By Alan Huxtable, Vice President, Business Development & Commercial Director
Ft Lauderdale, June 10th 2014 -Brothers, Ross and Shahram Khaledi have successful history in the electronics business based in Texas. They not only distributed major brands such as Sony, JVC, Sharp, Panasonic, AIWA and Toshiba, but also developed and began manufacturing their own line, called Gotech. Consequently, it’s no surprise that when they decided to enter the duty free market, the Khaledi’s chose to specialize in electronics. Laredo, one of the largest land border crossings in the US, processes 15 million people crossing each year. The Khaledi’s recognized the enormous opportunity to serve potential customers entering Mexico. In April 2009, HKG Duty Free opened El Portal, their flagship duty free/duty paid store located in Laredo, Texas. Since opening this flagship store, the Khaledi’s have expanded operations considerably. HKG Duty Free now have 11 locations operating along the US-Mexico border: three in California (two in San Diego County and one in Calexico); one in Arizona at the Nogales crossing; and seven in Texas, three in Laredo, and one each in Hidalgo, Brownsville, Roma and El Paso). Not surprisingly, HKG Duty Free is a market leader in electronics, but has also been developing its business in fashion watch and accessories. El Portal already retains personalized corners with Lacoste, Guess, and Swarovski. This year, additional personalized corners are scheduled for introduction including Mont Blanc, Tous, Michael Kors, and AX Armani Exchange in the El Portal fashion department. Furthermore, plans are underway to personalize areas for key beauty brands as well.
For years the Khaledi’s have also been involved in other successful business ventures including commercial development in Laredo, Texas. Endeavors include building and leasing large capacity warehouse distribution facilities, even developing residential community and other land developments in the Laredo market. In 2012, HK Global Trading Ltd purchased a high-end retail electronics business operating in Montana. This company retains existing business-to-business division, selling brands including SubZero, Wolf, Kitchenaid, Apple, Samsung and LG among others. With knowledge in the electronics industry, this was logical acquisition. With the growing business portfolio, it eventually made sense for the Khaledi’s to move their headquarters from Laredo, Texas to Fort Lauderdale, Florida.
Moving into airports
The company began to look at other areas of expansion. Because of his years of management experience in travel retail affiliated with Dufry, the Khaledi’s brought on Alan Huxtable to help with these plans. Huxtable has extensive history involving airports and destination retail encompassing US, Caribbean, Mexico, and LATAM territories, and he began searching for potential opportunities.
Having stores along the US-Mexico border have given the Khaledi’s special insight into the Mexican consumer market. Together, Huxtable and the Khaledi’s developed and executed a business plan and began looking for suitable locations in Mexico. Huxtable’s research eventually led him to Querétaro airport, located just north of Mexico City.
Queretaro is the fastest-growing city in Mexico, with the highest per-capita income. The city is also home to a number of high profile international companies, including Bombardier, Samsung, Kellogg’s and others. The airport has been developing a major hub for freight carriers and there is a growing air travel business market. United Airlines has daily connections from Querétaro with Houston, Dallas, Chicago, Denver and Los Angeles including Volaris who operates charter flights. Huxtable says, “Opening in Querétaro was a logical first step into airports in Mexico”.
HKG identified long term growth opportunity in Querétaro, which until now has not included duty free operations, and therefore initiated negotiations with the airport. Eventually, the company came to an agreement with the airport. The opening of a 300-square-meter duty free store located in the main international and domestic departures area is scheduled for completion by July, 2014.
The Querétaro Airport HKG Duty Free store will serve both international and domestic passengers. Unlike other existing HKG's stores, this location will not specialize in featuring the electronics category, but the offering will be similar: spirit, tobacco, fragrances, watches, fashion accessories, and confectionery, with spirits, tobacco, and fragrances assortments taking up the most of the merchandising presentation. The Airport and HKG Duty Free have signed an exclusive contract for three years, with the option for two more two-year renewals, for a total of seven years.
Continuing expansion in Querétaro and elsewhere
HKG Duty Free is already looking to expand, both within Querétaro Airport and in other Mexican airports that it has identified as showing similar growth potential. In Querétaro, HKG Duty Free hopes to open a satellite showroom in the Fixed-Base Operation (FBO) Terminal. Huxtable and the Khaledi’s envision opportunity to service executives and frequent business travelers utilizing private planes in this adjacent terminal to the main airport.
For future opportunities, HKG Duty Free is seeking out airports with substantial business traffic, in areas with higher revenue capacity and growing population centers. HKG Duty Free firmly believes this combination offers the best possibility for long-term success. To this end, Huxtable is researching emerging airports throughout Mexico to find those that match this set of criteria.
While HKG Duty Free clearly understands and is certainly focusing on developing the Mexico portfolio, it is also currently considering the US Airport market encompassing both duty free and duty paid concession opportunities.
Another border crossing
After years of operating exclusively at the US-Mexico border, HKG Duty Free recently expanded into the southern region located at the three-way border crossing between Belize, Mexico and Guatemala. This business, which goes by the name of HKG Duty Free Belize Ltd., is similar to the stores the company already operates along the US Southern Border. The two acquisition stores will subsequently be remodeled to HKG standards this year.
Moving in every direction
Many years of developing their business acumen, especially in the duty free industry, have combined to make the Khaledi brothers and Alan Huxtable a formidable and winning combination. They have taken duty free and duty paid from the north of Mexico down to its southern borders, and is now expanding from the heart of the country near Mexico City to any number of emerging areas throughout the region. The company has grown from its roots in electronics to a full-range duty free operation offering major brands from every category. The growth of HKG has been rapid since 2009, and it shows no signs of slowing down anytime soon.