Air battling with sea for increased market share

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Getting food to a customer’s plate as fresh, tasty and nutritious as possible has been the mantra of retailers and growers for hundreds of years.

Where in the past this may have involved a quick cart ride from farm to village market, today’s globalised world means making the best use of freight options either by air or by sea.

Sea freight is increasingly the dominant mode of choice. Kuehne + Nagel’s global business development manager perishables logistics Natasha Solano, customers being attracted by improved reefer technology, lower emissions and fewer temperature fluctuations than air.

Again, according to World ACD between 2014 and 2015 the share of sea in the movement of flowers and plants from Europe and Qatar grew from 80 per cent to 82 per cent. Air reight dropped from 20 to 18 per cent. The movement of vegetables between Europe and the UAE grew 50 to 53 per cent by sea and dropped from 50 to 47 per cent by air.

But there are plenty of positives for airfreight. It dominates in sector specific movements such as 100 per cent share of flowers freight between Ethiopia and Europe and has a lead in the share of fish movements between Europe and the US.

Perishables is one of the few growing categories in the airfreight sector. The Seabury Group says between January and July this year there was eight per cent growth in the movement of temperature-controlled goods such as flowers and salmon by air with LCD screens down 22 per cent and plastics down 10 per cent.

Seabury senior vice president, Marco Bloeman says: “Who would have said a year ago, that salmon, flowers and milk powders going in to China are the key commodities for growth, rather than the high-tech sector that we are used to. In that sense, we are seeing a shift; perishables will be the commodities that cater for airfreight growth in the years ahead, be it fish, flowers or fruit.”

Gerard de Wit of World ACD says the growth in perishables is being driven by factors such as the world’s largest retailers growing bigger and seeking year-round freshness for their customers and growing middle class populations in developing countries mainly India and China stoking that demand while countries such as Qatar, Singapore, Hong Kong, UAE and Saudi Arabia are beginning to shift from sea and instead move more perishables by air.

So, how are freight forwarders, airports and airlines responding to this evolving market?

Panalpina took a decision in 2014 to increase its focus on the perishables market. According to Colin Wells, who was brought in to the group as global vertical head perishables, there had been “pockets of success” in the sector prior to this mainly the movement of fruit by air from South American nations Peru and Ecuador.

“The reason behind the drive to increase perishables is because it is a solid growth market which contrasted with other challenging sectors such as oil and gas. It has a recession proof factor because even in suppressed markets people still need to eat,” he explains. “The only thing that changes is that people go from the luxury to the more staple type perishables such as apples and pears.”

Indeed, one of its big recent moves came in November 2015 when it acquired a majority stake in Airflo, an airfreight forwarder based in Kenya and the Netherlands specialising in the export handling of fresh cut flowers and vegetables.

At the time of purchase it organised up to 1,500 temperature-controlled shipments per week from Kenya, totalling more than 40,000 tons of fresh cut flowers, especially roses, each year.

“We have developed that business in the last year with a better mix of Kenyan vegetables, fresh herbs and fruits going not just to Europe but also APAC,“ Wells explains. The boundaries of perishables are changing, with ever increasing demand from Asia.

“The Asian market has a bigger appetite for food with provenance so they are now buying from markets which used to just supply Europe. We are seeing growth in China of fresh milk from Australia and Chilean cherries.”

It also moving more “artisan foods” such as bread and cheeses and responding to new customer trends such as blueberries and other super-foods.

“In the next two to three years small artisan producers will start to get platformed into the global stage and they will move their products by air rather than sea,” Wells says. “That’s because it is a very high value product and because to fill a 40 ft container you need a lot of product which these producers don’t have.

“Also, you are finding that some products are pushing back into air freight because people want fresher, more tree ripened products. Taste is coming more into play and the only way to maintain that is by air.”

Indeed, the global growth in perishables air and ocean freight is between 8-10 per cent with an expectation of double-digit growth continuing for at least the next three years. Wells says Panalpina is exceeding that growth figure as it moves to meet the sector’s challenges.

“Currency fluctuations, especially recently after Brexit and the election of Donald Trump, can be very negative for some of our customers and positive for others,” says Panalpina regional business development manager, Quint Wilken. “That is a challenge to manage.”