Being one of the best-known names worldwide, tempting business through Heathrow Airport shouldn’t be a tough task. But rising fuel prices, a weak pound and some tough, ill-informed media coverage has damaged airfreight’s image.
Heathrow plays host to the Perishables Handling Centre (PHC) - a purpose-built facility bought in 1999 by British Airways (BA) and operated by Christian Salvesen before Norbert Dentressangle bought out the latter in 2007. Norbert Dentressangle has become one of the world’s largest logistics businesses and, with the acquisition of global transport company TDG earlier this year, has put its focus very firmly on the UK, where it has a turnover of £1.2 billion. The acquisition has added nearly 100 locations into the UK base, while the acquisition of Schneider last year and APC Beijing - due for completion before the end of this year - have boosted the company’s global freight forwarding business.
With 33,000 employees across 500 sites in 20 countries in Europe, North America and Asia - including 110 permanent staff at Heathrow - Norbert Dentressangle generated revenues of more than €2.8 billion in 2010.
Touring the PHC, it’s easy to see why Norbert Dentressangle values the premises as among its prize assets. Increasingly offering more services for the major multiples - re-packing, transport solutions and export services (including, a little bizarrely, shipping pizzas out to the Far East for a major retailer) - the PHC has become a focal point for Norbert Dentressangle’s perishables handling operations. Clare Davies, director of Norbert Dentressangle’s shared user business unit, says the management structure allows an invigorating level of freedom. “Being proven and being able to maintain a level of skill and financial stability sets us apart from the competition,” she claims. “We operate with quite a local mentality and have intimate points of contact with clients. We still have the entrepreneurial spirit of Norbert Dentressangle himself and have a very lean structure, which allows us to be very responsive. It’s challenging to keep pace with an organisation that’s moving so quickly.”
But it’s this speed that can create operational challenges and Norbert Dentressangle’s Jillian Khan, site manager for the PHC, says no two years are ever the same. “Forecasting and knowing what to expect is very difficult,” she says. “It depends on weather and consumers. We manage that by having a flexible labour model. We give our agency, which is based on site, a call each morning to tell them who we need. The staff are working for businesses all over the airport so they can be quite flexible.”
While Norbert Dentressangle dominates the flow of perishables at Heathrow, there are a number of other strong, established companies vying for business at the site. Following the liquidation of CCG Logistics (UK), the remaining big names on site - namely H&M Freight, Hellmann Perishable Logistics (HPL) and Perishable Movement Limited (PML) - will have heeded the warning. However, Graham Bulley, a director at PML, says business is still strong off the back of a busy summer period. The company has been working with an agent in Kenya to create new links in the African nation while its grape supplies direct and via New York from California have also provided good trade. “I think for the services we provide to our customers, we are very good value for money,” says Bulley. “It’s a competitive market at the moment [at Heathrow] but customers are more loyal than you might think,” he says. “There’s not a lot of change in terms of the big contracts and price is so competitive that it’s all about offering services.”
Nick Finbow, operations director at HPL, says the economic climate is challenging and going the extra mile - sometimes literally - is key. “It has been a tough year with volumes down and the economic climate is not helping. Any service that you can offer customers that’s above and beyond the norm can help. Because we are a global company, it does give us the edge to add value. We have even offered a door-to-door service for flowers from Thailand into retail outlets and can assist with quality assurance, labelling and trucking to RDCs in the UK. We also have a UK dedicated export department and can offer services going as far away as Shanghai.”
The advent of direct sourcing from the retailers has also had an affect on airfreight at Heathrow. One source says: “We are doing some direct work with some of the retailers. You can do it on apples or a commodity product but, what if say there’s a problem halfway through that South African grape season? Will Tesco want to search around looking for new sources? I doubt it.”
Ultimately, there’s a constant theme of price and competition when talking airfreight in fresh produce, but there are a number of innovative businesses willing to add extra services for retailers clearly examining their supply chains very closely. -
ROB SHELLEY: CALLS FOR TOP PLAYERS TO WITHDRAW CAPACITY AS CHASE FOR MARKET SHARE KEEPS RATES DEPRESSED
In news that will cheer fresh produce importers and exporters - if not the overall shipping industry - the biggest shipping lines are still refusing to withdraw capacity, further depressing rates on the major trade routes.
Underlining the continuing global economic uncertainty, one of the leading shippers, OOCL, has just announced an increase of 6.6 per cent in volumes for the third quarter; accompanied by an 8.3 per cent drop in revenue. Furthermore, another of the leading lights in the industry, NOL, has also just declared a nine per cent drop in revenues for the same period, claiming that it is facing slowing demand, excess capacity and fuel costs that are significantly higher than a year ago.
This has led to some of the shipping lines delaying the announcement of their spring rates as they struggle to forecast volumes amid an expanding global fleet and shaky economic growth.
This highlights the dilemma facing all the major lines: an anticipated weakening in volume growth alongside overcapacity, which is prolonging a price war, shrinking revenues and threatening profits.
Aside from the soaring cost of oil and, of course, physical demand from customers, the current problems in the industry are also being blamed by some on a chase for market share determined by the actions of some of the top players - such as Maersk, MSC and CMA CGM - and their ability to withstand losses.
The only way to improve rates would be for the top players to withdraw capacity, as lines with a much smaller market share do not have the ability to make a difference. But there is no sign of this happening any time soon and Maersk has already publicly stated that it does not plan to idle vessels.
Finally, many in the shipping industry - and of course, given the location, the fresh produce industry - will have one eye on the long-term environmental and commercial ramifications following the recent disaster involving the grounding of the ship off New Zealand. In what was the country’s largest-ever environmental disaster, container ship Rena spilled significant amounts of oil, polluting many beaches in the region. It is anticipated that, one way or another, in the fullness of time this will have a long-term effect on container shipping in the region. Watch this space. -
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