Our journey in logistics started in 2017 with Entrego as a last mile delivery service provider. Our entry into the space was motivated largely by the rising trend of e-commerce, industry disruption with the entry of regional players, and an internal shift in focus away from regulated sectors.
The recent pandemic further underscored the importance of logistics as a critical component of trade and commerce. The supply chain disruptions highlighted the need for a robust and integrated logistics network in the country. E-commerce growth accelerated with both consumers and retailers shifting online where last mile delivery is a key component of the purchase cycle. Demand for healthcare and pharma logistics as well as food security became all the more critical.
These trends highlighted the imperative to scale up our presence in logistics. While Entrego expanded its services beyond e-commerce last mile delivery to include domestic freight forwarding, contract logistics and warehousing, there remain segments of the supply chain that can potentially be served with an expanded logistics platform. Our direction was to further augment our capabilities towards becoming an end-to-end logistics platform to be able to cater to customers’ requirements across the value chain. The opportunity to expand emerged with the AIR21 group of companies, a well-established brand in the Philippine logistics industry.
The signing of the Investment Agreement for the acquisition of the AIR21 Group companies in November 2021 gives AC Logistics immediate presence and more comprehensive capability to serve all segments of the supply chain. Comprised of eight operating companies, the acquisition gives us a platform with a full range of logistics services including— domestic door-to-door express delivery, various types of warehousing services, transport, international and domestic freight forwarding, and reverse logistics for waste and management of hazardous and non-hazardous waste. At the time of writing, the acquisition is subject to the fulfillment of certain conditions precedents and regulatory consents prior to financial close.
In parallel, AC Logistics also recently started its initial foray in cold chain logistics recognizing that food security and quality are of critical importance. In October 2021, we forged a joint venture partnership with Glacier Megafridge Inc. for the construction and operation of a cold storage facility in Cagayan De Oro as our initial venture in the space under GMAC Logitech Refrigeration and Corp. Glacier Megafridge is one of the largest integrated cold chain storage providers in the country while Cagayan De Oro is a trade hub of Northern Mindanao. Demand for cold storage is expected to grow driven by rising incomes, increasing propensity for eating out, growth in other regions, growth in meat and fish consumption, and population growth. The project is currently under construction and is expected to be complete in 2022.
As a portfolio we see Entrego, the AIR21 Group, and GMAC complementing each other. Each has specific expertise that can leverage off each other to provide robust service for customers. We hope that by bringing in appropriate technology to optimize existing capabilities, whether through digitization, automation, and better analytics, we will be able to contribute in redefining the service levels and alleviate the pain points across the supply chain. With this in mind, we believe our logistics portfolio can tap numerous synergies and opportunities to serve the Ayala group and likewise enable partnerships outside the group.
The fundamental shifts in the business environment at present has amplified the important role logistics has always played in the country’s trade and economy. As we build out our portfolio, AC Logistics hopes to contribute in addressing not only the customer pain points in the logistics industry, but also the broader challenges our country is facing in the areas of food security and preservation, access to pharma and health care aids, environmental preservation, and access to goods.
Outlook and Strategy
The COVID-19 pandemic accelerated the growth of the e-commerce industry and underscored the need for an integrated, efficient, and reliable logistics network across the country. Online shopping behavior is expected to continue growing even when quarantine restrictions are relaxed. Expansion of warehousing facilities and transportation network capacities are needed to support the anticipated volume growth in the next few years.
Develop end-to-end logistics portfolio
Build up Entrego’s freight forwarding and contract logistics capabilities alongside growth in the courier express parcel business
The Value We Create
2021 Financial Performance
Develop end-to-end logistics portfolio
Freight forwarding volume up by 77%
Improved contract logistics operations because of enhanced operating efficiencies and technology investments
Entrego ended 2021 with revenues of ₱2 billion, 8% higher from 2020.
Annual courier express parcel volume increased by 8%
Number of clients tripled during pandemic as more retailers/brands are selling online
Contract logistics revenues up by 138.7%
Grow base of MSME clients
Improve digital booking and tracking experience through myEntrego app
Expand freight forwarding and contract logistics businesses and offer end-to-end solutions
Improve nationwide delivery network and efficiencies
Courier express parcel volume increased by 8.3 percent from 2020 on sustained growth from standard CEP and major e-commerce clients. CEP delivery lead times were shortened and contactless payment-on-delivery options GCash and Transakto were introduced to meet increasing customer expectations on the last mile segment. The company recently launched the myEntrego app as part of its push to make booking and tracking services accessible directly to MSMEs and various online retailers.
Entrego continues to build up its Freight Forwarding and Contract Logistics businesses in line with its goal to provide end-to-end solutions to clients in various industries. 2021 freight forwarding volume grew by 77 percent from 2020 and is expected to further expand as the company targets to service a wider set of B2B clients and leverages on its established land, sea, and air freight routes. On the other hand, revenues from contract logistics grew by 138.7 percent in 2021 because of improved operating efficiencies and technology investments.
Entrego contract logistics provides warehousing and order fulfillment services for more than 20 major retail brands present in various e-commerce marketplace platforms and web stores.
The company expects to sustain its growth trajectory in 2022 amidst tighter competition by expanding its range of service offerings, improving its nationwide delivery network and efficiencies, and broadening its base of B2B and B2C clients focusing on MSMEs.