Moving fast in the New Zealand courier business

Mark Thompson, chief executive of Express Couriers, is not going to disclose how much New Zealand's biggest courier business makes, even if it is part state-owned.

The courier companies built up by NZ Post "courageously" disclosed much information about parcel movements to customers, he said. But he was not about to telegraph sales and profits to rivals including Freightways, Peter Baker Transport, Toll Priority and a host of small round-town couriers.

He did say, however, that Express Couriers was probably more than a couple of points ahead of Freightways in market share.

Freightways estimated it had 39 per cent of the nation's express package market when it floated on the stock exchange, and that it and NZ Post together had 85 per cent. Freightways has since estimated that both have slightly more than 40 per cent, the state-owned operator being a couple of points ahead.

Mr Thompson said NZ Post's courier business was profitable; otherwise DHL would not have paid money for 50 per cent of it.

DHL, the express freight arm of Deutsche Post, bought half of NZ Post's courier business to create the Express Couriers joint venture from January 1.

The total business was valued at between $160 million and $180 million.

The deal was controversial — it was a privatisation by a government that was not supposed to be selling businesses and no contestable process was involved. No accounts for Express Couriers are publicly available.

Mr Thompson returned from Australia nearly two years ago to separate the courier businesses from the rest of NZ Post and set up the joint venture.

Now he is about to return to Australia to "scope opportunities". Express Couriers owns Couriers Please, in eastern Australia.

He says the partnership with DHL made sense, as it meant the company could go to customers with a broad offering and say what service do you want, just tick the box.

He says Freightways has made a mistake by not going into "3PL contract logistics" — industry jargon for the outsourcing of pretty much everything, except marketing, to your transport provider. "The key is customer relationships. If you walk away from contract logistics you let someone get between you and the customer," he said.

DHL is global and has big customers. He says Express Couriers will now be hooked into decisions about logistics that big customers make in head offices overseas, through its DHL connection. Together they will hunt for new customers among small and medium-sized businesses in New Zealand and trans-Tasman businesses.

"We don't want to scrap over what we have already," he said.

DHL was "trying to paint the world yellow", he said. Yellow would soon appear in the Express Courier brands, now under review. DHL is a sponsor of the pending Lions rugby tour, so expect a rebranding before then.

Express Couriers owns CourierPost, Skyroad Express, Pace' and Contract Logistics, while Freightways has New Zealand Couriers, Castle Parcels, Post Haste Couriers and Sub60.

Skyroad and CourierPost are tipped to consolidate into the CourierPost brand with some sort of DHL branding tagged on. Mr Thompson says listed logistics company Mainfreight is not well positioned without an express freight arm because the trend is toward making and moving goods "just in time," or as they are ordered by customers.

Customers want goods moved faster, and he says that is why Mainfreight moved closer to Freightways with a partnership.

Toll Holdings of Australia is the company he is watching most closely. "I take my hat off to them. They are a force to be reckoned with.

"I'm more worried about them than Freightways because they are focused on customer relationships and the trans-Tasman as the future."

Mr Thompson started as a courier for Freightways, which pioneered couriers in New Zealand. After 14 years he moved to NZ Post, and has also worked for Star Track Express, an Australia courier business that shook up incumbents TNT and Mayne Nickless.

Star Track was sold to Australia Post and Qantas for A$750 million last year, a price that made the industry's eyes water.

When he goes to Australia, Mr Thompson will be replaced by Jim Quinn, also a former Freightways executive.

Mr Thompson said few people understood how good the business model used by New Zealand courier firms was.

A "hub and spoke" system pioneered by Freightways, when Trevor Farmer owned it, was not embraced by the rest of the world, but it was an efficient parcel distribution system.

That was why TNT and Mayne Nickless could never take on the New Zealand express freight market.

"Farmer was clever — he set up a model that was so low-cost. Hub and spoke is unique."

The model has central depots feeding to smaller satellite hubs. Couriers come in four times a day only to their local hub; there are no across-town trips.

The market for delivering parcels the same day within a country is hard to enter because a strong national network with an air component is needed. Freightways and NZ Post have it.

DHL uses Origin Airways. Toll uses Freightways' network. Mr Thompson says Freightways is unwise to let Toll piggyback on its network.

NZ Post's courier business "morphed out of the parcel business". It bought several smaller courier business and airlines' express freight businesses.

He sees his next job as "making sure our capability is broader than New Zealand".

He will not say how, but calls Couriers Please a "neat little spoke-and-hub business based in Australia's eastern seaboard". It has 450 contract couriers.

Toll Holdings is wooing trans-Tasman customers and is trying to cross-sell express freight services to its existing customer base. It took IPEC, the Mayne Nickless express business, over when it was performing poorly. Toll now controls Tranz Rail in New Zealand and has a stevedoring joint venture with Port of Tauranga.

Mr Thompson says the Australian courier model is inefficient and companies mostly made their margin on line-haul between large centres. This cannot continue long-term.

He has a huge amount of time for NZ Post boss John Allen, saying he is a great leader. He describes Express Couriers as "a neat business".