Danish shipping giant is looking at supply-chain investments to boost its sagging revenue
The world’s biggest commercial shipping operator plans to add extensive new capacity—but it won’t be on the water.
Danish shipping giant A.P. Moller-Maersk AS instead wants to buy warehouses, container terminals and customs brokerage firms to boost its logistics-services capabilities, part of a strategic shift toward a landside business the company hopes will produce half its revenue in two years.
“Today up to 80% of our earnings comes from container shipping,” Maersk Chief Executive Soren Skou said in an interview. “Hopefully a couple of years from now will be much closer to a 50-50 scenario between ocean and nonocean services.”
Mr. Skou’s plan would extend a transformation of the 115-year-old maritime business that began when he became CEO in 2016. Since then, the sprawling Danish conglomerate has disposed of its oil and tanker businesses to focus more closely on building a singular company with container shipping at its center that provides transportation and logistics services to big customers like Walmart Inc.
Mr. Skou said the stronger focus on inland logistics comes as the company continues to feel the aftereffects of the 2008 financial crisis, which dealt a blow to global trade, and as the Maersk Line container ship operator faces new challenges from the growing trade dispute between the U.S. and China. “To put in perspective, in 2011 our turnover as a group was around $60 billion and in 2016 our turnover had declined to around $35 billion, so we were not in a good trajectory,” he said.
Maersk Line has around 70,000 customers at sea, moving around 20% of all container capacity. Clients include a range of businesses, from U.S. retail chains and car makers to furniture suppliers, electronics companies and clothing importers.
But less than a quarter of those customers use the company to move their goods from ports to warehouses and distribution centers.
For Maersk and some of its oceangoing rivals, the business of managing goods before and after they move on ships is looking especially attractive after several years of sagging freight rates have eaten away at profit margins.
France’s CMA CGM SA, the world’s fourth-largest container ship operator, this year bought Switzerland-based freight services provider Ceva Logistics AG for $1.7 billion. Chinese shipping heavyweights Cosco Shipping Holdings Co. and China Merchants Shipping and Enterprises Co. have poured billions over the past decade into terminals, rail links and road infrastructure as part of Beijing’s One Belt, One Road initiative to control supply chains from Asia to Europe.
Maersk is faced with a market “that ultimately views its services as commodities, so it’s got to find a way to add value to make sure it’s a shipping line of choice,” said Nick Bailey, the head of research at U.K.-based Transport Intelligence Ltd. “Providing a service which appeals directly to shippers, potentially as an alternative to forwarders, seems to be its solution to this.”
Maersk’s APM Terminals unit operates a network of 76 ports in more than 100 inland cargo-handling locations around the world. In North America, it runs along with Damco, Maersk’s freight forwarding unit, 20 warehousing and distribution facilities in places such as California, New Jersey, Texas and Georgia.
By contrast, global logistics providers such as Switzerland’s Kuehne + Nagel InternationalAG , Deutsche Post AG ’s DHL Supply Chain and Denmark’s DSV A/S typically have hundreds of warehouses around the world. Ceva Logistics says it has 1,000 logistics facilities world-wide and 130 in the U.S. and Canada.
Those companies handle business for big customers such as Walmart, Amazon.com Inc.and Home Depot Inc. that source goods from scores of vendors across Asia, which are delivered to warehouses in China and then packaged and shipped to the U.S. and Europe.
“We want to do that. We want to run the warehouse, receive the goods, stuff it into containers, ship it to the U.S. and provide a data feed that says the yellow swim trunks are in that box,” Mr. Skou said. “Then we take it out of the containers,” and send the goods by trucks to distribution centers closer to the final delivery point.
Maersk already is a big player in port-to-port transportation for retail and lifestyle supply chains. Mr. Skou said he is looking for rapid growth in automotive logistics and chemicals, where Maersk would run the process from customs clearance to distribution center deliveries. The carrier won’t be a last-mile supplier so it isn’t looking to invest in trucks. Instead, Mr. Skou said he is on the lookout for brokerage firms and supply chain management companies in the automotive industry.
The company bought U.S. customs house brokerage Vandegrift Forwarding Co. earlier this year, and Mr. Skou said there may be more such acquisitions.
The company also invested in a freight-booking startup, Loadsmart Inc., last year, and this month launched an online tool called Maersk Spot aimed at simplifying booking with the shipping line.
Still, Mr. Skou said, some senior managers continue to debate whether it’s better to get on the phone with customers they have known for years and negotiate freight rates, or let them book ship space on digitized platforms.
It is a sign of the challenge in turning around a business that grew from a company formed early in the 20th century that grew into an umbrella group overseeing investments from ships to supermarkets. Mr. Skou says the business now needs to approach its corporate customers “with one sales force and one customer-care office and one delivery organization.”
He said he plans to complete Maersk’s makeover by 2021.