Deutsche Post Steps Up Investments in Asia

German postal and logistics giant Deutsche Post AG plans to expand its position in Asia.

Deutsche Post chief executive Klaus Zumwinkel, speaking during a visit to Japan, said that parcel-express service DHL and logistics service provider Danzas will be at the center of these plans. "Asia is, for us, a growth market to which we are paying a great deal of attention," he said. The group had particularly high expectations of opportunities on the Chinese market, he added.

With a share of 34%, DHL is already market leader in Asia for cross-border services, ahead of U.S. rivals Fedex and UPS. "We are expecting to achieve the highest growth rates in the express business," Zumwinkel said. The express market for deliveries within Asia was expected to expand 10% a year, while express services between Asia and Europe were set to grow by 12%, he said. Express deliveries between Asia and North America were expected to expand by 11%.

This was why DHL planned to channel more than one third of its global investments into Asia – "more than a three-digit million euros sum", Zumwinkel said. Between 2000 and 2002, Deutsche Post had already invested around 300 million euros in DHL in Asia to expand storage facilities and develop its supply chain management.

Zumwinkel did not rule out small acquisitions in the region, but he said there were no plans for a major takeover.

Danzas, with a 10% share of the Asian logistics market, was not in the same strong position as DHL, Zumwinkel said, but its growth and profitability rates were also high. On balance, Deutsche Post was making a profit in the region, he stressed.

At present, business in Asia accounts for less than 3% of group sales, which total around 33 billion euros. The 21,000 people Deutsche Post employs in the region make up around 5% of its global workforce.

Expansion in Asia is part of Deutsche Post's strategy to become less dependent on the letter-delivery business on its home market, which currently accounts for around 70% of earnings and which is gradually being opened up to competitors. The group's goal is to reduce the letter-delivery business's share of earnings to 50% by 2005.

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German postal services and logistics group Deutsche Post plans to expand its business in Asia substantially during the next three years, Deutsche Post Chairman Klaus Zumwinkel announced in Tokyo on Monday. The company would invest sums in the triple-digit millions of euros during that period, he said.

Two divisions in particular, logistics and express mail, in which Deutsche Post is already one of the market leaders in cross-border Asian trade, are to be expanded. Deutsche Post is represented in the Far East by subsidiaries Danzas in the field of logistics and DHL in express mail.

In the medium term, the company plans to become the world's largest logistics group. "Asia is a growth market on which we are focusing a lot of our attention," said Mr. Zumwinkel. "Thus, we want to invest heavily in our own companies there."

Mr. Zumwinkel did not want to disclose any details of his one-hour talk with Japanese Prime Minister Junichiro Koizumi on Monday. He did say, however, that he was under the impression that Mr. Koizumi was doing his utmost to privatize the Japanese postal system and make it competitive. A draft bill on the disposal of Japan's public postal service was presented to the Japanese parliament on Tuesday. It is strongly influenced by the German Postal Act from the 1990s.

"I am not saying that we will be a good example for Japan," Mr. Zumwinkel said, "but alongside the Netherlands, Germany currently has the most modern postal laws in the world."

However, Mr. Zumwinkel stressed that Deutsche Post was not interested in Japanese domestic mail services. Investment would go into subsidiaries Danzas and DHL, he said. Since 2000, Deutsche Post has invested euro 300 million ($276 million) in these two business areas, over a third of which went into DHL's expansion in Asia.

In the express business, which also includes parcel delivery, Asia had the highest growth rate in the world at currently 10 percent, Mr. Zumwinkel said. He added that Asia's market volume in this field came to euro 1.6 billion annually. DHL, employing 17,000 people in 40 eastern and southeast Asian countries, accounted for 34 percent of this volume and was thus market leader in the region, outperforming even U.S. group UPS, Mr. Zumwinkel pointed out.

Via subsidiary Danzas, Deutsche Post founded a joint logistics company with Japanese Maruzen at the beginning of 2002. Deutsche Post is the majority shareholder with a 70 percent stake. Although China was a promising market, Deutsche Post still generated a large share of its Asian sales in Japan, said Mr. Zumwinkel.

In 2001, Deutsche Post posted sales of euro 33 billion. Profits before interest, tax and appreciations amounted to euro 2.5 billion, almost euro 2 billion of which are accounted for by letter delivery services. However, the company's monopoly on the delivery of mail weighing less than 200 grams in Germany will be abolished gradually until the end of this decade. The company is thus focusing on profitably expanding other divisions.