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Acquisition marks further consolidation in logistics sector

By Ahmed ElAmin , 10-Jan-2006

Swiss-based transport company Kuehne + Nagel has acquired ACR Logistics, expanding its global network further into Eastern Europe and Asia.

Third-party logistics (3PL), as a sector within the transportation industry, is growing exponentially as manufacturers try to cut supply chain costs, according to InboundLogistics.com.

Food processors and other industries contract 3PL providers to broker transportation and other supply chain management services. As such it is a form of outsourcing supply chain management so that the processor can concentrate on in-plant operations.

 

Kuehne + Nagel's acquisition follows the general trend of consolidation within the European third-party logistics and transport sector. The trend could leave food processors with less choice among companies and pricing on the market.

 

Transporting perishable food is a small but important part of the company's business, a Kuehne + Nagel spokesperson told FoodProductionDaily.com.

 

Small businesses are more likely to use 3PL providers since they generally cannot meet the economies-of-scale that bigger businesses can achieve. All companies may turn to 3PL providers when expanding globally into countries in which they have no experience or units.

 

The €440 million purchase was completed in the first week of January, two weeks after the European Commission's approval of the takeover. With over 40,000 employees in more than 100 countries, the Kuehne + Nagel Group says it now ranks among the top five global service providers in contract logistics. The company has 2004 sales of $8 billion, a growth of about 33 per cent.

 

ACR Logistics, which is headquartered in Paris, has about 15,000 employees and operates in 11 countries, where it manages 2.2 million sqm of warehouse space. In 2004 the company reported a turnover of about €1.2 billion.

 

The company has a leading market position particularly in Great Britain, France, Italy and the Benelux countries.

 

"This acquisition marks a quantum leap for our organisation," stated Klaus-Michael Kuehne, executive chairman of the company's board of directors. "Logistics represents an excellent strategic fit for Kuehne + Nagel and strengthens our contract logistics capabilities, know-how and management competence significantly."

 

ACR Logistics will operate under the Kuehne + Nagel brand. Kuehne + Nagel expects increased cross-selling opportunities to ACR's client base, particularly in Eastern Europe and Asia. Xavier Urbain, ACR's former chief executive, has been appointed to head the company's southwest Europe operations.

 

Kuehne + Nagel main business segments are international forwarding and contract logistics. Sea freight account for 46 per cent of the company's revenues, airfreight 24 per cent and warehousing nine percent. Kuehne + Nagel said turnover for the first nine months of 2005 rose 20.1 per cent.

 

Chairman and majority shareholder Klaus-Michael Kuehne said the transaction would help the company compete in a tougher market. The transaction would help Kuehne + Nagel to gain market share while competitor Deutsche Post completes its integration with UK-based logistics company Exel, which was acquired by the German firm last year.

 

Analyst Datamonitor says the Kuehne + Nagel acquisition maintains the recent trend towards increasing consolidation within the logistics industry.

 

Danish company DSV is currently in talks about a possible merger with Dutch firm Frans Maas, the analyst noted. TNT also stated it was to divest its logistics arm and concentrate on the parcels and express market.

 

In December APL Logistics and Christian Salvesen launched a joint venture in the UK that combines the companies container transport and supply-chain logistics capabilities.

 

A global study of logistics and supply chain executives finds that for the first time in 10 years price has overtaken value-added services as the most important attribute in selecting a third-party logistics (3PL) provider.

 

However technology still remains an important requirement for executives when choosing a 3PL provider, according to the survey by Capgemini. Survey respondents identified the top three future requirements of IT-based services as being radio frequency identification, Internet-based transportation and logistics markets, and supplier management systems

 

According to World Trade Magazine the third-party logistics market grew by about six per cent in 2003 to an estimated $80 billion.

 

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