Date
20 October 2017

Kerry Logistics on complex quest to deliver

For newly listed Kerry Logistics Network (00636.HK), delivering will have to mean much more than moving freight from one place to another. The Hong Kong-based company says it aims to set itself apart through value-added services, an area known in the trade as “complex logistics”.

Take the services Kerry offers to European chocolatiers, group chairman and Singapore’s former foreign minister George Yeo Yong-boon {楊榮文} told the Hong Kong Economic Journal.

Yeo said Kerry first transports the chocolates to Hong Kong in a minus-40 degrees Centigrade environment and then takes charge of the packaging process — all the way down to tying ribbons on boxes. After that, the group distributes the products to the brand’s retail stores.

Yeo said Kerry’s edge was the supportive sales system it developed for corporate clients, which together with the company’s warehouse and distribution services, made him confident of future competitiveness. The company has 11.2 million square feet of logistics facilities on the mainland and a delivery network that covers 2,600 cities and towns.

“Of the hundred most powerful brands worldwide, 40 of them are clients of ours,” Yeo said.

Yeo does seem to have cause for at least some optimism. In the week or so since Kerry Logistics Network debuted in Hong Kong, it has gained more than 8 percent from its listing price, reaching a market capitalization of HK$17 billion (US$2.2 billion).

But it’s not just the mainland that presents possibilities. Yeo said consumer and logistics services are bound to rise in countries belonging to the Association of Southeast Asian Nations (ASEAN) as their economies grow and infrastructure improves.

China’s trade with ASEAN reached US$400 billion last year and Beijing plans to expand that to US$1 trillion by 2020. Yeo insists that logistics will be key to realizing the goal.

He said Kerry’s network already links China with numerous cities in Vietnam, Thailand and Singapore, and the future will depend on building a comprehensive road transport web in the region.

One area Yeo said Kerry will steer clear of is express courier services, despite the sector’s rapid growth in China in recent years. He said the business amounts to “commodity logistics” because competition is cut-throat and there is very little room for profit.

The company remains based in Hong Kong because logistics is at the city’s core but, Yeo said, other centers such Singapore and Shanghai are mounting challenges. Asked if the group will one day move its headquarters elsewhere, Yeo maintained that “business will adjust to the market”. High rents, shrinking warehousing options and slow progress in Hong Kong’s plan to build a third airport runway are some factors Yeo said undermine the city’s attractiveness.

– Contact the writer at [email protected]

SK

 

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