UPS to acquire pharma logistics company, announces major LNG transportation plans

On top of announcements heralding its first quarter earnings and its brokered deal with union membership last week, transportation and parcel bellwether UPS made inroads on other fronts, too, including its planned acquisition of CEMELOG, Zrt., a pharmaceutical logistics company based in Hungary, and rolling out its plan to purchase roughly 700 liquefied natural gas (LNG) vehicles and build four refueling stations by the end of next year.

CEMELOG: As an active player in healthcare logistics, UPS said that adding CEMELOG to its portfolio in this sector boosts its presence in Europe, coupled with the fact that it will help to enable comprehensive and compliant services to pharmaceutical, biotech, and medical device shippers for emerging markets in Central and Eastern Europe. This acquisition is expected to be completed during the second quarter and is subject to customary closing conditions, according to UPS.

On its first quarter earnings call last week, UPS President and CEO Scott Davis said that acquisitions like this reflect the company’s growing commitment to emerging markets, which will generate the bulk of global growth in coming decades. 

And in an interview with LM, Bill Hook, UPS VP of Global Healthcare Strategy, said that UPS’s global growth strategy in healthcare calls for the development of a new pan-European network of which expanded capabilities in central eastern Europe are critical.

“CEMELOG has built a strong healthcare logistics business in Central and Eastern Europe, including specialized healthcare services, deep regional knowledge and infrastructure,” explained Hook. “The company has high operating standards, a strong focus on compliance and service excellence, making it a good fit for the UPS healthcare network. We began discussions with CEMELOG in mid-2012. Through the acquisition, UPS further expands its global healthcare network, offering customers expanded access to regional expertise and assets to reach new patient populations. It also adds three healthcare-dedicated distribution facilities to UPS’s existing European network, which represent a combined 255,000 square feet (nearly 24,000 square meters) in additional dedicated healthcare distribution space in the region.”

These facilities are located outside of Budapest, Hungary and serve Central/Eastern Europe. Hook said the addition of these facilities to UPS’s network bring its footprint in Europe to more than one hundred thousand square meters and the total number of global dedicated healthcare facilities to 41.

Hook said that UPS customers realize the value of the company’s vast dedicated global healthcare network,  consistent high standard of compliance, expertise and visibility that comes with its single technology platform combined with CEMELOG’s deep regional knowledge and expertise in Central and Eastern Europe. Specific customer value delivered, he said, will include the ability to consolidate inventory into regional distribution centers, have greater inventory and product integrity control, and improved service to customers in Europe.

“This is part of UPS’s strategy to move away from a decentralized, country-by-country model in Europe to a more centralized, pan-European model,” noted Hook.

CEMELOG provides a broad range of healthcare logistics services to pharmaceutical, biotech and medical device customers, including a range of temperature-sensitive distribution and transportation capabilities and specialized services for areas such as primary and secondary packaging, labeling and kitting. CEMELOG has approximately 270 employees, and its customers include some of the top pharmaceutical companies in the world, with many of CEMELOG’s customers being existing UPS customers.

“This acquisition will allow us to provide even more regional and specialized services to these global customers,” said Hook.

LNG investment: With its planned purchase of 700 LNG vehicles and build out of four refueling stations, UPS said that when these efforts are completed it will have one of the most extensive LNG private fleets in the United States.

Its new LNG refueling stations will be located in Knoxville, Nashville, and Memphis, Tenn., with the fourth one in Dallas, Texas. UPS said these stations will serve its heavy-weight rigs traveling into adjacent states, and it added that the company will also add LNG trucks on routes from Dallas, Houston, and San Antonio.

UPS has been actively involved on the LNG front for more than a decade and is making a major investment push into LNG to make it part of its domestic delivery network, due in large part to the price disparity between LNG and diesel fuel, with LNG on average 30-to-40 cents cheaper, and U.S.-based natural gas production on the rise.

“LNG will be a viable alternative transportation fuel for UPS in the next decade as a bridge between traditional fossil fuels and emerging renewable alternative fuels and technologies that are not quite ready for broad-based long-term commercial deployment,” UPS Chief Davis said in a statement.

UPS will commit $18 million to build its refueling stations. It currently has 112 LNG tractor trailers running out of fueling stations in Las Vegas, Nevada, Phoenix, Ariz., and Beaver and Salt Lake City, Utah, along with its own fueling station located on company-owned property in Ontario, California.

A noted green transportation expert told LM that what UPS is doing in terms of LNG-related transportation efforts is highly impressive.

“UPS considers [itself] to be a leader in testing and investing in LNG for transportation,” said Brittain Ladd, a global supply chain consultant. “What UPS has been able to do is convey to corporations that have fleets of similar size and that operate in a similar environment that LNG is not only a viable source of fuel, LNG is becoming good business. As with all trends in business, especially trends that require capital investment and a paradigm shift, LNG has been slowly embraced by a few leading corporations.” However, said Ladd, this move by UPS reinforces that LNG is worth the investment and for the companies that integrate LNG into their fleets, over the coming months and years they will reap the benefits of being an early adopter of LNG.

“Slowly but surely momentum for LNG continues to increase and it is only a matter of time before trucking fleets and the railroads put as much emphasis on the use of LNG as a fuel as UPS,” he said.