DHL Asia Pacific CEO Scott Price Interview on CNBC World 4-3-2005

Nigeria’s comments this morning that OPEC might raise production if oil prices continue to stay at record highs would be music to the ears of the express logistics companies UPS, FedEx Express, and DHL are impacted to greater or lesser extent as prices for jet fuel and diesel rise and their customers face higher oil prices too. DHL for its part hopes it can out run the competition in other areas as well starting a new daily Melbourne – Sydney in two months and they’re continuing on strengthening their almost 20 year old joint venture with China Sinotrans. DHL’s new executive for Asia Pacific will need all the marketing know how he accumulated at his decade long stint at Coca Cola and his previous job heading DHL Japan to go up against those two big competitors and some of those other factors. Scott Price thanks for joining us this morning.

Scott Price: Good morning Mark.
CNBC World: How big and tough of an environment is it right now?
Scott Price: Well I think in general Asia Pacific continues to power ahead I don’t think there are significant risks on the horizon but clearly as you mentioned in your lead up that the market expansion that we are seeing in terms of the pricing on fuel could have impacted in the long term. We’re hedged and we as market industry practice pass it along to most of our customers but I think there could be a long term impact on revenue if we don’t start seeing some lower fuel prices.
CNBC World: Previous chief executives in unrelated businesses were telling me that they have some fairly cozy relationships with their fuel suppliers so they can down squeeze it a bit is that an experience you have?
Scott Price: Well I don’t think in general fuel revenue is part of our total revenue pie is less than 1.5% and so it is not a significant impact to us. We don’t have any cozy relationships we deal through our airline partners in buying fuel, but we don’t go directly to OPEC.
CNBC World: What about the customers whose packages you transport what sort of impact are you seeing on their business?
Scott Price: Well we are not seeing and impact in general we had very solid double digit growth I think what we’re seeing is the potential for weakness if this continues on for maybe in greater 12 months from now.
CNBC World: And how much weakness are you expecting or anticipating?
Scott Price: Well I don’t think we would see a significant drop down from double digit growth rates but I think you could expect a few percentage points off the top as customers relook at the use of express as opposed to maybe other options such as shipping air freight etc.
CNBC World: But shipping prices are also going up aren’t they?
Scott Price: In general they are going up and they are being forced to pass on the fuel surcharge but what they are doing is their customers are relooking at the absolute cost of it and therefore are looking at the speed of express may to them may not necessarily be not be worth the 10 percent fuel surcharge versus a slower option.
CNBC World: Let’s talk a little bit about how you’re positioning yourself against UPS and Federal Express. FedEx Express as they now call themselves. The most interesting part about your marketing strategy I found was that your now representing the Grand Prix and that sort of thing of packages and parcels at trackside practically that would suggest that the express logistics companies, such as yourself, really need to go all out in order to retain customers. That doesn’t seem to be a universal selling proposition that anyone has over the other.
Scott Price: Well I think in general our long term commitment to Asia, we were first in Asia, we still maintain number one market share at 40%, and the intra Asia growth that we are seeing I think clearly spells a huge opportunity and we are investing heavily in Asia as a result. I think in general the international express companies as an industry we focus on B-to-B, we are really trade facilitators, and the F1 sponsorship in addition to an overall sport there is a very large corporate involvement in F1 which led to that particular investment and its paying off very nicely.
CNBC World: How is this translating into business in China where you have a local partner in your joint venture, You’ve been there many years Are you finding you’re having to fight the same battles as you do in the rest of Asia?
Scott Price: Well I think we have a head start. There’s been a number of announcements by our competitors and frankly competition in a market that’s growing in a market that China is … it only benefits the economy and it spices up our lives but we have been growing from 35 to 45 percent last year we grew between 50 and 60 percent in China and so our infrastructure, the joint venture is quite solid so we think that operating model is superior we think and is therefore paying great dividends.
CNBC World: Very quickly, do you expect this growth rate to continue?
Scott Price: Yes
CNBC World: At 35-45 percent specifically?
Scott Price: I think would continue to see it as in the last few years around at 35-45 percent yes.
CNBC World: Alright thanks so much for coming in. Scott Price the new chief executive for DHL Asia Pacific.

DHL Asia Pacific Facts:

Central Asia Hub in HK Managing 140 flights Per Day

$100 million Express Cargo Center at HK International Airport

5% Stake in Sinotrans LTD & Owns 40% Air HK

Investment in Asia Pacific Totals >$1.0 Billion

Five Hubs: Bangkok, Seoul, Singapore, Sydney & Tokyo

Intra regional Cargo Sales Nearly Half of Total Regional Sales

Key Driver of Regional Growth: China

Annual Growth Rate: 35-45%

Over 4,700 Employees in Over 300 cities.