center in Uruguay. As a result of the above, we have considerably less transit time and we managed to significantly reduce spending. Also, from Uruguay we can serve the operations of Top Brands in Chile and Paraguay, also achieving a substantial improvement in efficiency.
Technologically, we merged the innovation and development department and as a result of the above, we already have an APP developed by the new team and a business intelligence tool that allows us to receive daily the different KPIs by country, store, category and brand. This possibility of reliable information in real time allows us to make quick decisions.
Naturally in terms of business development plans, the acquisition allowed us to broaden our coverage horizon to our main business partners. Our value proposition as a group includes operations in 14 countries, 85 stores and more than 1,000 collaborators committed to the same mission.
Neutral offers a selected international brand portfolio including categories such as beauty, spirits, confectionery, apparel, consumer electronics, appliances, toys and home products
GTRM: Are there any other new developments you can tell me about?
Montico: We are changing the way we see the development of our value proposition, so innovation will be oriented to offer experiences instead of products. This implies a change in the way we will present the categories in the stores and in what we want the consumer to receive when they visit us. This strategy will be complemented by new categories and brands, which reflect what consumers request from us in the satisfaction surveys that we have been carrying out since last October 2022.
GTRM: What are the current challenges that you’re facing?
Montico: We think that consumer behavior will increase consumption of all those products that generate personal gratification and in that there is no doubt that the portfolio that Neutral by Luryx stores have, comply with that goal. The question we ask ourselves is how they are going to buy it and where, since because of the health crisis there was a profound change in consumer habits and buying through electronic devices occupied a predominant place to the detriment of face-to-face shopping.
Neutral has already developed a series of innovations in this direction that aim to increase the buyer base, that is, to enhance the visit to our stores by incorporating exclusive brands and SIS for borders (MAC, Adidas, GAP and Pandora among others).
In short, we think that the consumer will buy more but not in the traditional way as we have known it until now.
