Christian Salvesen’s involvement in BA World Cargo’s Heathrow-based fresh produce handling and distribution activities began in 1998. Nine years down the track, the relationship has evolved in directions that have undoubtedly surprised the main protagonists. “I don’t think anyone would have envisaged it becoming so big,” says Giles Brown. “Or that Salvesen would take such a huge role in the running of the business at the Perishables Handling Centre (PHC).”
Salvesen Logistics is now two years into a five-year deal with total responsibility for operating the centre on BA’s behalf. “We have a unique relationship with BA now and they have a large bank of expertise from which we can springboard, as well as the transport, infrastructure and financial systems to support the operation,” says Matt George. “It works very well and gives us an element of independence from BA that we can pass on to customers - our relationship now is with the core customer base and not with the airline and we are also able to deal with more airlines and therefore offer a more comprehensive service.”
The biggest volume going through the PHC is from southern Africa, through fresh-cut, prepared fruit specialists Blue Sky and Spring Valley, with daily arrivals on BA, South African Airlines and Virgin from Ghana and South Africa for three major supermarket chains. The berry category is a large customer, with KG and Driscolls also sending huge quantities of fruit through the facility during the non-UK season.
The flower sector has also become a big customer and the centre recently taken on additional flowers business for M&S, which brings several thousand bunches a week through the facility.
“It is a real tribute to the guys here that they have been able to adapt very quickly to the changing demands put on them,” says George.
There is also a small amount of export business going through the PHC, notably British berries being flown out to Singapore at peak season for the ex-pat community. This is something Brown would like to build on. “Obviously, we are looking at every way to use the facility and to make use of any revenue opportunity,” he says. “And we have an area that we can use as an export unit. Only perishable products are going through there at the moment.”
Salvesen’s extensive European roadfreight network means it can offer the door-to-door service required by many customers, and the PHC is also used to carry out consolidation and packing by some customers. “What we are attempting to do is fill the capacity we have for as much of the year as possible and efficiently sweat our assets,” Brown says.
Major investment has gone into the Heathrow facility in the last two years, with £1m spent on new ULD lifts and work to transform part of the upper floor into a 20,000 square foot processing area. Overall, capacity has risen by 40 per cent. “Underpinning everything is a desire to grow this site and the activities here,” says Brown. “We could take on a lot more business here and I do foresee us becoming a consolidation hub in the future.
“We have the experience and expertise to find a way to do just about anything and we have shown that by adding a lot of value to our customers’ businesses. Sometimes it’s simply a case of stepping back from the supply chain and working out a way that we can do something better than it is being done already.”
As Salvesen becomes better integrated in the airport community, relationships are beginning to build with in-flight caterers, which again adds to the usage of the PHC facilities - and not only for fresh produce or flowers. And the company is also offering a service that connects suppliers with the airline catering fraternity.
From the customer’s point of view, Brown adds that the ultimate demand is for an end-to-end price for their product, built into one structure. “We have the capacity to do that already with BA, with negotiated preferential rates for BA customers, and we can also do it with other airlines,” he says. “But we have to become better at feeding into existing routes and building a critical mass, rather than using factory-gate priced transport. Again, the only way to do that is through building partnerships and strategic alliances with freight forwarders abroad to optimise the offer to the UK supply chain.”
Salvesen Logistics sits within Christian Salvesen’s food and consumer division, which has 55 locations spread across the UK, with an annual combined turnover of £251.5m, more than 4,000 employees, 3.8msqft of warehouse space and 540 temperature-controlled vehicles.
One of the first actions of the logistics giant’s recently appointed chief executive Stewart Oades was to split the division from its links with the CS industrial division and once again give it its own identity and focus. But the isolation of the five different divisions of the company has one end goal - to strengthen each separate part and bring the capabilities of the whole to the fore through greater cross-fertilisation of assets and services.
“As part of the temperature-control network, we are looking at the sectors into which we can realistically expand and the companies we can work with to do that,” says George. “The aviation logistics market is quite innovative in terms of the numbers of third party logistics players in it. It is a wide area and there are lots of opportunities for consolidation. The number of small freight forwarders fighting for small slices of the cargo market will inevitably fall. The question for us is how we can develop an offer that encompasses all the skills needed to take us into new areas - we can do that by drawing on the different elements of the Salvesen network and bringing them together in a consolidated offer.”
Salvesen is already involved in a plethora of diverse aviation logistics activities other than fresh produce handling, from the handling of all airside activities for customers in various sectors to services like the cleaning and distribution of BA’s staff uniforms. The task now is to put the network together into one, manageable offer, that is obvious not only to customers who need to dip in and dip out depending on their own requirements, but also to the Salvesen employees in any of its differing sub-divisions.
To follow Oades’ strategy and achieve its organic growth objectives, Salvesen Aviation Logistics is first undertaking a process of internal and market evaluation. The key areas, says George, are: identifying areas of particular strength and operational expertise; listening to existing customers and discussing their needs; defining market segmentation to support the growth; channelling customers through existing operations; developing new complimentary services as start-ups; and ultimately delivering top-line revenue.
And outside of the confines of the aviation industry, there are further synergies to be squeezed out of the Salvesen network. The group is perhaps best known in food in the UK for its role in the frozen sector. “The temperature-controlled business unit - an £80m business for us - is dominated by the frozen sector and very mature for us,” says George. “The UK’s frozen food sector is the biggest in Europe, worth £5.4 billion, and Christian Salvesen Foods has an 18.2 per cent share on the distribution side of that, but it is very much a fight to maintain market share in a sector that has growth of around two per cent a year, with just five major operators and the need for further consolidation.
“In that situation, it becomes extremely important to have strong relationships with players in the chill business, which is very hard to penetrate ourselves. We have not gone aggressively into it, but we have been and still are looking for joint ventures, partnerships and perhaps acquisition opportunities.”
It was the success of Salvesen’s frozen vegetable business and its proven ability dealing with the larger UK retailers that gave it an edge when the PHC deal was first struck. The PHC is now in a position to act as the model for the company as it attempts to secure its next raft of business opportunities.
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