Mainfreight boss tips China acquisition

Mainfreight boss Don Braid says his company wants to ramp up its growth in China and that may involve buying a local business.

Braid was a key speaker at today's China Business Summit in Auckland, and shared with business leaders the story of Mainfreight's ten-year journey getting established in China.

It had been a slow road and the global logistics and freight company had chosen to grow organically in China rather than through acquisitions, he said.

"It was a deliberate choice to grow our business organically, but it slowed us down. However, we are a stronger business because of it.

"The joint venture we started with - where we did our apprenticeship - was certainly far better than thinking we could go in there and buy Chinese freight forwarding."

Mainfreight were no longer just "truckers from New Zealand" and aimed to be the biggest listed company here, he said.

But it was still a small player on the global stage and in China, Braid said.

"We've got competitors that are 10 and 20 times bigger than we are.

"We're proud to be New Zealanders and I think that we can do this and continue to grow the business without needing to raise capital offshore and without needing to be listed offshore."

The key question was whether to acquire a Chinese business in the freight forwarding sector, he said.

"There will likely come a time when we'll acquire a business which will surely double our size if not more."

He said an all-China solution for logistics would take significant investment.

"The rise of e-commerce in terms of freight is rising very quickly, there's no doubt about that.

"But the last mile is very difficult and for us to establish our networks to service the last mile will take an awfully long time when you're talking about cities of 22 million people."

The company was now finding itself being pushed inland as labour and manufacturing moved west rather than east, he said.

Braid, the Herald Business Leader of the Year for 2011, said about 75 per cent of Mainfreight's overall revenue, at $1.8 billion, was from offshore operations. But the China business was at this stage only $100 million.

One of the key reasons Mainfreight had found success in China so far was down to its decision to employ local people.

"We had one foreigner based up there. Effectively the rest of the business are locals and those locals have given us a strength and improved our knowledge of the Chinese business practises.

"More importantly, we've established a Mainfreight Asia culture."

An important lesson for those entering China to learn was that business there was driven commercially from a local and provincial base, not from a centralised base, he said.

"Therefore, having locals in each of the areas is extremely important to be successful in that particular area."

Mainfreight last year purchased one of the largest privately-owned transport and logistics providers in the Netherlands and Belgium, the Wim Bosman Group.

Braid said buying the European business was not to do with increasing freight between New Zealand and Australia. "It was all to do with what we have in China."

He thought the Government and Ministry of Foreign Affairs and Trade possibly failed to understand that a relationship with China was not just about exports.

"Certainly from a service industries perspective, the earnings we've got on that China to the US trade helps our profitability, which we bring back home in what we view as export earnings.

"Yet perhaps that's not necessarily understood by the Government. But in terms of what we do, that helps us develop our business."