Competition, Opportunity Behind UPS $1B Euro Investment

Jul 31, 2014 12:14 PM  By

Last month’s announcement by UPS CFO Kurt Koehn that the company planned to invest $1 billion in European operations was made in the context of Germany’s surging economy, expected growth in healthcare spending and competitors’ logistical build-out, according to analysis in The Motley Fool.

Koehn told a German newspaper that most of the investment would go to Germany, adding the healthcare sector would be a focus. He added UPS will provide more detail about its European plans in November.

In June, German central bank, Deutsche Bundesbank, raised the country’s 2014 GDP growth forecast to 1.9%, up from the earlier estimate of 1.7%, The Motley Fool reported. The bank expects growth to accelerate by another 2% in 2015 and 1.8% in 2016.

UPS also needs additional German hubs to handle rising demand. Market research consultant GfK said online retail sales in Germany could grow 25% this year, with overall retail sales improving 1.2% over the past year.

The Motley Fool also reported that UPS rival Deutsche Post plans to double capacity of its European logistics hub at Germany’s Leipzig/Halle airport, while FedEx has added 100 new European depots since 2012.

As for healthcare, up to 20% of Germany’s population will be over 65 by 2017, according to a Deloitte report, making it an especially lucrative market. In February, The Motley Fool reported, UPS acquired UK-based pharmaceutical logistics company Polar Speed, with its fleet of 118 temperature-controlled vehicles and three European warehouses.

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