Research unveiled; Speakers at the EG Industrial Summit presented some specially commissioned research papers. Noella Pio Kivlehan reports
During the tow day EG Industrial Summit, a wide range of top speakers from the industry presented unique and exclusive research into the European market.
Key among the topics discussed was “going green,” which focussed on recent trends and market conditions; tracking and anticipating transport and logistics across Europe; how to break into new markets, and excelling in an evolving market.
Central to several speakers’ delivery was the increasing presence of Russia. but depite the attractions in the country, there were warnings about the differences of doing business for those either considering investing or operating in a former Soviet state.
The growing economies of the eastern countries and the importance they are starting to have as a gateway between Chine an Western Europe was featured, while retailers pointed out the difficulties they face in getting the right warehouse and operators for storing hilled and frozen goods.
Panellists also took to the stage to give differing points of view on the importance of transporting freight by rail.
Taras Oksyuk: the best and worst of doing business in Russia
Continuing a discussion on Russia, Taras Oksyuk, senior associate with Lovells in Moscow, highlighted the benefits and pitfalls of legal issues of doing business in the country.
Doing business in Russia – the legal pitfalls:
Legal factors contributing to further foreign investments:
1 Regime of national treatment (save for very few limitations)
2 Reform of land law, construction law and tax law
3 Harmonisation of federal and regional laws
4 Protection against appropriation of real estate by the state authorities.
“Golden rules” for foreign investors:
1 Remember that only Russian law is applicable to transactions with real estate
2 Make sure that the legal due diligence is properly exercised before the deal
3 Remember specific limitations established for foreign investors
4 Choose the title to state or municipal land carefully.
Specific limitations established for foreign investors:
1 Generally, limitations are related to land only.
2 Limitations include: (a) prohibition to own agricultural land plots (b) prohibition to own land plots in locations close to the state border. In both cases a foreign investor may have only the leasehold title to land.
Major challenges for foreign investors in Central and Eastern European countries
In general:
- Slow administrative services
- Slow judicial process
- Underdeveloped infrastructure (roads and utility networks)
- Politics
Real estate:
- Risk of restitution claims (regarding former state/municipality owned property) – this risk will be reduced in Bulgaria after 21 November
- Risk related to the certainty of title
- Problems with obtaining financing for the acquisition of plots of land for development.
Choice of title to land after the completion of construction
1 After the completion of construction, the owner of the constructed property enjoys the exclusive right either to lease or to purchase the state or municipal land plot under such property
2 Only the owner of the constructed property may choose the title to land
3 Sale of land can be refused by authorities only in cases prescribed by law (e.g. limitation of tradability of land, reservation of land for state or municipal needs).
Martin Whitcombe: facing the logistics challenges in Europe
Addressing the conference, Unilever’s European logistics director Martin Whitcombe spoke about how new chilled products on the market can pose real problems across Europe, and also the difficulties of getting the right transport.
He pointed out that as Unilever already has a presence in virtually every market in the world, what was more important to the company was “entering into new channels,” and “how to get product from manufacturing to consumers”.
Citing a new fruit drink, Knorr Vie, which needs to be stored at 5e_SDgrC, Whitcombe said that: “How to get the fruit drink – which is stored at 5e_SDgrC in the UK, but for most of Europe the standard is plus 12-16e_SDgrC – to the customers is a challenge.”
Whitcombe said that this was not a problem in the UK, but it proved difficult for European locations.
“Let us not assume that the logistics companies can do everything. There is no pan-European logistics company.”
As a result, Whitcombe said, FMCGs (fast-moving consumer goods firms) were now sharing storage units with each other.
Whitcombe said that even with this product, it still proved difficult to find the perfect solution as Unilever “always has to keep coming back to the financials. In logistics, our costs soon run away with us.”
“Unilever is increasingly going direct to developers and bypassing logistic companies. In the case of the drink, do we go and find the building ourselves?” The answer was yes.
Unilever’s presentation to delegates
Warehouse network dynamics
- Global turnover of €40bn
- Over 350 European storage locations
- 1.3m+ m2 rented or owned
- Warehouse budget is €400m-plus
- Top 72 warehouse locations make up 80% of warehouse budget
- 31m pallets are moved through the network each year
Unilever guide to new market entrance
Global market presence
- Unilever is present in every global market
- Main challenges for Unilever are new channels and not completely new markets.
Real life – new channel demands Knorr Vie
- Chilled product at 5ºC, being distributed in all Western and Central European markets (most Unilever chilled products run between 12-16e_SDgrC)
- Considerable advertising spend behind major product launch
- In some markets no obvious existing channel this could be distributed via small, daily deliveries to all retailers of which most are mixed pallets.
Key considerations
- Volumes, temperature ranges, delivery frequency, retailer order times, geographic coverage
- Are there any existing channels that this could be distributed through? Key consideration is the cost to serve, what will this product require in terms of service and cost?
How to respond?
- Volumes, geographies and physical operational characteristics
- Existing operations, integrate, if not 3PLs or share with other FMCG
- If none of the above, set up own new network, consider implications?
- Financial implications, assume will achieve service levels required
- Build design and, if need be, find warehouse location ourselves?
- Build, test and start operations, improve, benchmark
- Live happily every after!
Source: Unilever
Prospecting for Gold
The age of sustainable development is upon us, but can developers turn green into gold?
This was the question Gazeley managing director Nick Redwood put to delegates at a breakout session hosted by the developer, itself a passionate advocate of sustainable design, at the EG Industrial Summit, writes Patrick Clift.
A frustrated Jonathan Fenton-Jones, Gazeley’s sustainability director, said, investors had yet to place a premium on the “financially future-proofed” eco-shed.
“Environmental consideration should be embedded in the value,” he said. “It has to be, but we do not see it. How can they be valued at best neutral, and at worst negative, to stock that has no such consideration, when a valuer takes a 20-year punt on behalf of his investor?”
Legal & General director John Holland admitted investors needed a “certain amount of educating” in the ways of green sheds, but denied that valuers make the market.
“It is the tenants who decide,” he said. “If they want a green building, are they going to pay more for it and create a market which the valuers can pick up?”
So do occupiers pay more? Delegates from industrial agency M3 said there was little evidence, aside from freehold owners or those with CSR commitments, of tenants paying above the market value.
However, panellist Ken Hall, ProLogis senior vice president of design and construction, predicted a sea-change would come in “one or two years”, when developers could more easily help valuers compare the carbon footprint of rival buildings.
Hall also said he was convinced developers could turn green into gold. “How do you compute a rental yield? It’s about desirability. That is what creates the value in the building. Sustainability is just another one of those desirable things and I think it is inevitable it will pay.”
Peter Acton:manufacturers and retailers will drive demand
Peter Acton of Gyros Communications, who works on behalf of the Chartered Institute of Logistics & Transport for the UK Logistics Directors Forum, summed up the conference’s main themes.
Focusing on how consumer demand is changing and driving the globalisation of supply chains, Acton spoke about the 21-day car project, spearheaded by the motor industry. This, he explained, allows shoppers to walk into any dealership and place an order for a specific make, model and colour of car, for delivery within 21 days.
But, he pointed out, moving ships around the world can take 21 days, so this project creates a logistical challenge. He said that this will continue and the time given to deliver goods will get tighter and tighter as time goes on.
Clothing retailers are also upping their demands. Acton highlighted Spanish fashion chain Zara, which has an 18-day change-over time for its clothing stock in their shops. This means having to produce the clothes near to where the are sold.
It is a trend catching on with other retailers. As Acton pointed out, M&S had previously changed its stock only twice a year, at spring and autumn, but it has now switched to fortnightly samples. Acton said that, as a result, there is a requirement for more warehouses to be located in the country of origin “Companies have been getting away with this using air freight to transport smaller amounts of goods,” he said.
Acton said that because globalisation is only going to increase, the industry needed to be ready to move those goods around.
Summing up, Ackon predicted that there would be more collaboration between manufacturers as they look to smooth out their own supply chains. And in Eastern and Central Europe development will be be manufacturer- and retailer-driven.
Taras Oksyuk: the best and the worst of doing business in Russia
Martin Whitcombe: facing the logistics challenges in Europe
Deals segmentation (%)
Demand segmentation (%)
Peter Acton: manufacturers and retailers will drive demand
