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Pushing perishables

Switzerland-based Panalpina is looking to increase its presence in the growing perishables sector and offset a gas and oil business that has been slowing
 

Switzerland-based global freight forwarder and logistics expert Panalpina is hoping to grab a bigger slice of the perishables sector to help achieve its growth ambitions.

 

The company, like many others, experienced a slowdown last year, hit especially by falling demand in the oil, gas and energy sectors, which have typically accounted for at least 15% of Panalpina’s gross profit.

 

“For all of 2015 we recorded slightly negative growth – one of the drivers was our exposure in oil, gas and energy. That segment really contracted in 2015. A lot of projects simply came to a halt. Some of these projects really only make sense with an oil price north of $100,” says Lucas Kuehner, Global Head of Air Freight at Panalpina.

 

However, demand for the delivery of spare parts for oil and gas projects, what Kuehner describes as the ‘bread and butter’ of that sector, has continued. “That is quite encouraging,” says Kuehner. “We’ve now seen a stabilisation in recent months and hopefully we’ve seen the bottom. In the first quarter we reported positive overall growth and we are cautiously optimistic for the remainder of the year.”

 

Looking beyond Panalpina itself, the context is still tough, Kuehner says. “In the (wider) market I don’t think much has changed – it is not thriving. Overcapacity continues to be an issue. There is a capacity overhang of at least 10%, which puts pressure on margins.”

 

That tough operating environment, coupled with the cyclical nature of sectors including oil, gas and technology, means the company is actively looking for ways to diversify, Kuehner says.

 

“We’ve strategically chosen the perishables market – a stable market which is less cyclical. It’s the one market that has been growing in the last few months.”

 

To that end, the group bought Airflo, Kenya’s second largest freight forwarder, from Dutch Flower Group last year. Airflo specialises in carrying flowers from Africa to Europe, transporting more than 40,000 tonnes of fresh flowers, especially roses, every year. The new business is performing as expected, with rush days such as Valentine’s Day and Mother’s Day safely behind it, Kuehner says. Kenya’s flower business is blooming, with expected annual export growth rates of around 5%.

 

“Our goal is to grow perishables but not at the expense of another vertical. We want to grow overall. In perishables, we already have a leading position in South America northbound and we're looking for opportunities to cement and strengthen that. Over to Europe we have positive developments already in the Netherlands and the UK, including salmon out of Norway.” Panalpina can get salmon from Norway’s fjords to its destination within 48 hours, meaning it is available in supermarkets and restaurants in under three days.

 

“Asia is sort of next on the agenda,” Kuehner says. “There is a huge intra-Asia perishables market. We’re participating in perishables imports into China too – meat coming in from Australia, milk powder from Europe, vegetables from the US or Latin America, fish from other Asian countries. We're trying to do this organically.”

 

Panalpina has so far not felt the effects of a slowing Chinese economy, Kuehner says. “Our numbers have really been better than you would expect in and out of China, we haven’t been contracting at all.” He points to the West Coast ports strike which hit trans-pacific traffic last year. “That was really an anomaly last year, based on trends it’s moderately positive.” >>


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