New Zealand Logistics: Infrastructure, E-commerce, Competition - Reshaping the Future, What Lies Ahead?

The New Zealand Logistics Market has seen a consistent rise in market size from 2017 to 2022 and is expected to continue growing from 2022 to 2027. This growth is attributed to strategic location and strong transport infrastructure. However, a significant challenge arises with the unprecedented increase in shipping and fuel costs, which restrains the market's growth. To understand how New Zealand plans to tackle this issue and discover the market's future outlook, explore further. Learn about the innovative strategies and adaptations being implemented to overcome these obstacles and ensure the logistics market's continued success.

1. Robust agricultural & forestry industry absorbed the impact of COVID-19 in 2020 whereas the growth in online shopping, rise in manufacturing & pharma industries steered up the logistics demand in New Zealand

Contraction of New Zealand’s GDP & Retail* in 2020 and Recovery in 2021

Unprecedented Growth in Ecommerce Stressed the Supply Chain Network

• The arrival of COVID-19 in the country catalyzed the Ecommerce industry and shot up the sales of goods via online channels.
• This necessitated the seller to realign and strategize their logistics approach to cater to the unprecedented growth and match customer expectations.
• Non-contact delivery, click & collect**, introduction of more payment options, investments in technology, expansion of warehouses, etc., were some of the initiatives that sellers took.

Transport Industry was the worst hit industry during COVID-19 lockdown

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2. Massive Food & Beverages Industry, Improvement in Transportation Infrastructure, integration of sustainable mode of transport for delivery, along with…

Increasing Demand for Temperature-controlled Storage Facilities

• Food & Beverage industry contributes significantly towards the country’s GDP. In 2020, F&B products accounted for ~46% of its total exports.
• Growing F&B product manufacturers has escalated the demand for cold-storage industry.
• Retailers, such as Woolworth Group, Foodstuffs SI, among other large retailers majorly rely on third-party cold-storage providers.
• In 2020, Americold Realty Trust invested ~USD 41.95 Mn in expanding its Auckland cold storage site.

Supportive Government Initiatives towards Transportation Infrastructure

• Rising government initiatives & policies towards strengthening transportation infrastructure.
• Investments in building public infrastructure, such as roads, bridges, tunnels, and railway tracks would ease the transit of goods & reduce the time of delivery.
• Various government initiatives, including the Upper North Island Supply Chain Strategy, the New Zealand Rail Plan (2021), the New Zealand Infrastructure Strategy, etc., have assisted in consolidating supply chain networks.

Incorporation of Electric Vehicles (EVs) in Delivery Fleet

• Decarbonization of supply chain networks through incorporating electric vehicles, utilizing biofuel & hydrogen, adopting telematics for route optimization, etc.
• W.e.f. 2^nd April 2023, the government would launch the Sustainable Biofuels Mandate to reduce emissions intensity of fuels & catalyze the utilization of electric vehicles.
• Ports of Auckland has committed to make zero emissions by 2040, and the Port of Tauranga by 2050 by transitioning to battery-powered tug, hybrid straddle carriers, light electric commercial vehicles, etc.

Source: Interviews conducted with Industry Experts, Industry Articles & Ken Research Analysis

2.1 ...the increasing digitization, diversifying export destinations and rapid online retailing industry have stimulated the demand for logistics & continue to provide opportunities for the players

Digitization of Supply Chain

• Escalating cross-border flow of goods, would necessitate incorporation of digital technologies to integrate operations of freight providers, optimizing their movements with higher visibility and thereby, promulgating efficiency of shipments.
• Rapid implementation of Artificial Intelligence (AI), autonomous technologies, 3D printing, low emissions delivery fleets, etc., have resulted in greater efficiency in supply chain networks.

Changing Goods Export Paradigm to other Countries

• In the coming years, New Zealand’s export patterns may shift from Western markets, such as Europe & the US to other emerging economies in Asia, South America and Africa.
• Changing trading relationships with emerging economies would correspond changes in patterns and availability of freight forwarding & other logistics services in that route.
• In 2021, 15 East Asian & Pacific countries, including New Zealand, launched new free trade agreement (FTA), "Regional Comprehensive Economic Partnership (RCEP)", to target intra-regional exports to USD 42 Bn.

Increasing Utilization of Online Retailing

• A large portion of New Zealand population buys groceries & other commodities via offline stores.
• COVID-19 shifted the buying habits of consumers through online channels, including Ecommerce websites, quick commerce platforms, etc.
• Logistics players can serve as third-party vendors for small to medium-sized businesses.
• During 2019-20, NZ Post posted a steep increase of online sales of specialty food, groceries and liquor by 47% to USD 1.3 Bn.

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4. The strategic investments made by the New Zealand government to develop railway network, rehabilitate existing infrastructure combined with green port approaches will fuel the market growth in future

Some initiatives by the government of New Zealand for improving Logistics

The Upper North Island Supply Chain Strategy (UNISCS)

• Launched with the aim to develop a strategic approach for bringing efficient supply chain and prioritize the investments to the supply chain system in the Upper North Island, including its ports.
• The strategy includes managed closure of The Port of Auckland freight, development of Northport, rehabilitation of North Auckland rail line, establishment of a new inland freight hub in North West Auckland, etc.
• In the aftermath, the proper implementation of the strategy would facilitate effective transport infrastructure, promote opportunities for regional development and optimum utilization of land resource, especially in metro areas.

Rail Network Investment Programme

• It highlights a 3-year investment programme and a 10-year investment forecast for the national rail network to lay the network for rail freight & passenger services in the country.
• The 3-year programme comprises of investments in three categories: network maintenance, operations & management (USD 361 Mn), network renewals (USD 790 Mn), and network improvement (USD 50 Mn).

Green Ports

• In the efforts to decarbonize the port operations, several ports have switched their attention towards environment friendly alternatives. For instance, the Ports of Auckland has committed to zero emissions by 2040. Towards which, it has initiated a project for a commercial hydrogen production & refueling facility and a battery-powered tug at its ports.
• Similarly, the Port of Tauranga has set target for achieving net zero emissions by 2050. It also aims to reduce emissions from port activities by 5% each year relative to cargo volumes by transitioning to battery-hybrid straddle carriers and light vehicles.

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