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On the evening of November 19, SF Holdings released the October express logistics business operation briefing, which is also the first time that Kerry's data has been consolidated. In October 2021, SF's supply chain and international business revenue increased significantly, with a total revenue of 8.747 billion yuan in the month, an increase of 779.10%.
Ten years after going to sea, relying on the acquisition of Kerry, SF's overseas business has finally achieved a breakthrough in revenue. Once, overseas markets were SF's dream of opportunities, and since 2009, it has taken the first step to go to sea, with the intention of conquering a wider range of overseas markets through Southeast Asia.
However, so far, SF's overseas business has always achieved mediocre results. Until February 2021, SF suddenly announced the acquisition of Kerry Logistics, adding new variables to SF's overseas layout. Speaking of Kerry, Wang Wei also put on a humble posture, claiming that the transaction is not an acquisition understood by the outside world, but a deep cooperation between the two sides. However, in the eyes of many people in the industry, compared with Kerry, SF's international business is relatively weak, and there are new uncertainties in the integration of the two after the acquisition.
Industry insiders have noted that in the past two years, many executives have left SF, and SF's original international department has also officially changed its name. SF also said that Kerry has a very strong team of international management capabilities and rich experience in localization operations, which will help SF improve its international operation capabilities in the future.
The addition of Kerry is tantamount to making up for this shortcoming for SF, which originally lacked international business genes.
Why is Kerry selling?
On the evening of 28 September 2021, SF Holdings completed the closing of the transaction to acquire a controlling stake in Kerry Logistics for HK$17.555 billion (approximately RMB14.6 billion). Kerry Logistics will maintain its listing status as the third listed company under SF Holdings.
According to official sources, Kerry Logistics is the largest international logistics company listed on the Hong Kong Stock Exchange, with more than 43,000 employees worldwide, its core business includes integrated logistics, international freight forwarding and supply chain solutions, the Group is headquartered in Hong Kong, has a global network spanning six continents, including one of the largest distribution networks and hubs in the Greater China and ASEAN regions.
But Kerry 'selling herself' has long been indicative. According to overseas media reports, SF had spent three or four years consulting with Kerry before that. The company spent three or four years communicating with Guo Konghua, chairman of Kerry Logistics, and believed that the other party's team attraction could be the first in the logistics industry in Asia. If the (Guo) family had not trusted me and SF, this project would not have existed. I want to emphasize that the outside world understands that this is an acquisition, I think it does not exist, this is the deep cooperation between the two sides, is the capital cooperation, trust SF and I Wang Wei, will give us a controlling right, hope to jointly develop logistics. Wang Wei said.
"Kerry and SF had a conversation a few years ago, but Kerry probably didn't particularly want to sell it at that time." Huang Ling (pseudonym), who used to work in SF's international department, revealed that in just a few years, Kerry's attitude has suddenly changed. "This year, for a number of reasons, Kerry is looking for strategic investors."
Li Weidong (pseudonym), an investor who has long been concerned about the logistics market, also noticed Kerry in the market, "This case has been floating in the market for a long time, Kerry has talked to many state-owned enterprises, and finally SF took it." ”
In his view, Kerry's "selling" may stem from changes in the entire overseas logistics market. From the perspective of 2019, global economic growth has slowed down, the Sino-US trade war has also had a profound impact on global trade, the demand for cross-border transportation is also shrinking, and traditional freight forwarding logistics companies are also facing huge challenges.
In addition, Tiger Sniff's report also shows that first, due to the intensification of competition in the industry market, foreign-funded enterprises with high costs have lost their competitive advantage, and foreign logistics companies such as Kerry Logistics have difficulty in obtaining domestic customers; second, the business of foreign customers in the mainland has slowed down, and factories have shifted to Southeast Asia.
In the context of the great changes in the industry, Kerry is the first to bear the brunt. According to the data, in 2019, Kerry Logistics' business in the mainland slowed down to 8% from 2019, while Kerry Logistics' business in Southeast Asia grew by as much as 20%.
In March 2019, at Kerry Logistics' 2018 results conference, President Ma Rongkai also said that China's market performance last year was lower than we expected, especially after the rising Sino-US trade friction, so our China business performed poorly last year. However, although the number of orders exported to the United States has shrunk, orders for exports to Southeast Asian and South Asian countries have increased. Sino-US trade frictions have eased this year. In the first two months of this year, our China business experienced double-digit strong growth, hoping to have a positive growth performance by the end of the year, and in the long run, we hope to turn China's business from export-led to domestic demand-led.
No one could have predicted that in 2020, the new crown epidemic has become a turning point in the logistics industry. The outbreak of COVID-19 in the first half of 2020 had a huge impact on domestic supply chains, but in the second half of 2020, the outbreak of the epidemic overseas reversed the trend of cross-border trade in China as a whole. Kerry also ushered in a year of take-off. According to the Kerry Annual Report 2020, revenue reached HK$53.36 billion that year, an increase of 30%, and the growth was mainly from the international freight forwarding business. Profit from main business was HK$3.3 billion, an increase of 20%, and operating margin exceeded 6%. The net profit of the main business was 1.83 billion, an increase of 33%.
However, Kerry's business growth in the mainland has not been able to turn around, and the data shows that in 2020, the revenue and profit margin of Kerry's logistics business in the mainland region will increase by only 0.5%. In 2020, the revenue of freight forwarding business increased by about 40%, but the profit margin increased by only 30%, mainly driven by the epidemic.
Therefore, finding collaborators in the country is also imperative for Kerry.
SF does not go out to sea with a smooth wind
In this context, SF also urgently needs to contribute to its commercial sector.
In fact, SF has long realized the importance of overseas markets, and began to build SF's international business network in a planned way as early as 2009, established the Singapore SF branch in 2010, and has since traveled to Malaysia, South Korea, Japan and other Southeast Asian countries.
"SF has been looking for a second growth curve," Li Weidong said, "if you look at SF's data, you can find that SF has entered the stock market in the field of commercial express delivery." We believe that for the development of Chinese logistics enterprises, cross-border logistics, especially whether it is traditional cross-border trade logistics or cross-border e-commerce logistics, should be a very important growth curve in the next 5 to 10 years. ”
At the investor relations event held by SF Holdings, talking about overseas business, SF said that the international main supply chain and cross-border e-commerce performance, each track will have its own benchmarking and development strategy. In the past, the core was domestic, and the international proportion would become larger and larger in the future.
According to SF, at present, SF has outlets in 78 countries and regions, each of which has a scale of about 100 people, in addition to self-operated business, overseas business also includes authorized agents, franchise networks and joint ventures four types. Referring to future planning, SF said, "It will focus on The Asian region, do the best in Asia, and cooperate more in Europe and the United States, and then expand the Middle East, Africa and South America."
Although SF has been going to sea for more than a decade, from the data point of view, the international business has also maintained growth, but its international business has always been in an embarrassing situation.
According to Huang Ling, SF's overseas business is mainly divided into three types: express delivery, freight forwarding and contract logistics, in these three aspects, SF has made many attempts, "but in the end the overseas network has not been built."
In Huang Ling's view, the problem is that the magnitude of the express delivery business is not enough to support SF to build an overseas network. "Logistics business is nothing more than volume and network, SF overseas business is mainly focused on business parts or high-efficiency express delivery, the magnitude is not enough to build an overseas network." Basically, SF's international business only has cross-border pieces, if it is done local delivery, it needs to rely on local agents for delivery. Later, I also tried the franchisee system, but because there was no gene to join, it was not particularly successful, which was equivalent to not having its own foundation in each country. ”
In addition, SF has not been able to seize the dividends of e-commerce, "companies like Jitu, Flash, and iMile are largely because they rely on e-commerce platforms, rely on e-commerce platforms to build their own networks." ”
On the other hand, according to Zhang Jiong, a veteran of cross-border e-commerce logistics, due to the loss of SF International in Russia, after the seller refused to pay the goods, SF filed a lawsuit against them, and a series of incidents led to SF's poor reputation in the seller circle, "Many old sellers dare not use SF." ”
In addition to express delivery, SF has also tried logistics business overseas. "Freight forwarding business mainly relies on aviation advantages, in the market procurement resources pure freight forwarding part is very small, the first two years of SF main solution services, accompanied by Chinese-funded enterprises to go to sea, for large customers to provide contract logistics, in fact, also started, in some countries also from 0 to 1 established, but this model is difficult to scale, profit margin is not so high." Huang Ling said.
The deeper reason is that SF has always lacked a team with international logistics experience to expand overseas. Zhang Jiong, who has had contact with the SF international team, found that in the more than ten years that SF has gone to sea, the CEO of the international department has changed frequently, and he has hired senior executives from many large companies to form an international team, but without exception, they do not have international logistics experience.
According to public information, in January 2020, Sun Xun took over the helm of SF International, and previously served as SF Chief Risk Management Officer and general counsel. "Wang Wei also does not understand international business, and can only rely on SF's executives to do international business to input, but SF has not come from international business in previous international bosses, and has a background in human resources or a professional business, in fact, no one has been deeply involved in international business for many years." Huang Ling said.
In Zhang Jiong's view, the lack of a professional team with international logistics may not only be lacking in management, but also a direct result is that it is rare to see SF's overseas acquisitions. In this regard, SF is in stark contrast to Kerry. For Kerry, the acquisition and holding became one of the means for it to expand its new business overseas, "in addition to the relatively unsuccessful acquisitions in Europe, Kerry's acquisition success rate is very high." Zhang Jiong said.
Through continuous acquisition and integration, Kerry's unique competitive advantage has also been formed. "Two years ago, I joined a large central enterprise logistics platform to go to Kerry. At that time, according to the company's existing domestic and international logistics system, I designed the M&A integration strategy of 'domestic onshore network supply chain system + international top integrated freight network + several vertical subdivision solutions', hoping to create a Chinese version of DHL. Among them, the 'International Logistics' section is Kerry, which is the most important part of this design. ”
An industry insider who has been exposed to Kerry's sale wrote in his public account, "The result is very regrettable, and Kerry has also been pocketed by SF. If the same strategic planning is to be carried out in the future, there are almost no alternative targets. ”
Integrate suspense
After the acquisition is completed, how SF and Kerry will integrate has become a common concern of the outside world.
In response to this transaction, SF has repeatedly stated that after the completion of the cooperation with Kerry Logistics, SF Holdings will take Kerry Logistics as the main platform for expanding overseas markets, will further improve the company's ability to integrate integrated logistics solutions, and effectively supplement the company's resources and capabilities in international freight forwarding, customs clearance, etc., combined with SF's own international cargo and shipping resources and Kerry Logistics' extensive international freight forwarding network, will further strengthen SF's competitive advantage in international cross-border freight.
Specifically, SF said that in terms of international freight, Kerry Logistics has strong strength and has a stable growth in cargo volume, which can use SF's own air transport capacity resources, and SF can improve the loading rate of international routes and further expand the layout of the international air network on the basis of sufficient cargo volume; in addition to air cargo, Kerry Logistics also has rich maritime resources, and in the future, the two sides can also provide customers with more choices for cross-border supply chains; in addition, the Southeast Asian market is growing faster and the e-commerce penetration rate is rapidly increasing. Kerry Logistics has a more mature network in the Southeast Asian market, with a layout in the fields of express delivery and supply chain, and SF also has some self-operated and joint venture companies, which can use the integration of resources of both sides to expand more markets.
SF also mentioned that more and more Chinese-funded enterprises hope to find Chinese-funded logistics to assist them in completing the construction of the international supply chain, in the past, SF International resources were limited and many businesses were difficult to undertake in the short term, and in the future, Kerry Logistics believed that it could undertake more international supply chain business opportunities for customers; at the same time, Kerry has a very strong team of international management capabilities, rich localization management experience, and will be able to help SF International improve its international operation capabilities in the future.
However, Li Weidong pointed out that the uncertain factor lies in whether SF can integrate Kerry's system well, and whether the culture and management system of Kerry and SF can be well merged, which is also a problem faced by every enterprise that does mergers and acquisitions.
Now, SF is going through this process. Zhang Jiong noted that in the two years from 2020 to 2021, many SF executives have left, "SF International may be broken, or optimized, and returned to Kerry to manage."
According to Huang Ling, from the general direction, overseas business will mainly be based on Kerry, SF's original international business has also been adjusted, SF's original international department has been renamed the international e-commerce express business department, in addition to retaining the cross-border e-commerce express business, other international business will be at least in the short term with Kerry-based.