Deutsche Post expands business in India with subsidiary DHL

Deutsche Post expands business in India with subsidiary DHL

Edgar Bauer, Deutsche Presse-Agentur, Bombay

With bags of optimism and a lot of money, German postal company Deutsche Post is getting into the world's fasting growing logistics market with its subsidiary DHL.

A key region in their Asian expansion strategy is India, which, like its neighbor China, has high levels of growth. Deutsche Post chairman Klaus Zumwinkel, recently opening a logistics HQ in Bombay, announced increased involvement in India and the whole Asia-Pacific area. Around US$250 million is invested there every year.

The Bonn-based company, which already has half of its turnover abroad, is set to become the clear world market leader in logistics (air and sea freight and contract logistics) with the agreed takeover of the British firm Exel. Zumwinkel said the takeover is due to be completed by December. He sees Asia as the engine of growth to cement this leading position.

"Asia is the world's strongest growth market for us," he notes.

Like China, India is an important building block for DHL. After investment of around $250 million in the last three years, DHL is now the market leader in India in both the express and logistics business.

Zumwinkel did not give any exact figures for turnover and profit. This market leader position is to be strengthened with further investment and connected more closely to the Asian network. "India offers us excellent opportunities which we are pursuing strongly," the Deutsche Post chairman emphasized.

A few months ago DHL, which has been active in the Indian market since 1979, secured a majority share of over 80 per cent of the express market leader Blue Dart. With Blue Dart and around 5,800 employees in India, DHL has 14,000 locations and over 3,000 vehicles and five Boeing-737 freight aircraft.

The specialist logistics firm Danzas Lemuir was founded in 2003. The joint venture (DHL 49 percent/Lemuir Group 51 percent) with over 300 employees organizes land, air and sea transport and complete logistics services for over 5,000 companies in India. Deutsche Post will profit from Indian economic growth and its "enormous potential", says Zumwinkel.

The most interesting market for DHL is estimated to amount to 22 billion euros, of which 80 percent is domestic and 20 percent international. Growth rates of 12 percent per year are expected.

Zumwinkel aims for quality for customers in India too. He can build on a large reservoir of well-trained workers with good English. The wages at DHL are attractive by Indian standards. An average DHL worker in Bangalore might make the equivalent of 80 to 100 euros per month.

Pradeep Kunar, 34, who works at the customs department for express parcels at the DHL sorting center in New Delhi, gets about 250 euros per month. "The money's OK, but the most important thing for me is that I work for a big and well-known company."

Experts see India as a sleeping giant with huge potential and as a new growing economic power alongside China. This year a growth rate of around 7 percent is expected. The U.S. investment bank Goldman Sachs predicts that the Indian economy will be one of the three fastest-growing in the world in the next 20 years.

DHL wants to position itself in the Indian market early, as it does in China. Economic growth has a direct effect on the logistics sector. More and more goods have to be sent to and from the Indian subcontinent. Rapidly growing foreign investment (around $8 billion in 2005) will support and strengthen this trend, Zumwinkel is confident.

The movement of production to India also helps the logistics sector. IT firms such as SAP, Dell and Hewlett Packard have offices in Bangalore, the Indian "Silicon Valley". Multinationals like this are DHL customers. DHL managers expect further strong growth in the textile, pharmaceutical, electronic and car component sectors.

A lot of this is just prediction and success in logistics does not happen by itself. Competition is also a factor, with many rivals in the market, and DHL's competitors also have their eye on the new markets. There are also incalculable business risks such as natural disasters like earthquakes, floods and epidemics.

India still only has around one per cent of world exports while China already has 6 per cent. India, a country with around 1.1 billion people (China 1.3 billion), still has much poverty and weak infrastructure.

A quarter of the population lives below the poverty line. Widespread misery is obvious on the street of Bombay and Calcutta, where huts and tents lie in the gutter and countless homeless people struggle for survival on a daily basis.