In recent years, logistics companies have taken great strides towards creating pan-European enterprises in every market and in multiple logistics segments. However it is clear that there is a still some way to go before even the largest logistics companies can claim to offer homogeneous levels of service across all European markets.
Identifying the extent to which companies have developed pan-European capabilities is far from straightforward. There is often a wide gap between the reality and the image companies like to project. The growth of 4PL providers has introduced a further layer of complexity as it enables companies with few assets to claim they offer services in every European market, most frequently through agents or suppliers.
4pl momentum gathers
This type of business model, pioneered by companies such as Accenture, UPS Supply Chain Solutions, Exel and Kuehne & Nagel, has gathered momentum in the past couple of years. Although it has advantages in its own right, it has also grown in popularity due to the difficulty establishing ownedasset operations throughout Europe.
The main player in acquisitive expansion has of course been Deutsche Post World Net which has built a European presence from scratch in the course of just over half a decade. Where DPWN led, other companies were keen to follow, albeit without the seemingly bottomless pit of money the German postal operator has available.
Many found to their cost that aggressive expansion had high levels of risk attached, with some underestimating the resources and know-how needed to develop a European presence. Much of the geographical expansion occurred just prior to the bursting of the dotcom bubble in the late 1990s. At the time volumes – and company valuations – in the logistics sector were booming, encouraging companies to embrace the mantra of Europeanisation. Then, just as the full cost of acquisitions hit, volumes collapsed.
This led to some well-publicised withdrawals from foreign markets. UK company TDG recently transferred its French operations to a local provider and Christian Salvesen sold off its loss-making German subsidiary Wohlfarth to a management buyout. ABX Logistics, part of SNCB Belgian Railways, also partially withdrew from the French market, selling part of its Dubois logistics business.
German companies Thiel and D.Logistics were other high profile casualties.
In Europe, Germany has been the hardest market to crack for foreign competitors. Many of the problems cited by companies struggling to do business in the country go beyond the difficulties associated with the weak economy and high levels of regulation. There is a perception that German manufacturers and retailers prefer to work with logistics companies from their own country and, indeed, ties go back many years. The market is also difficult to buy into due to the high number of medium-sized familyowned businesses whose operators are often unwilling to let go.
Italy has also been problematic. Acquisitions of logistics operators in the market have been notoriously difficult partly due to the lack of appropriate targets and partly due to byzantine ownership structures which make the purchasing process complex. Despite this TNT, Geodis, ABX Logistics, Norbert Dentressangle and recently Exel, have overcome these barriers in order to develop their operations in one of Europe’s largest, but difficult, markets.
Through the acquisitions made by its parent company, DPWN has achieved the greatest European coverage of all the contract logistics players. These acquisitions were made through its Danzas subsidiary (one of its earliest purchases) and included ASG in the Nordic area (giving it market leadership); Nedlloyd European Transport and Distribution in the Benelux region and Securicor Omega Logistics in the UK. Of the markets in which it is present it is weakest (relatively speaking) in the UK which is also Europe’s largest single contract logistics market. Until its acquisition of Securicor Omega Express & Logistics, the UK was a ‘white spot’ for the company. However although its logistics operations do not have the same scale as the market leaders, it has given the company a platform for development.
DHL Solutions also has a major presence in Benelux, Spain, France, Italy and the Nordic area in addition to its German business. It has a natural advantage in its home market, which gives it considerable competitive advantage over its non-German rivals. One of its biggest contracts is with Deutsche Telekom.
A company which has not been so much associated with European growth is Fiege, one of the few German logistics companies to focus on the contract logistics sector. In the late 1990s it built operations throughout the key economies in Europe, achieving a strong market position in Italy and Iberia as well as having significant operations in France, Benelux and the UK. In addition to this it is the largest player in its home market, Germany where it operates 56 sites with over 750,000 sq m of logistics facilities. Most of its operations are devolved and focussed around each individual market rather than a Europe-wide solution. Outside of Germany, it is strongest in the Swiss/Italian region. Its presence here has been built on the acquisition of Swiss forwarder, Goth, which itself has offices worldwide. It has more than 300,000 sq m of logistics facilities (including eastern Europe), and a strong presence in the Italian pharma logistics industry.
Fiege entered the UK market in the 1990s through the acquisition of a distribution and parcels company, Merlin. It now has 33 national locations employing 1,500 staff. Its services include home delivery operations such as the installation of white goods and home improvement products.
Elsewhere in Europe it has a significant presence in Spain and Portugal where it operates 160,000 sq m of logistics facilities and in the Benelux region where it provides 60,000 sq m of European distribution centre facilities with a range of value added logistics services.
One of its major rivals, TNT Logistics, has also developed a significant presence throughout Europe by a combination of acquisitions and organic growth. It is the market leader in Italy, where it acquired the largest domestic player, Tecnologistica, to which it added its existing contract with Fiat. The UK is its second strongest market where it has a mix of consumer goods logistics (having acquired Taylor Barnard), automotive and press distribution operations. The company does not have the same depth in Europe’s largest economy, Germany, and has not until recently in the Nordic region. It first attempted to penetrate this latter market last year by establishing a joint venture with DFDS. However following its recent acquisition of Wilson Logistics (which is based in the Nordic area) it sold back its holding.
In Europe, Italy is the single largest country of operation where it is also the market leader. In the UK it is a top five player. Perhaps surprisingly Germany is only its fifth largest operation after Italy, UK, France and Benelux, contributing only 5.5 per cent to overall European revenues.
The company offers a mix of dedicated distribution services and shared user networks (such as in UK and Italy). It focusses mainly on the automotive sector but has been growing its operations in the consumer goods and high tech sectors. On a pan- European basis, TNT Logistics is also a major player in spare parts aftermarket distribution, supplying both vehicle manufacturers and first tier suppliers.
UK players have been among the most enthusiastic participants in the rush to create pan-European operations, as much due to the level of competition and the maturity of the UK market as the regionalisation of supply chains.
Exel has gone the furthest of the UK players towards this goal with a presence in most of the major European markets. Unusually growth has been largely organic, due in part to its automotive operations that have enabled it to expand regionally alongside a number of its clients. However it has recently made acquisitions in Italy as well as expanding its scope into Germany, central and eastern Europe through an alliance with Militzer & Muench.
Its acquisition of Tibbett & Britten will considerably increase its mainland European presence, especially in the East, although in the main markets of Germany, France, Italy and Spain it will remain under strength compared with many market leaders.
One of Exel’s strongest operations in Europe is in the Netherlands, based on the early acquisition of Intexo. Although it is focussed on the high tech sector, it has a significant presence in healthcare and pharmaceuticals operating 35,000 sq m of multi-temperature warehousing.
Throughout the rest of Europe it is strongest in Spain where it is active in the retail, consumer goods and automotive sectors, and in France. In this latter market it works for a number of major retail and consumer goods clients including Intermarche, for which it operates a 16,000 sq m facility in a three-year, e15m contract.
Wincanton has been another UK company to expand successfully in Europe. Although until the end of 2002 Wincanton was wholly focussed on the UK market, its acquisition of P&O Trans European allowed the company to extend its geographic scope. In particular it established a strong market position in Germany, and also operations in central and eastern Europe. The company is less strong in southern Europe and the Nordic area.
In Germany Wincanton provides dedicated operations as well as a shared user network which primarily services its contract logistics clients. The company also operates an intermodal business, managing freight movements by rail and container traffic on the Rhine. The latter business contributes about 30 per cent of the business unit’s revenue. Although at the time of the acquisition there was talk that the intermodal unit would be sold off, Wincanton has since strengthened its operations.
In France Wincanton has built up 14 locations based mainly on the transport network provided by a Strasbourg-based acquisition Mondia. In Spain the company operates out of Barcelona, Madrid, Valencia, and Irun, serving the automotive, industrial and consumer goods sectors. As in France, the company is focussing increasingly on value added logistics.
Of all the major European contract logistics companies, Wincanton Trans European is probably the strongest in the central and eastern European region. It has an established presence in Poland (11 facilities), Hungary (six facilities) and the Czech and Slovak Republics (five facilities) employing 525 staff in the region.
Another major UK provider, Tibbett & Britten, has built up a strong presence in France and Iberia for its consumer goods and retail clients. Although it has managed to expand into central and eastern Europe, it lacks a large scale presence in Germany and the Nordic area. Italy is also a relatively weak market for the company although it is present there with a joint venture.
In France Tibbett & Britten has been established since 1992 and grew quickly in 1994 with the acquisition of Clef Entrepolis. The company’s main activities include the transport of bottled drinks and the intermodal distribution of FMCG and fashion throughout the country. Following acquisition of specialist fresh produce logistics provider TCA in 2000, T&B became a leading player in this sector in both France and Spain. The division runs a fleet of 180 refrigerated vehicles and has 18,000 sq m of temperature- controlled warehousing.
Growth through acquisition
Elsewhere in western Europe, the company also has significant operations in the Netherlands and Spain. Present in the Netherlands for over a decade, Tibbett & Britten has grown through a number of acquisitions. Its logistics business now operates 140 vehicles and trailers and manages 11,500 sq m of warehousing at two locations. In Iberia Tibbett & Britten Iberia has three main business units which have operations in the clothing, food (frozen and fresh) and high tech sectors. The company operates throughout Spain and Portugal, primarily for multinational retailers and manufacturers. Following the acquisition of TCA, the company is able to provide national services from a distribution centre at Valencia.
Along with Wincanton Trans European, since the early 1990s Tibbett & Britten has developed a strong presence in the central and eastern Europe area. It has major operations in Austria, Hungary (with contracts for Tesco and Unilever), Czech Republic (largely through the acquisition of Logis International), Poland, Romania and Slovakia.
Another UK company, Hays, expanded into Europe in the 1990s and achieved a strong market position in France, Benelux and Italy through acquisition. However in the run-up to its sale to an American investment company, Hays sold some of its operations and facilities in the Netherlands and Germany, reducing its geographic scope and capabilities.
After the sell-off in November 2003, Hays Logistics is likely to remain intact, with its senior management in place, and will probably get a new identity this year. Hays Logistics has diverse operations throughout Europe which address a wide range of supply chain functions.
Its strongest operations outside of the UK are in France and Italy. In France it operates 70 sites with over 1,000,000 sq m of warehousing capacity employing 4,800 staff whilst in Italy its business has developed from the activities of Sodibelco, a wellknown service provider in Italy that was acquired in 1998. It has eight sites with 450,000 sq m of warehousing and employs 800 staff.
The company has also attempted to penetrate the German market. Its operations in the country were established in 1999 with the merger of two local German companies Mordhorst and Daufenbach. It operates 200,000 sq m of logistics space covering 28 sites, and has 850 employees. In addition Hays also has extensive operations in Iberia and Benelux as well as more recent operations in Poland (170 staff, 35,000 sq m) and Greece (70 staff, 40,000 sq m).
Unlike many of its rivals Christian Salvesen’s European strategy was to replicate its shared user network model throughout Europe. To this end it acquired operations in France (Darfeuille), Spain (Gerposa) and Germany although in the latter market it ran into problems and has since exited from owned operations. In Italy Salvesen’s Consumer Division is present in Italy through a three-way joint venture with Galbani (a Danone subsidiary) and a local supplier.
Although French logistics companies do not have a reputation for expansion outside of their home market, Geodis and Norbert Dentressangle have proved to be exceptions.
Geodis, the largest player in France, has made significant efforts to develop a European portfolio. In the Netherlands it acquired family-run Vitesse which has major European distribution centre capabilities and over 200,000 sq m of facilities. It is also strong in Italy through another subsidiary Zust Ambrosetti which has over a 1,000,000 sq m of warehousing and employs in the region of 1,200 staff. However as far as Europe’s two largest economies, UK and Germany, are concerned, it is still relatively weak.
Although not immediately associated with contract logistics, Norbert Dentressangle has developed strongly in this sector, acquiring operations throughout Europe as well as in its home French market. Outside of France, it is strongest in Italy where in 2002 it recently acquired Cidem. It has also expanded into central and eastern Europe.
ND has specialist logistics operations in the automotive, consumer goods, books, high tech, retail, textile, brown goods and white goods sectors. These include the provision of value added services. ND’s logistics operations are particularly strong in France, the Netherlands, Italy and UK, which have been developed through acquisitions. In total it has 2,100,000 sq m of warehousing throughout Europe.
The company’s revenues in logistics from its international markets grew to 26 per cent of total turnover in 2003 as compared with 14 per cent in 2000. This can be attributed to its increasing presence in the UK, Netherlands, Czech Republic, Italy and the Netherlands
Although European expansion has been on the corporate agenda of logistics companies for some time, there is still considerable progress to be made before most companies can claim to be truly pan- European. For most manufacturers and retailers piecing together a regional solution, this means there is still a need to seek out national players in each market.
Amongst these country leaders and specialists are:
- FM Logistic. The company (formerly Faure et Machet) has a major presence in France and has built an extensive network throughout eastern Europe, including Russia. Its strategy is to develop into a lead logistics provider, managing outsourced providers on behalf of a blue chip client base.
- Thiel Logistik. Although one of Europe’s biggest contract logistics specialists, Thiel is mainly focussed on the German, Austrian and Swiss markets. Its two largest verticals are automotive and fashion.
- Number 1 Group. Second in Italy only to TNT Logistics, this little known company is the market leader in grocery logistics. It has facilities throughout the country totalling 350,000 sq m.
- Vos Logistics. Vos Logistics is one of the larger asset-based transport and logistics companies on the European scene. The company has grown steadily and now employs more than 4,000 people working at more than 30 offices throughout Europe.
- Logista. One of the leading logistics and distribution operators in Spain and Portugal, the company operates from 12 logistics warehouses, 22 transit hubs, 79 provincial warehouses throughout Iberia.
John Manners-Bell is with analysts Transport Intelligence www.transportintelligence.com
The pan-european logistics index
Logistics Europe and Transport Intelligence has undertaken a comprehensive review of the largest contract logistics players in Europe to establish exactly how strong they are in the main European markets. The Pan- European Logistics Index adopts a weighted scorecard approach which rates each provider in each economy or region by their market position. The system is as follows: Market leader: 10 points; Top five : 8 points; Top twenty: 6 points; Significant operation: 4 points; Presence: 2 points; Agent only:1 point
In addition the index takes into account the importance of the market in which the company is present by weighting the score according to the size of the economy. Therefore the scorecard rewards companies which have substantial operations in Germany, Europe’s largest economy and one central to the strategies of the largest multi-national manufacturers.
This approach gives a clearer picture of the relative positions of the major European logistics providers than looking at solely European revenues. The Index measures how successful each of these companies has been in becoming Logistics Leaders in foreign markets. Although it is theoretically possible to achieve a score of 100 per cent, most contract logistics operators (and probably their clients) would be satisfied to achieve 80 per cent (ie a top 5 market position in each of the key markets and regions). DHL Solutions has moved furthest towards this goal with a score of just under 65 per cent.