Benny & the jets

South Florida CEO, Sept, 2002 by J.P. Faber

DFASS is one of those low-profile companies that make South Florida the economic powerhouse it is. Started from scratch 15 years ago by CEO Bernard "Benny" Klepach, it's the largest duty-free airline sales operation in the US, a $140 million macine that runs like clockwork. Now, Klepach wants to crank his private company up a notch.

It's a Wednesday morning and DFASS CEO Bernard "Benny" Klepach is flying high. At about 37,000 feet, to be exact, en route to a private airport outside of Newark, New Jersey. It's the first leg of a four-day whirlwind tour of his US operations. Aboard the Gulfstream III jet, which he leases on a time-share basis, are two representatives from British corporate giant Diageo, the world's largest liquor maker and one of Klepach's biggest suppliers. Also on board is Klepach's right hand man, John Garner, a Brit who runs purchasing and vendor relations for the duty-free company.

Klepach's first stop will be a "packing station" in Elizabeth, New Jersey. He has nearly 40 of these mini-warehouse stations around the globe, in places such as Osaka, Japan and Santiago, Chile. With this network, Klepach's private company DFASS (Duty Free Air and Ship Supply) will fill duty-free carts destined to board thousands of international flights this year. Each cart will be stocked with perfumes, liquors, chocolates and other luxury goods, and each will be trundled down the isle of an international passenger jet by a flight attendant. About 20,000 such flight attendants receive quarterly commission checks from DFASS.

After New Jersey, Klepach will continue on to another packing station in Detroit, then fly to Columbus, Ohio, for a meeting with NetJets to discuss the logistics of supplying liquor to that firm's 400 private corporate jets. That's another big part of DFASS' business: the supply of "pouring" alcohol -- wine, Champagne and mini-bottles of spirits -- served on airlines worldwide.

Before Klepach and his passengers reach New Jersey, however, the foursome will spend a couple of hours brainstorming ways to sell more of the duty-free liquor that Diageo supplies DFASS, brands such as Johnnie Walker, Tanqueray, Smirnoff and Bailey's. The discussion will have as much to do with commonsense marketing as it will with the science of buying and selling.

"We bounce a lot of ideas around," says Mark Mirgel, in charge of the Americas for Diageo's Global Duty Free division, and a passenger on the flight. "They [DFASS] know their market well -- they're the experts on the shop floor, so to speak. We know the products. And we have a mutual interest, which is selling."

A big part of the "sell" is packaging, and DFASS works with its suppliers -- Diageo, Bacardi, Allied Domecq, Estee Lauder, Lancaster, Christian Dior -- to create unique shapes, sizes and presentations. On this flight Klepach is discussing ways to gift pack Diageo's Johnnie Walker collection, so that customers can give them as gifts. Should there be a two-pack, or a three-pack? How big should the bottles be? Should they be individually boxed? "Suppose they open it, and say, 'I'm going to give this one to my boss, and this one to may father,"' muses Klepach. "What will they do with the box? You have to be able to break the pack into pieces."

Such questions might seem mundane to someone not in the duty-free business. But they fascinate Klepach. After all, the right answer could mean a huge increase in sates.

Skye McMurray, Diageo's senior marketing manager for the Americas, is the other Diageo guest onboard. She likes the idea of separate packaging. She's also a big believer in something called "threshold sales," which refers to the tendency among consumers to spend even more once they have crossed a certain monetary line. McMurray has a sample on hand, a voucher for passengers on LanChile aircraft. It offers a $25 discount if passengers spend $100 on Johnnie Walker products -- Blue Label or Black Label.

"The person who spends $25 will spend $50," explains Klepach. "The person who spends $100 will spend $300. The incremental sale is what we're going for." The LanChile voucher, in theory, will help consumers cross the $100 "threshold barrier" to a new level of purchasing.

"With DFASS you always have the opportunity to try new things," says McMurray. "It's us who lag behind, because of the higher ups."

That's not apparent when McMurray flips open a laptop computer to display storyboards for custom ads that Diageo is creating for insertion in DFASS catalogues. The ads are based, she explains, on three different premises. First there is the "Make Someone's Day" concept, with ads that emphasize the pleasure of giving. Then there is the "Don't Waste Your Allowance" concept, with a "Use It, Don't Lose It" campaign. Finally, there is everybody's favorite, the "Treat Yourself' concept, with story boards for a new "How Come I Resist Buying Something a Little More Special?" campaign.

Inside the Clockwork

When the aircraft lands, the passengers are met by Saul Hyatt, the company's New York-affiliate COO. In addition to running operations system-wide, Hyatt keeps a special eye out for the company's New Jersey operations, which serve key accounts in all three major New York metropolitan airports.