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Issue 6 2015 - Freight Business Journal


///GERMANY Frozen food market hots up Quick to seek out fresh opportunities


With a €100m increase in turnover to €1.7 billion in 2014, Nagel-Group is now one of the leading food logistics companies in Europe and the number one in Germany. The relatively new frozen


business has contributed to this success, and is an area that the temperature-controlled transport specialist wants more of in future. “Admittedly frozen goods is a relatively small segment in food logistics, but it is the one with the highest rate of growth”, emphasises Nagel-Group chief executive, Bernhard Heinrich. This is due partly to demographic The


shifts. number of single


households and canteen kitchens is increasing, which in turn is leading to a boom in frozen products. “We recognised this development early on”, continues Bernhard Heinrich “and entered the frozen products business four years ago.” The sector


has recorded continuous rates of growth ever since – in 2014 alone it was up more than 30% compared to the previous year. Nagel’s European connections


have contributed to this success. The Group, which currently employs over 11,000 employees in over 100 locations in 16 countries, has set itself the goal of being the first provider to establish a comprehensive European network for the transport of frozen goods. With products being transported


in a temperature range of -25 to +25 degrees Celsius, one of the greatest challenges in food logistics is to provide different services in different temperature classes at a consistently high quality. As a result, the Nagel-


Group is increasingly relying on multi-compartment vehicles. A total of 6,000 units, of which


1,500 are tractor units and 4,500 are trailers, are on the road for the group of companies. They transport around 100,000 consignments daily of all sizes and temperature classes all over Europe. The company has recently ordered 90 new vehicles for distribution in conurbations, which can transport frozen and fresh goods at the same time with their two-chamber cooling system.


The main current issue for Stephan Haltmayer, managing director of independent German forwarder, Quick Cargo, is how to breathe life into a generally stagnant freight market. “It’s fair to say that 2015 has not matched expectations. The market was very weak in May,” he told FBJ. There are several, fairly obvious,


reasons for the poor performance, including EU sanctions against Russia, Greece’s continued economic woes and the relative fall-off in the Chinese economy. “Beijing may drop by around 48%, Shanghai by 10% - these are tremendous downturns, and the market is under a lot of pressure.” The trick then is to look for


Germany: cheaper than you think, says online specialist


Like the UK, Germany is now quite a mature market for online delivery, say Lars Peter and Marcus Karten, respectively head of carrier and transport management and vice-president global business development and solution design at Arvato Consumer Products. Arvato describes itself as a third party full-service e-commerce and retail logistics specialist for fashion, beauty and FMCG brands. German consumers are


perhaps slightly less demanding in terms of delivery windows and precisely defined delivery times than their UK counterparts, but they are certainly moving in the same direction, says Lars Peter. “New companies are coming into the market, and they are trying to set the scene by offering more customer options – and the existing ones are having to adapt too.” Existing players are having to


be more flexible – for example, working on Saturdays. Arvato has warehouse


operations throughout Europe, including the UK – and is investing in new campus locations close to either big centres of population or major carriers. Germany is an excellent


location for pan-


European distribution hubs and Arvato is increasingly developing for its fashion clients line hauls direct into CEP carrier hubs in other countries, to improve delivery times. For example, its direct line


haul into Denmark has trimmed 1-3 days off compared with collection from a DC in Germany by parcels carrier, delivering to the depot in Denmark, sorting and delivering from there, and it’s a similar story in the Benelux, Poland, Switzerland and all the countries it serves. That said, Germany can be a


very effective location for a pan- European hub, considers Marcus Karten. One major


difference


between DCs in Germany and the UK, for instance, is that those in the former are much more likely to be involved in cross-border as well as domestic delivery. Also, contrary to many perceptions, Germany is quite a low-cost country for distribution. “The labour cost can be actually about 10- 15% below that of the Netherlands, and shipping costs are lower too,” he says. The reasons for this are, partly,


because some of Germany’s logistics ‘hotspots’ are areas with – relatively – high unemployment, whereas the labour market is


very tight in the regions of the Netherlands that are favoured by the distribution industry there. The reasons for lower freight


costs are less clear-cut, but it may have something to do with the much greater size of the German market compared with the Netherlands, which has in turn produced economies of scale for freight transport providers. From a domestic distribution


point of view, Germany is a rather different country from the UK. Population and industry are fairly evenly spread, so most logistics operators prefer to run direct links between their regional depots wherever possible rather than use hub and spoke systems. (Around 35-40 depots can cover the country adequately.) Not only does this make for faster distribution, but it tends to lower costs too, says Lars Peter. Arvato runs a mixture of its own


warehouses, ranging from 5,000 to 80,000sq m, and cross-dock


markets where there are still some growth prospects, and chief among these is the US. With the Euro now at its lowest point against the Dollar, now is the time for savvy buyers to snap up machinery, Mercedes cars or supplies of spare parts. “The US market is certainly the one to give attention to,” says Haltmayer. “We think it will grow by about 3%” - which, as it tends to be a better-paying and more balanced market than China/ Germany, would go at least some way towards offsetting the decline in the latter. In fact, says Haltmayer, “we think the US-bound market could grow even more in the second half of the year, as it takes six months to produce many products” - so there could still be a lot in the pipeline. Technology, computer and car parts are among the big sellers to the US. The other side of the coin


though is that imports from the US could well decline as the strong Dollar makes them too expensive for buyers in Europe. China’s relative decline could


also help open up new markets in south-east Asia, which have remained in China’s shadow for many years. Before China developed as a force in world trade,


hubs operated by its partners. It tends to build properties itself, and generally finding space is not an issue except in one or two regions where obtaining very large parcels of land can be a problem. As


a mature, sophisticated


market, quite a few variations have developed for delivery to consumers,


beyond simply


dropping the goods at the customer’s door. Lockers and parcels shops are quite popular, along with ‘click and collect’ type services from shops. DHL has even


these were the ‘Tiger Economies’ of their day and they could spring up again, Haltmayer considers. As a relatively small company,


without a large network of offices in worldwide locations to somehow keep occupied, Quick Cargo can be much more flexible than the larger multinational forwarders in developing new markets. Like many forwarders in


its category, Quick Cargo has developed several niche areas as a way of countering the low margins and commoditisation of the mainstream freight market. One of these are urgent aerospace parts (AOG or aircraſt on ground), and another is cold chain pharmaceuticals especially medicines for clinical trials. “Forwarding companies like us have to look to niche markets because the volume business is all cheap, cheap, cheap,” Haltmayer explains. Quick Cargo is a member of the


ALG worldwide network of freight companies specialising in the aerospace sector - the UK member is B&H. Member firms provide certain service standards, such as the ability to deliver straight to the airport tarmac and run 24/7 operations. ALG carries joint marketing and generally promotes the membership. Another grouping of which


Quick Cargo is a member is the IGLU freight forwarders’ buying network. This came about when 23 companies got together to develop joint buying of airfreight from the carriers, operating in its own right as an IATA agent – in fact it is in the top ten in Germany - and using its buying power to offer competitive rates on selected trade lanes. Quick Cargo buys around a third of its airfreight through IGLU, Haltmayer estimates. “It’s our instrument to survive as a mid-size company, and we get at least 10% better buying power on some routes,” he says. Quick Cargo however


experimented with delivering goods into the boots of customers’ cars. Most German towns and even villages still have post offices where goods can be collected, even if the post office may these days double as the local shop or bakery. It helps of course, that the German post office now owns the mighty DHL organisation. As in other countries, retailers


are grappling with the issue of whether to keep online distribution networks separate from those for traditional bricks and mortar


remains an IATA agent in its own right for other routes. One of IGLU’s strengths is that it is


purely a buying network and not a consolidator, so there are no issues such as customer confidentiality, as each forwarder keeps control of its own air waybills. There have been delegations


from other countries to look at the concept, but Haltmayer considers that the conditions need to be right to create such a network. “We’re all competitors, so you need the right, neutral person to run it – and the members need to commit the funds to start it.” Like many freight forwarders


in Germany, Quick Cargo is meanwhile having to address the shortage of young talent in the industry. Germany has a low birth rate, so the number of youngsters available to work in many industries is restricted, and other sectors can offer better social programmes or shorter hours than freight forwarding. Quick’s solution is to train


youngsters from scratch, offering them a comprehensive day release study programme. In fact, it aims for 15% or more of its staff to be trainees. “We prefer to train our own people from a young age,” Haltmayer explains. “If you take people from another company, it can be a bit of a gamble. You get much better results if you grow your own.” Expansion of Quick Cargo’s


office network is always under consideration. If overseas expansion comes, it very likely would be in Eastern Europe. Quick Cargo currently has


seven offices outside Germany, and ten within the country. This may seem like a large number for a relatively small forwarder, but Germany is quite a dispersed country in terms of where its population and industry is located. Unlike France of the UK, there is no single dominant city.


stores. Logistics, supply chain


and financial functions are also becoming increasingly integrated. While deliveries to consumers


has proved difficult for traditional logistics companies in many countries, Lars Peter notes that German firms seem to have embraced the concept and many have set up specialist services and divisions to cater for this market, which Lars Peter and Marcus Karten, say is still growing in double digits and is expected to continue to do so until at least 2017.


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