Monteiro told the travel agents he would continue filling their booze orders for one week, and then he would cut them off unless they also brought the Japanese to the shop. They capitulated. They started bringing tour groups to the downtown shop. Within a week, the DFS store was so busy, they could not find enough salesgirls to hire.
“The travel agents would work with anybody who gave them a kickback, and they realized after a while we were the best game in town,” said Feeney. “They made more commission from us. To this day still do. They might make $1 a head for bringing people to a restaurant for lunch, but when it came to us they made serious money.” Some of the travel agents found that when they did bring people to the DFS stores, the commissions they got were so big that they closed their own stores down.
One of the most audacious gambles in the history of Hong Kong retailing had paid off. Duty Free Shoppers could now sell high-end luxury goods of every description to tourists who might imagine they were in a store where everything, not just booze and tobacco, was duty free. “We were using the carrot of the liquor and tobacco to bring them in to buy watches,” said Feeney.
The pressure on the salesgirls was unrelenting. They worked fifteen hours a day, seven days a week. Their husbands began complaining. They called up the store saying, “Hell, I don’t see my wife any more, the kids don’t see their mothers any more, you know, when will it stop?” Finally, the angry husbands got together and confronted management in the downtown shop. Feeney and Monteiro faced them together as they screamed abuse. “Please be patient,” pleaded Chuck. A few of the women left, but most stayed. The pressure eased as the staff was doubled, then doubled again.
There was no letup for Monteiro. On New Year’s Eve, he and a manager did stocktaking in tuxedos while their fiancées waited for them to finish. At 2:00 AM they were still working, and the women had gone home.
The demand was so heavy that the downtown store had to be expanded, which meant asking the landlord to persuade other tenants of Hotung House to leave. Some of them saw how much business their neighbor was doing and decided they wanted to stay put. A Hong Kong manager suggested the “Chinese cricket attack” to get them to leave, covering a cricket with human excrement and letting it loose in a rival store. “We told him that it was very creative but that we wouldn’t do it,” said Monteiro with a laugh.
Feeney and Monteiro did a study of the Japanese visitors’ shopping habits. They discovered that tourists spent 30 percent more money on the third day of a four-day visit than on the first day. By the third day the Japanese had figured out prices and were anxious to complete their shopping. Monteiro went to the agents again to get them to bring the Japanese shoppers back a second time. “Some agents would, a lot of agents resisted it. They would give me this bullshit, ‘I have already taken them to six stores, and they have already been to your store. So what excuse have I got to bring them back to the same store?’ I said, ‘OK, I will build another one, so that you visit this one and then you go to that one.’”
Which is what DFS did. The company opened a second downtown store—called the “repeater” store—at the junction of Nathan Road and Granville Road in Kowloon’s “Golden Mile.” Monteiro promised the agents they would get commission on anything bought by tourists on a visit to the second shop, even if they wandered in of their own accord. He would know who the agent was by the shopping cards the tourists got in the Hotung House store for delivery of their purchases to the airport.
Some agents were again skeptical. Monteiro took them to dinner and showed them calculations of how much money they would make from the scheme. “Their jaws would drop. They would say, ‘You’re bullshitting me.’ I said, ‘It’s true! Try it next month!’”
Liquor and tobacco was the come-on, but general merchandise was turning out to be the biggest part of Duty Free Shoppers’ business from the status-conscious Japanese travelers. However, the claim that the store was “duty free” created some problems with competitors. There was considerable resentment among other Hong Kong businesses that tourists might gain the impression they were getting better prices than in regular shops for everything. The company started using only the initials DFS to avoid trouble.
The venerable companies in Hong Kong and Hawaii missed out on the duty-free business. “At the beginning, the Jardine Mathesons, the Hongs, the equivalent of the big five in Hawaii, were asleep,” said Alan Parker. “It was amazing that they missed it.”
After the car debts were paid off and the duty-free shops began to make substantial profits, the owners agreed to take 90 percent of the dividends in cash, a practice that would continue for a quarter of a century. “We didn’t want the cash to build up in the company,” said Feeney, “so from the time that DFS worked, we did nothing but distribute the money out in dividends.” “Usually every three months there was a cash pot,” said Miller. Three years after facing bankruptcy and disgrace, Feeney and Miller were well on their way to achieving their goal of making a million. And the duty-free shops had become spigots producing a cascade of money that just got bigger and bigger.
On March 18, 1968, about six months after Feeney flew in to help Monteiro, Danielle arrived in Hong Kong to join her husband. They now had four daughters. The youngest, Diane, was just ten days old. Feeney had found for them a beautiful twentieth-floor apartment in Cape Mansions on Mount Davis Road high above the sea. At the age of thirty-seven, Chuck Feeney was now, by the standards of the day, a wealthy man. The fact that they had become rich did not impact on Danielle’s consciousness until she and Chuck settled in the British colony. It was not so much that the reality of having a lot of money dawned on Danielle suddenly, but mostly the realization of it through the eyes of others. People looked at them and treated them in a different way.
The Feeneys began sharing a life with wealthy and extravagant people. They bought a Jaguar and a small boat. They employed a driver named George and several other domestic workers. They joined clubs and gave parties. Feeney in those days had two tuxedos. They patronized the Ladies’ Recreation Club at Midlevels, one of the most exclusive and prestigious clubs in the colony, where the kids would splash around in the pool on Sundays while the parents played tennis. Danielle found it easy to live in luxury in Hong Kong. Domestic help, construction, and food was cheap. She bought jewelry and antiques and made the apartment a showcase of décor and beautiful objects.
Danielle was not from a wealthy background. Her family had moved from Algeria to Paris and endured a catastrophic financial situation before her father was able to establish himself as a prominent psychiatrist. She had lived through World War II in difficult circumstances, then endured many moves from country to country because of Chuck’s business, and now in Hong Kong she felt that money was there to be enjoyed. She liked the colonial life, though she was quite aware of its futile aspects.
Chuck Feeney, fit and tanned with neat haircut and short sideburns, exuded the confidence and dynamism that typified the postwar generation of U.S. entrepreneurs. He was the decent American, generous, hardworking, and family oriented. Feeney enjoyed his work, he was pleased with his business accomplishments, and he seemed, at first anyway, to be taking some enjoyment from the comfortable life he led. The DFS people loved him. He gave loyalty, and he expected loyalty. He knew the names of every sales assistant and took an interest in their families. He got a reputation for helping staff with problems. When John Monteiro’s eight-year-old son Michael was badly burned after throwing a lit match into a motorcycle gas tank, Feeney had the boy transferred to a first-class hospital in New York for multiple operations and paid all the bills.
In Hong Kong, Feeney displayed a concern for the well-being of less fortunate kids that was to characterize his whole life. His eagerness to look after children in the camp on the Villefranche beach had not been simply a commercial exercise. He obsessed about getting the best treatment for a girl named Susanna, who lived in an apartment below theirs in Hong Kong and suffered from deafness. He worried about the children
he saw in a minibus en route to the American School whose driver allowed them to stick their heads out of the sun roof. “If she jams on the brakes or has an accident, they will get such injuries!” he would say. He called at the woman’s apartment to express his concern, and when she told him, “Go to hell,” he went to each parent and eventually got the practice stopped.
The duty-free business got so big in Hong Kong, and the potential for expansion around the Pacific was so great, that in 1969 Feeney persuaded Bob Miller he should come back into the firm. “Frankly I wasn’t capable of looking after everything in Hong Kong,” recalled Feeney. “I said, ‘Bob, everybody should get back in. There is potential to do so much more.’” He was eyeing the possibility of expanding, of opening up the first duty-free stores in Alaska and the Pacific Islands. “‘OK, I will go back,’ said Miller.” He and his young family returned from London to the British colony in a move that would prove permanent. With Alan Parker running Hawaii and Miller taking care of Hong Kong, Feeney could now operate out of Hong Kong to look for new opportunities.
The Feeneys and the Millers were both part of the social set in British Hong Kong, but they rarely socialized together. Danielle liked Bob and got on well with the Millers, but Chuck recalled only one occasion when the Millers visited their home and only once when he went to the Miller residence. The coolness between the two founding members was exacerbated by their different social aspirations. Bob and Chantal Miller believed in spending on the best things and aspired to elegance and the highest social status. Chantal once pledged to Danielle, “My daughters will marry princes.” (Two of them did.)
As time went by, Feeney, however, was starting to rethink his attitude about that kind of life, so far removed from the life he had lived—and which his family and friends continued to live in Elizabeth, New Jersey—and the values of thrift imbued in him from childhood. It only became clear to Danielle afterward how strongly her American husband felt that he did not belong to the world of black-tie dinners and leisure yachts, and how much he was coming to hate ostentation and to despise the life of wealthy socialites in Hong Kong.
The differences between the two DFS founders expressed themselves in disagreements over the company’s charitable giving. When they got into the black, Feeney suggested giving 5 percent of pre-tax profit to good causes. Donating such a proportion of profits ran against the corporate ethos of the time—in 1970, Milton Friedman made his famous comment in the New York Times Magazine that “the only social responsibility of business is to increase its profits”—and only about ten Hong Kong companies gave anything significant to charity. Miller thought it was excessive, but he went along. Chuck got the company to set up a charitable trust administered by Monteiro, who recruited several notables to serve on the advisory board, including senior government official (and later chief secretary) Anson Chan, former governor Sir David Akers-Jones, and former chief secretary Sir Denis Brady. The company’s trust, which made donations to the homeless, the blind, and the aged, also helped give DFS respectability.
The personal relationship between Chuck and Bob became further strained over who was doing the most to develop the business. To insiders, it was Feeney who was doing all the work. On the other hand, it was Miller who had secured the two key DFS concessions in Hawaii and Hong Kong at the very beginning. “Bob wanted to have fun, and Chuck wanted to make the business successful,” said a DFS manager, who recalled Feeney saying that he would never do another business deal with Miller. “That doesn’t mean Bob wasn’t an astute and smart businessman; it’s just that Chuck was doing a lot more hours.” Bob Matousek recalled Miller as “a classy guy and a raconteur” and someone who enjoyed the good things in life to the full. Alan Parker believed that Feeney, as the company’s leader and the one who came up with almost all the creative ideas, felt he should have the controlling say in DFS.
Perhaps unsurprisingly, Feeney started to take some business initiatives on his own. He saw an opportunity to set up a venture on the side to sell Camus cognac and armagnac to domestic markets in Asia, and also to act as the agent for Chanel perfume in the region. Without telling his duty-free partners, he registered a separate company in the Bahamas on April 1, 1970. He persuaded Jean Gentzbourger to join him full time on the basis of a profit-sharing arrangement. To convince the Frenchman it was a good deal, he sketched a potential month’s activity on a page of a grid-lined workbook showing Gentzbourger getting 50 percent of the profits, minus operating expenses, while Feeney got the other 50 percent. They both signed it and shook hands. They would trade under the name Airport Chandlers Incorporated to distinguish themselves from Airport Chandlers Ltd., which was owned by the four DFS shareholders. Gentzbourger and his dentist wife, Irene, moved from France to Hong Kong two months later to start trading.
Feeney later justified setting up his separate Camus distribution operation on the grounds that he simply saw the opportunity where no one else did. Camus “was fated to be a kind of second-class brand unless the brand was selling all over Asia and not only in DFS,” he said. It was in fact a logical step that would ultimately benefit his partners. The higher the profile Camus got throughout Asia, the more Camus would be sold by DFS.
Tony Pilaro said he found out about Feeney’s operation a year later when he met Gentzbourger in Tokyo and asked him, “What the hell are you doing here?” He and the other DFS shareholders were affronted to discover that Feeney had struck out on his own. As far as Alan Parker was concerned, Feeney’s relationship with Camus came out of the relationship DFS had with the cognac maker, and if it belonged to anybody, it belonged to them all. “Chuck couldn’t see it that way,” he said. “He just has a block. He probably doesn’t see it to this day.”
They confronted Feeney, recalled Pilaro, and he simply agreed to fold his duty-paid Camus distribution into Airport Chandlers Ltd. “He just let it go,” recalled Miller. “I think he let it smolder inside him, as he does.” They bought Jean Gentzbourger out—to his huge delight—for $375,000. The integrated company was eventually renamed Camus Overseas Ltd. (COL) and went on to become the world’s largest distributor of Camus cognac, providing handsome dividends for its four owners.
CHAPTER 9
Surrounding Japan
In 1969, John Monteiro prepared to leave Hong Kong and move to Honolulu. He reminded Chuck Feeney of the clause in his contract that they would get him a visa to transfer to Hawaii. It proved difficult. DFS had to employ lawyers in Honolulu to show U.S. immigration authorities that they absolutely needed someone skilled in management who could speak Portuguese, Cantonese, English, and a bit of Japanese, and that only John Monteiro met those requirements.
“I finally got permission to go to the U.S., so I packed all my stuff, put it on a ship, and bought my ticket,” said Monteiro. “And Chuck Feeney calls me up to meet him, and says, ‘I hope you don’t mind but the company really needs you in Alaska, not in Hawaii.’”
Monteiro and his wife, Carol, had always lived in the steamy climate of Hong Kong. Now they found themselves at Feeney’s behest in the city of Anchorage, where the winters were frigid, with an average sixty inches of snow. With a population of just over 100,000, Anchorage in those days had the atmosphere of a frontier town and was plagued by crime. It was still recovering from a devastating earthquake in 1964. It was the last place on earth Monteiro wanted to be. They had a one-year-old boy. Carol was pregnant. She was used to two maids in the apartment in Hong Kong, and now she was in Alaska with snow everywhere and unable to drive, and her husband working from morning to night. Stick it out for a year, Feeney had said, then they could go to Hawaii.
Feeney needed someone of Monteiro’s drive and experience in Alaska because in 1969, he had gone to the state authorities and persuaded them to grant DFS a duty-free concession at Anchorage airport. The cash-rich Japanese tourists were not only flocking to Hawaii and Hong Kong, they were now heading to destinations in Europe and the mainland United States. The era of the Boeing 747 jumbo jets had arrived, making t
he world more of a global village. Anchorage was a refueling stopover for planes that were obliged to fly to and from East Asia across the North Pole, as they were not permitted to enter Soviet air space. The passengers had to disembark during refueling and hang around the primitive terminal building.
“Who would have thought of going to Alaska, a fueling stop, to open a duty free there?” said Bob Matousek. “Chuck did. He was prepared to take the risk. He had an uncanny quality, a perception, an ability to see business opportunities that no one else could. The 747s exploded the business, opened the floodgates.”
The Alaska store, dominated by a stuffed polar bear, was an instant success. When the half-dozen morning flights arrived from Japan en route to London or Paris, the passengers would stream into the terminal, shriek at the low prices in duty free, and plunge into a frenzy of shopping. There was mayhem again in the afternoon as planes arrived bound for Europe or Asia and travelers snapped up liquor, watches, perfumes, and furs. They could leave their purchases there and collect them on the way back, when they could also stock up on Alaskan king crab and salmon.
Feeney stopped over in Anchorage once on a trip with Jean Gentzbourger. Carol Monteiro had given birth to a son. They were Catholics, and they asked Feeney to become his godfather because, they joked, he was the only Catholic around at the time. Monteiro took Feeney and Gentzbourger on a tour of the city sights, which included a raunchy bar where scantily dressed women took the drink orders. Gentzbourger went to the fattest hooker in the bar, a 250-pound toothless woman, gave her $20 and told her Feeney really admired her but was very shy. She said she knew how to handle such guys and went and sat on Chuck’s knee. She was so big he couldn’t move. “No, no,” protested Feeney as she said, “Don’t worry. I know you are a shy man.” His friends fell about laughing.
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