Thursday, June 22, 2017

TWO ROLES FOR CONTAINER SHIPPING

Container shipping has 2 roles. Commodity service transport provider. And supply chain service provider. They over focus on first.  And therein is an issue.




Tuesday, June 20, 2017

CEVA TAKEOVER BY GEODIS

CEVA takeover back on the table – Geodis the main contender again

CEVA US_Truck_side_view
Several interested parties are seriously considering acquiring CEVA Logistics, according to sources across the logistics and banking industries.
Speculation over a sale has reached fever pitch – one rumoured buyer in particular is failing to fade away: Geodis.
But sources suggest that non-forwarding buyers are also interested in acquiring CEVA from its private equity owner, Apollo. However, a banking source in New York noted that private equity was unlikely to be interested, as it would be unable to refinance CEVA’s debt at much cheaper rates.
The fear for CEVA would be a break up of the business, something a company like Geodis, searching for network synergies, may look to do.
However, CEO Marie-Christine Lombard told The Loadstar last month Geodis’s main acquisition targets were in the US, China and Germany.
Renewed interest in CEVA, saddled with debt after its acquisition by Apollo, is thought to be sparked by its recent financial restructuring as well as improved results.
While refraining from comment on a possible sale, CEVA CEO Xavier Urbain told The Loadstar last month the “main focus” was to drive the restructure, “which is starting to deliver good returns”.
One source said he believed the CEVA management team would have to be a part of any deal.
“CEVA is a relationship company with business controlled by groups and individuals. If they were not treated well they would walk.”
Apollo was famously accused of “shafting CEVA’s staff”, a history that some believe would make finalising a sale difficult without the buy-in of management. Some former employees have been chasing Apollo in the courts.
“Without the teams, Apollo has got nothing to sell,” said one source.
Speculation mounted after XPO Logistics’ CEO Brad Jacobs told a conference that his acquisitive company was looking again at M&A activity after 18 months of integration. XPO was eyeing deals over $500m, in Europe and the US, particularly in contract logistics, he said. However, XPO declined to comment on speculation about CEVA.
In fact, The Loadstar could find no potential buyers that would comment on the rumours. These include CJ Korea Express, which said in April it was looking for acquisitive growth in Europe and the US. However, it began talks with Apollo over CEVA last year, but a deal failed to get off the table.
Another possible contender is Japan Post, which paid $5.1bn for Toll Holdings in 2015. However, it has found the integration of Toll challenging. In April it said it was to make another 1,700 staff redundant, after the merged company announced an annual net loss, Japan Post’s first in a decade, of $363m.
While the Japanese company may well be cash-rich, it might not have the appetite currently for another big integration.
In January, a banking source indicated that a Chinese buyer was close to making a deal with Apollo, at a price tag of $3bn, but nothing came of it.
Alessandro Pasetti, The Loadstar’s financial columnist, said: “CEVA can easily be bought by a major transport and logistics company such as Japan Post, which could afford multiple times CEVA’s take-out price these days. How much, though, depends on whether Apollo will be greedy or not.
“Given the value of its equity in the secondary market, and the amount of debt sitting on its balance sheet, any suitor would need to shell out at least $2bn to secure a deal.”
He added: “Competition could be fierce: the purchase would make a lot of sense for Kuehne + Nagel and, as it fits with its stated mission to grow inorganically, at a time when organic growth is more of an uphill struggle than a stroll.
“Denmark’s DSV, too, has greatly exceeded expectations in regard to the integration of UTi Worldwide – and how not to mention cash-rich but laggard DHL Global Forwarding?
“Most of these buyers could replace CEVA’s more expensive debt with cheaper funding, likely rendering any cash-funded deal accretive from day one.”

CONTAINER NO SHOW FEES AND FORWARDERS

Container no-show and cancellation fees 'a potential nightmare' for intermediaries


dreamstime_s_14769002
© Diego Vito Cervo | Dreamstime.com - Business man with shipping containers
Freight forwarders have been warned that the recent trend by shipping lines to impose container no-show and booking cancellation fees could leave intermediaries exposed to “accounting nightmares”.
In recent months, ocean carriers have begun to tackle the problem of cargo no shows/late cancellations and applied a variety of fees, and the wording of their conditions are crucial to forwarders.
The fee is levied on the party that made the booking, rather than the beneficial cargo owner, notes online freight forwarder iContainers, which suggests forwarders draw up new policies with shippers that cancel shipments at the last minute.
Vice president of sales and operations of iContainers Klaus Lysdal said: “For freight forwarders and NVOCCs [non-vessel operating common carriers], these fees could become a much bigger challenge, as we do not necessarily control the cargo we are booking and often have no control over a client cancelling at the last minute.
“The OTI [ocean transport intermediary] community will have to prepare itself. OTIs should consider implementing policies to prevent potential accounting nightmares that could leave them stuck with cancellation charges.”

Like the European Shippers Council, Mr Lysdale partly welcomed the carriers’ initiative and suggested that, with the concentration of carriers into three main alliances as well as the recent round of consolidation in the industry, lines were now in stronger position to penalise no-shows.
“The no-shows fine is a step in the right direction from the carriers. Certainly, from their perspective, it’s strange that they have never been able to implement charges like these in the past. But now there are fewer carriers to choose from, the chances of these fees sticking around have greatly increased.”
However, he suggests that if carriers are unable to collect penalties, and the initiative does not lead to any significant decline in no-shows, carriers might have to change their strategy.
“If this fails to work again, the next step in the process may be to follow the airlines and demand payment at the time of booking. This would certainly ease the burden on the carriers’ planning.
“But it would also increase the demand for them to deliver in terms of space and equipment, and quite possibly increase sailing schedule integrity and dependability,” he said.

COSCO BUYING OOCL

Cosco Nears $4 Billion Takeover of Orient Overseas

Deal between shipping-container operators could come as early as July


State-owned Cosco Group’s Cosco Shipping unit is the world’s fourth largest container operator with an 8.5% market share.
State-owned Cosco Group’s Cosco Shipping unit is the world’s fourth largest container operator with an 8.5% market share. Photo: Ben Nelms/Bloomberg News
Chinese conglomerate Cosco Group is in advanced discussions to acquire smaller shipping rival Orient Overseas Container Line Co. for at least $4 billion in a deal that could be reached as early as July, people familiar with the matter said.
“OOCL’s owning family is warming up to the idea of a sale,” one of those people said. “It is down to the price and we may get an announcement as early as next month.”
State-owned Cosco Group’s Cosco Shipping unit is the world’s fourth largest container operator with an 8.5% market share. Orient Overseas, which is based in Hong Kong, is in seventh place with a 3.3% share. The Journal reported that Cosco was preparing a bid earlier this year.
Container shipping, which moves the majority of the world’s manufactured goods, is a $1 trillion a year industry, but individual players are struggling to stay profitable in one of the most severe down cycles in 30 years.
The industry was shaken last August when Korea major Hanjin Shipping Co. went bust, prompting a wave of consolidation that has left about a dozen major carriers grouped into three global alliances. Cosco and Orient Overseas are members of the same alliance.
Shares in Cosco Shipping were suspended on the Shanghai Stock Exchange on May 17 pending an announcement on a “plan for material assets.” Shares of Orient Overseas (International) Ltd. , a parent company that also owns real estate and other assets in Hong Kong, jumped 8% Tuesday in Hong Kong trading.
“OOCL is one of the few midsize carriers that managed to stay firm during the downturn, but it’s too small to survive on it’s own in the long term,” said Lars Jensen, chief executive of Copenhagen-based SeaIntelligence Consulting. “Its ties with Cosco go back decades and they are part of the same alliance with Cosco. A marriage makes good sense.”
Cosco, based in Beijing, stands to benefit from Orient Overseas’ sales team and young fleet, which data provider VesselsValue estimates is worth around $1.5 billion. Cosco merged its container-shipping assets with China Shipping (Group) in December 2015. Earlier this year it secured a $26 billion multiyear financing deal with China Development Bank.
OOCL is 69% owned by Hong Kong’s Tung family, which has deep ties to Beijing. Tung Chee-Hwa, the company’s former top executive, was appointed Hong Kong’s first governor after it was handed to China by England in 1997. His son, Andy Tung, is the company’s current chief executive.
Some analysts say the buyout could be announced on July 1, when Chinese President Xi Jinping visits Hong Kong to celebrate the 20th anniversary of the British colony’s return to China.
Write to Costas Paris at costas.paris@wsj.com

SUPPLY CHAIN MANAGEMENT NEXT-GEN TECHNOLOGY

Next-gen technology for supply chain management! When this-gen is a shot gun mess?




Monday, June 19, 2017

AMAZON - WHOLE FOODS AND LAST MILE LOGISTICS

For Amazon, Now Comes the Hard Part

The e-commerce titan may be the player most likely to persuade Americans to buy fresh food online, but it must first solve the ‘last mile’ logistics puzzle


A Whole Foods Market in Newark, N.J.
A Whole Foods Market in Newark, N.J. Photo: Richard B. Levine/Zuma Press
With Amazon.com Inc. AMZN +0.27% wheeling sharply into the grocery aisle, the business of selling food may never be the same.
Food retailing was already struggling with low margins and slow sales growth as shoppers shifted buying patterns. New players have swarmed the crowded market, with grocers ranging from giants Wal-Mart Stores Inc. and Kroger Co. to smaller chains fighting to attract consumers, in large part by slashing prices.
And the industry has been struggling to figure out how to sell fresh food online.
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Amazon-Whole Foods Deal: 3 Things to Know
Amazon's $13.7 billion acquisition of Whole Foods Market makes the online retailer a major player in the grocery sector. WSJ's Tanya Rivero outlines three things to know about the deal. Photo: Zuma Press
Amazon’s agreement to buy Whole Foods Inc. could add to the saturated market as it puts more of its own groceries into the distribution system, while putting new pressure on grocers to figure out how to sell fresh food online lest the web giant beat them. The deal is “a seminal moment in the world of eating,” said RBC Capital Markets LLC analyst David Palmer.
It isn’t at all clear whether the king of e-commerce can do in fresh cabbages what it has done in CDs, books and just about everything else. Amazon and Whole Foods combined still have a small fraction of Wal-Mart’s share of groceries. And Amazon faces a “last mile” logistics problem of getting fresh food to doorsteps that it doesn’t with other goods.
From Cart to Click
U.S. online grocery shopping is
expected to take off in the next few years
$200 billion
150
100
50
0
’12
’11
’10
’09
’08
’07
’14
’15
’16
’13
’17
’22
’18
’19
’20
’21
Estimates
Source: Cowen
“This is going to be one of the hardest areas for them to get into,” said Kent Knudson, a partner at consulting firm Bain & Co., “because of some of the physical challenges of getting food into people’s homes.”
The challenges for grocers today include a new reality: The days of shoppers filling carts during a big weekly trip to their neighborhood supermarket appear over for now. Consumers are more targeted in their shopping habits. They are less loyal to retailers and more willing to buy groceries online. And they are buying more from stores at two poles: ones with cheap prices, and ones that offer high-quality fresh food, often at a premium.
Grocery sales last year barely budged from 2015 levels, after rising a bit more than 2% in each of the previous three years, according to market-research firm Nielsen. Kroger ended a 13-year streak of rising quarterly same-store sales this year, while Wal-Mart, which gets more than half its sales from groceries, and Target Corp. , have struggled, too.
Consumers want “convenience, selection and the right price and they want it now,” said Natalie Kotlyar, head of the consumer business practice at consulting firm BDO USA. “Everyone is trying to meld those concepts to create the perfect shopping experience.”
An AmazonFresh Pickup location in Seattle.
An AmazonFresh Pickup location in Seattle. Photo: David Ryder/Bloomberg News
Amazon, which has revolutionized the way people shop, is betting it can learn the business and solve at least part of the puzzle. It has shown a willingness to forgo profits for years to build market share in an industry. It has cash to burn, deep experience in logistics and a record of relentlessly driving down supplier costs. And its big push into fresh groceries will likely force other food retailers to accelerate efforts at making e-commerce work if they are to remain competitive.
E-commerce has been tough to crack for the more-than-$700 billion grocery sector because selling food online is inherently complex. Last year, online shopping accounted for 2% of the sector’s sales, according to consulting firm Kantar Retail.
People want to squeeze their produce, pick out their vegetables and inspect their meat. Making sure fresh groceries stay that way through transit is challenging yet crucial for attracting shoppers. “It’s really the fresh categories such as produce and meat that are driving people’s decision of where to shop,” said Bain’s Mr. Knudson.
Wal-Mart, Peapod LLC and FreshDirect LLC have been competing to deliver groceries faster and more cheaply. But fresh-food delivery is typically unprofitable, analysts and some companies said.
The Web Aisle
Most Americans shopping
online for groceries are already
buying them from Amazon
47%
Amazon Prime
39%
Walmart.com
Amazon Fresh
21%
17%
Amazon Prime Now
Other online grocery site
13%
Kroger.com
10%
Google Express
8%
Albertsons/Safeway
8%
6%
Peapod
Other supermarket website
6%
FreshDirect
6%
Instacart
4%
Note: Percentages are based on average usage per month last year; survey takers had option to name more than one online shopping platform.
Source: Cowen
“Amazon has obviously reinvented supply chain and logistics in a way nobody has,” said Doug Ehrenkranz, a 25-year food industry veteran who is now a recruiter at Boyden Global Executive Search. Now, the more-than-460 Whole Foods stores across the country give Amazon access to the kind of refrigerated distribution system its regular fulfillment network lacks, all while tapping into the upmarket natural and organic foods market that it has barely touched.
“Wal-Mart and Kroger will feel pain for a while and the regional players that can’t move fast enough will disappear,” said Diana Sheehan, director of retail insights at Kantar Retail. “The bigger concern becomes, what does Amazon do next? Once they’ve navigated the Whole Foods space, they’ll learn how to play in mainstream grocery, too.”
Amazon and Whole Foods declined to comment for this article.
A Kroger spokesman said: “We’re in the middle of a transition today both because of the operating environment and the competitive landscape. We will continue to evolve.” Target said grocery is a key business for the company.
A spokeswoman for Peapod said it is profitable in its mature, established markets. “The grocery industry is a low-margin business and last mile logistics make margins even more challenging,” she said. Wal-Mart said: “We feel great about our position.”
Fresh-food logistics
While Amazon could put pressure on others to step up their e-commerce game, it has struggled for years with a logistical challenge in fresh food that it doesn’t in books and electronics. A Cowen & Co. report points out: “The entire fulfillment process is more complex and time consuming from the moment a ‘grocery’ shipment arrives” at a fulfillment center until it is shipped, what with the need for refrigeration and attention to factors such as “expiration dates, smell, and color, among others.”
The Amazon-Whole Foods deal came together relatively quickly, according to people familiar with the matter, indicating Amazon may not yet have a fully formed strategy for Whole Foods.
Amazon will try to expand the appeal of Whole Foods by using its efficiencies to lower prices, which would bring a fresh wave of pressure to the beleaguered sector, said Chris Baker, a retail and consumer-goods expert at management consulting firm Oliver Wyman.
The supermarket business has always been tough, in part because American consumers have grown accustomed to cheap food. Supermarkets arose out of the Depression, as the efficiency and scale of larger stores made food more affordable for consumers than shopping at local cheese and meat markets, said food historian Andrew F. Smith. As suburbs developed after World War II, grocery chains expanded and found that stocking more inventory provided greater economies of scale.
By the 1970s, there was saturation in the supermarket industry, according to Mr. Smith, and a national recession led to the creation of discount warehouse stores. Competition from fast-food chains and price wars in the grocery sector fueled a wave of consolidation in the 1980s.
A Wal-Mart Supercenter in Springdale, Ark.
A Wal-Mart Supercenter in Springdale, Ark. Photo: Rick Wilking/Reuters
A seismic change hit the industry in the 1990s when Wal-Mart began selling low-price food and within a decade became the nation’s largest grocer. Ever since, traditional grocery chains have been scrambling to compete. In recent years, price competition has become even more fierce as the number of retailers has grown.
There were more than 262,800 stores selling groceries in 2015, up 17% from a decade earlier, according to an analysis by the Willard Bishop grocery consultancy. “There are so many places to food shop and there’s not an infinite number of consumers,” BDO’s Ms. Kotlyar said. “All of these different stores are just splitting up the shoppers among themselves.”
Recent commodities deflation has forced grocery stores to slash prices on such staples as milk, beef and eggs. Labor costs have risen, applying further pressure to profit margins.
Other changes have taken root in recent years. Consumers are far more curious and educated about the source and content of their food, thanks to books and documentaries about the food industry and the rise of television cooking shows. More upscale organic-food stores have opened in response, eating into grocers’ market share while simultaneous demand for convenience has fueled the rise of meal-kit services such as Blue Apron Holdings Inc.
Grocery executives say they are willing to lower prices at the expense of profits if that’s what it takes to keep shoppers from turning to online and discount stores. Even Whole Foods has taken a hit to its margins by lowering prices in an effort to win back customers.
“We are not trying to lead the market down on price,” Kroger Chief Executive Rodney McMullen said in an interview last week. “But we want to make sure we won’t lose a customer based on price.”
Meanwhile, new discounters are still entering the U.S. market. German grocery chain Aldi said this month it planned to invest $5 billion over five years to open nearly 900 stores in the U.S. and remodel hundreds more. Rival Lidl, another German discounter, entered the U.S. market with 10 stores this month—another “body blow” to the traditional U.S. industry, said Craig Johnson of Customer Growth Partners, a retail research and strategy group.
Aldi and Lidl have disrupted European grocery markets by offering low prices, and company officials have said they believe they can aggressively compete in the U.S. market as well.
Driving downward pressure on prices are frugal shoppers such as Meg Meyers, a 35-year-old psychotherapist and married mother of two in St. Louis, Mo. She said she buys food exclusively at Aldi to help stretch her household’s $79,000 annual income, which also goes toward student loans. “We have no disposable income,” she said, adding that she limits her purchases to about $100 a week using a meal-planning app that enables her to buy only what she needs.
Enter the E-Commerce King
Amazon is expected to increase
its share of the U.S. grocery market
Costco
Amazon
Albertsons/Safeway
Wal-Mart
Kroger
32%
28
24
20
16
12
8
4
0
2016
2018
2022
2020
2021
2017
2019
Note: all estimates.
Data does not factor in the Whole Foods deal
Source: Cowen
Amazon, which first entered the food sector several years ago with dry groceries via its website, has slowly built its Fresh grocery-delivery business over years by targeting cities where it already owns large warehouses in part to avoid the need for refrigerated trucks. Still, Amazon has faced the same problem others have: Many consumers have been slow to buy produce and fresh items online.
Amazon has tiptoed into the brick-and-mortar grocery-store business this year, opening two Fresh Pickup stores in its hometown of Seattle and has explored various ideas for other types of grocery stores.
But Amazon’s deal to buy Whole Foods for $13.7 billion, including debt, may help close a gap in its offerings. “Amazon can’t compete in grocery without bricks and mortar,” said Ms. Sheehan of Kantar Retail. “Fresh food is at the heart of what grocery is. Shoppers trust their grocery store for fresh meats, seafood, produce and dairy and Amazon has struggled to convince shoppers that they should be the store people go to for fresh food.”
Amazon’s ‘last mile’
NPD Group Inc. food analyst David Portalatin said the Whole Food stores would solve much of “Amazon’s ‘last-mile’ delivery challenge for fresh groceries.” He said that logistics hurdle was a big reason Amazon hasn’t been able to make a dent in the grocery shopping of the 60% of millennials who already buy other items from Amazon.
The migration online for at least a portion of grocery purchases, led by Amazon, almost certainly means a further shakeout in the industry. The online grocery industry could grow into a $100 billion business over the next decade, according to Nielsen and the Food Marketing Institute.
“I would be the first one to sign up for Whole Foods delivery and would probably never step foot in the store again,” said Judah Ross, 29, an entrepreneur who lives near the Whole Foods flagship store in Austin, Texas, and shops there every other week. “Whole Foods is a pleasant place but I hate going out to shop for groceries. Even though it’s so close, there’s traffic, parking and waiting in line. The convenience of delivery would outweigh any benefit of picking out the food.”
Instacart employees fulfill orders for delivery at a Whole Foods Market in Los Angeles.
Instacart employees fulfill orders for delivery at a Whole Foods Market in Los Angeles. Photo: Patrick T. Fallon/Bloomberg News
Whole Foods currently partners with delivery service Instacart to offer grocery delivery in some cities.
Chains that don’t adapt quickly to the changes in consumer behavior and business dynamics won’t survive, say analysts, who, along with some supermarket executives, expect more consolidation in the coming years and predict more grocery stores will close.
To compete with Amazon, Wal-Mart is offering curbside pickup and home delivery in test markets. Kroger is expanding its platform for customers to order groceries online and pick them up at the stores. It also said it has invested $3.8 billion in lowering its prices over the past decade.
Albertsons Companies Inc., which owns Safeway, says it will offer grocery delivery in eight of the 10 most populated markets in the U.S. by February. It declined to comment for this article.
Even though it is expensive for Albertsons, Chief Executive Bob Miller said in an interview earlier this year, he doesn’t want Amazon to beat him to his customers. “Technology is changing rapidly. Amazon is a prime example of that,” he said. “We don’t want to be cutting edge, ahead of the curve, but we want to be understanding what’s going on.”
Write to Julie Jargon at julie.jargon@wsj.com, Annie Gasparro at annie.gasparro@wsj.com and Heather Haddon at heather.haddon@wsj.com
Appeared in the June 19, 2017, print edition.