DHL will look to smaller “bolt-on” acquisitions rather than major takeovers to speed growth in the years ahead, according to Frank Appel, CEO of Deutsche Post DHL.
Speaking in Shanghai earlier today, he said any purchases would be add-ons to the company’s existing portfolio.
“We have no need to do more large acquisitions anywhere in the world, including Asia,” he said.
Appel said the company would instead further grow its international supply chain, forwarding and express business in Asia in the coming years by “following our customers” with investments totalling 400 million euro. The company expects to make more investments as opportunities emerged.
He said although DHL did not disclose profits by region, its Asia Pacific business was “very healthy” and the company’s footprint growing rapidly despite the market being “very competitive.”
Appel also predicted Asia would remain the driver of world economic growth, accounting for about 50 percent of absolute GDP growth over 2010-2015. With logistics demand usually increasing one-and-a-half to two times as quickly as GDP, DHL would see further growth in the Asia Pacific region, which already contributes almost a fifth of the company’s total revenue and some 30 percent of express revenue.
“As long as there is still difference in wealth between countries there will still be arbitrage,” Appel said. “There is potential everywhere; by industry and by region.”
Despite slower recent GDP growth in China, Appel said demand for premium logistics services would continue to rise because China would maintain its position as the engine of the global economy through 2025.
However, despite China’s State Postal Bureau reporting that UPS and FedEx had both recently been granted domestic licenses to operate delivery services in China, Appel said DHL had no plans to follow suit despite thriving e-commerce, and the size of the domestic delivery market doubling in the five years through 2010 to total more than $9 billion.
“We have to be realistic about where can you really make a difference in a domestic market,” Appel said. “There are strong domestic players in China growing rapidly. It would take a significant investment for us to get close to them.
“The domestic business is very different to the international market. It would be very rough and tough to establish a domestic network. Others could be smarter, we’ll see,” he said.
Asked if he expected a Chinese company to emerge from the domestic market as a global player in express markets, he said the barriers to entry to challenge the big three players - FedEx, DHL and a merged UPS-TNT assuming the takeover by UPS is completed - were substantial because customers expected the same service quality globally.
“Our processes here are the same here as in the U.S. and Europe,” he added. “If you’re a domestic Chinese company, you can build this, but it takes a long time.
“There are very strong domestic players here in China, but that doesn’t mean we can do everywhere else. We’ve been doing it for over 40 years.”
Contact Mike King at firstname.lastname@example.org.