Maersk Line now decided to put a renewed strong, sharp focus on the intra-American market. The increased focus follows a market survey that was performed during the fall of 2013, and which brought the carrier on its toes. As somewhat of a surprise to Maersk Line the survey showed that 50 percent of the intra-American market consists of customers who need to ship less than 500 containers a year.
“We really needed to focus more on this segment,” says Craig Mygatt when ShippingWatch meets him at Esplanaden in Copenhagen, the headquarters of A.P. Moeller-Maersk, less than a week after the announcement that Maersk Line plans to bring back the old American container carrier SeaLand, which the Group purchased in the late 90's, headed by Craig Mygatt.
"We’ll build the organization in 2014. I need to work on our agreements with Maersk Line in terms of space on board the ships and crews, the offices in the various countries, and we’ll probably be working parallel with Maersk Line in the second half of 2014, but as Maersk Line. And in January 2015 we’ll be up and running."
He arrived at Copenhagen the day before from the United states after a seven hour delay, but in spite of the time difference he seems in good form to talk about the plans for the new carrier, his thoughts about potential locations for its headquarters, and where he sees the biggest market opportunities for SeaLand. We will get back to all that in a short while. First we will take a look at the benefits of bringing back SeaLand.
What opportunities does SeaLand bring that Maersk Line does not have today?
“We visited a lot of different customers after the survey. We bought SeaLand in 1999, and in North America, South America, and Central America people still recognize the brand. So we saw an opportunity for gearing the company to target this smaller customer segment via the SeaLand brand. And not just our commercial units, but we’ll be able to determine our own fate operationally,” explains Craig Mygatt, adding:
“When working at a major platform such as Maersk Line you have to be fairly rigid in terms of the operation, there can’t be too much delay. In the smaller market there can be times when you need a bit more flexibility, and we control our own operation we can produce a product aimed at the smaller customers that brings an increased degree of flexibility, which can be difficult to achieve in a company needing to cater to a very diversified customer base.”
The exact location of the new carrier's headquarters has yet to be decided. Craig Mygatt points to Miami as a solid guess, describing Southern Florida as the “capital of Latin America,” which holds a lot of activity related to trade in the region.
“There are a lot of regional carriers based in Miami, who we want to work with in terms of trading slots, where you buy and sell slots, thus creating a community for shippers and secure a broader reach together with other carriers,” he says, adding that Maersk has also looked at Panama City, Sao Paolo in Brazil, and Houston in the United States.
This means that the carrier will likely be based in the same country as another of the Group's subsidiaries, namely Maersk Inc., and before the establishment of SeaLand the company also considered whether its Maersk Inc could take over the intra-American operations. This idea, however, was quickly discarded, as Maersk Inc primarily operates within military transports today, says Craig Mygatt, stressing that there will be no conflict of interest in terms of Maersk Inc, he says, as SeaLand will not be sailing cabotage. But the future could hold potential collaborations in terms of government programs and food-aid programs.
“But it’s not something we’ll see at first. It’s possible, once we’ve gotten underway, that there could be potential in food-aid from the South Atlantic to Cuba. Our competitors are doing it today. But it takes time to settle and you have to understand the market. We haven’t really been in this market and we don’t want to jump headfirst into something right now. We need to keep things as stable as possible during the launch phase, and we need to understand things before acting on them.”
Drawing on the Maersk Line network
Maersk Line currently operates ships in the range of 2,500 and 3,500 teu in the market, and the plan is for SeaLand to start by acquiring this Maersk Line network, and to build the organization around this. But SeaLand can also draw on Maersk Line’s other networks, explains Craig Mygatt, while on the table before him he traces the route of a Maersk Line ship sailing from Mexico on to Panama before arriving in Chile:
“We can use the ship between the ports, where Maersk Line would be more focused on the longer journeys. There is a lot of imports in this region, a lot of goods are unloaded and not that much is taken back on, so the ships carry the equipment and space needed to target the smaller markets. It is called, double-dipping. We’re confident that we can use the Maersk Line network in this way.”
Where else do you see opportunities?
“There’s a great potential in feeder. Ships arrive at Panama and load containers, before feeding them to Venezuela, Columbia, and the Dominican Republic, for instance. If Maersk Line had to contact another carrier and try to sell or buy feeder services it would likely not have the same effect as SeaLand. It’s easier as a third party. If Maersk Line was contacted by another large carrier concerning feeder, we’d probably try to make our own business. So SeaLand enables us to cooperate with other carriers, to try to get their volumes on board larger vessels, thus securing an economy of scale."
Will the Group invest in Sealand?
“The expectation is that we’ll use the current services, build around the current platform, so the number of investments is limited here at first. If we’re able to make money, that would create a basis for potential investments, but we have to prove our worth in order to ensure that growing or investing is the right decision going forward ,” says Craig Mygatt.
Maersk Line today has a regional market share of around 6 percent. Biggest in North and Central America, satisfactory on the South American west coast, small on the east coast, and virtually non-existent in the Caribbean. A solid picture overall, says the new CEO:
“We’re okay where we are right now. We’re going to expand the reach of our services, but not in terms of market shares. We want a presence as SeaLand, and from that operational platform we’re going to grow where the opportunities are to be found,” he says.
Longevity is key
The key word for SeaLand is longevity, explains Crayg Mygatt. Too often new employees create changes in the service that can make it difficult for customers to understand what the carrier is doing, he says:
“So we want to create products that are going to be there during hard times and good times. We want longevity. They key is that the services we’ll be establishing during the coming years will there for a long time. Even if the profit turns out to be really bad, we have to keep the product available, if not we won’t be able to sustain the business.”
Craig Mygatt points to Latin America, the South American west coast, as well as the east coast down toward Mexico as potential growth markets for SeaLand. But there is a lot that needs to be settled before any potential expansions can take place, he says:
“Our approach is that we’ll consider expanding in the places where we can make money, but first of all we need to understand the markets before doing anything in that vein. We might even move in a different direction – if we can’t make money we’re not going to be present. But once customers have gotten used to the supply-chain we won’t change or replace the products. We’re going to be honest about what we plan, and then establish it as announced.”
So what are you going to do now?
"We’ll build the organization in 2014. I need to work on our agreements with Maersk Line in terms of space on board the ships and crews, the offices in the various countries, and we’ll probably be working parallel with Maersk Line in the second half of 2014, but as Maersk Line. And in January 2015 we’ll be up and running.”
You are going to need employees - who?
“This will be a mix between new people and Maersk Line people. There are a lot of people in the market who have good understanding of it that we want on our team. We’ll start by hiring the senior management team, and the I’ll ask them for advice. They know more than I do."