Maersk (MAERSKb.CO), the world’s biggest shipping company, plans to focus on premium services such as cold storage and digital solutions to avoid competing with its own freight-forwarding clients as it expands in the land transportation business.
Since announcing a new strategy in 2016, which included selling its oil and gas business, Maersk has focused less on market share and more on profitability and cost-cutting in its container and logistics business.
It now hopes to see its terminal and inland logistics operations, the non-Ocean business, make up a bigger part of its future earnings. In 2018, the ocean transport business accounted for almost 80% of core earnings.
While Maersk moves around one in five containers shipped at sea, it handles land transportation from ports to warehouses and distribution centers for less than a quarter of its customers.
Speaking to reporters on Monday, chief executive of APM Terminals and member of Maersk’s executive board, Morten Engelstoft, said Maersk had room to “catch up” with rival shippers in its land transportation business.
“Compared to the other shipping lines, our share of the inland business is lower percentage-wise,” Engelstoft said.
Rather than investing in freight trucks and threatening the core business of large freight forwarding companies – many of whom are Maersk’s own customers – Engelstoft pointed to so-called ‘cold chains’ as a more attractive investment.
Transporting goods in a ‘cold chain’ means keeping perishable goods, like fruits or meat, refrigerated throughout the entire journey in order to keep goods fresh for longer.
Engelstoft mentioned that Costa Rica, a major exporter of pineapples and bananas, could benefit from a cold chain between its banana plantations and Maersk’s recently inaugurated container terminal on its Caribbean coast.
Maersk is keen to avoid eating into its customers’ land transportation businesses as it develops more end-to-end customized solutions. It risks taking business from some of the world’s biggest freight-forwarders like DHL Logistics, Kuehne & Nagel (KNIN.S), DSV Panalpina (DSV.CO) and DB Schenker.
“Of course, Maersk needs to keep an eye on the fact, that a large part of our business is for freight forwarders,” Engelstoft said.
“The primary focus in the new Maersk is not the traditional freight forwarding business. We are much more interested in things like cold stores, data and digital solutions,” he added.