Polish parcel consolidation intensifies
At end-2004 there were 90 parcel delivery companies on the market, six times as many as in 1996. Their number grew by 32 last year, as 42 new companies started operations and 10 moved out of business. Estimating how much the market is worth is difficult, with estimates ranging between ZL1-2 billion. Different companies define their market share in different terms, and many believe the regulator, URTiP, should set a standard in this regard. The URTiP recently drew up a report about the postal services market for the infrastructure ministry, but the report, as containing commercially sensitive data, is confidential.
According to Rzeczpospolita, the largest company on the market last year was DHL, with sales of ZL596 million, up 22 percent on the previous year, and a market share of 36.8 percent. It was followed by Stolica (recently acquired by UPS), Z192 million, up 5 percent, a share of 11.9 percent, and TNT, ZL160 million, up 26 percent, a share of 9.9 percent.
The acquisition of Stolica by UPS was one of the most important developments in the sector in the last dozen months. It is unofficially believed that UPS paid some USD158 million for 100 percent in Stolica, which is seen as an overpayment as the company is estimated to be worth no more than USD90 million. UPS would not comment. The Stolica acquisition was yet another symptom of tightening consolidation, as the major players have been taking over the local operators. Earlier, DHL acquired Servisco.
"Consolidation is a common phenomenon on the European parcel delivery market. It has been driven chiefly by the customers who want the whole range of services to be provided by a single company and expect access to the whole world through that company," said Aleksander Morozowski, chief of DHL Express Polska.
Why are the majors taking over the local players? The Polish market is very attractive: growth is strong, and prices are still low.
"Investments in Central and Eastern Europe will pay for themselves far more quickly than investments in Germany or the Netherlands. Besides, the logistics markets in the region have been developing at a rapid pace," said Claude Begle, chief of GeoPost, a subsidiary of France's incumbent post operator La Poste, owner of Poland's Masterlink.
Market observers actually believe that small and mid-sized domestic-owned operators will soon disappear from the market altogether, as they will not be able to afford the IT equipment and specialised services expected by their customers.
Table. Parcel delivery companies (2004, million zlotys) Company sales change on 2003 market share DHL 596 22 36.8 Stolica 192 5 11.9 TNT 160 26 9.9 UPS 128 23 7.9 Masterlink 120 33 7.4 GLS 106 24 6.6 Siodemka 60 34 3.7 OPEK 57 27 3.5 Pocztex 52 8 3.2 other 147 21 9.1 source: Rzeczpospolita
Payments have also become a problem, as most clients pay after 30-40 days, while the delivery operators pay their couriers at least twice a month.
"That's why when analysts valuate delivery companies, they often perceive them as bankrupt businesses. Yet poor liquidity is this industry's specificity," said an industry watcher.
Tightening competition and falling prices mean that margins of 2.5-3 percent are regarded as high. Small and mid-sized companies have been looking for niches, such as servicing selected types of clients, yet such niches are also being targeted by the major operators. TNT, for instance, recently launched Clinical Express, and this year plans to deliver some 8,000 parcels to clinics and hospitals. Poczta Polska, the state-owned post operator, says it has some 5 percent in the Polish parcel delivery market with its Pocztex service, and wants to boost its presence in the segment in both domestic and international deliveries. The operator's international packages are currently delivered to their recipients by the national post operators as part of the EMS service. The service is cheap, but it does not offer some of the more advanced functionalities expected by customers, such as monitoring. That is why Poczta invited offers for a shared service, and has received them from TNT, DHL, and FedEx. The winner is to be named by the year-end. The EMS service will continue to be offered to retail customers and as an economic service to corporate ones. On the domestic market, Poczta had unsuccessfully tried to acquire Stolica, in which it was pre-empted by UPS, and is reported to be eyeing other potential targets, including Siodemka and OPEK.
"We're interested in strengthening our position on the parcel delivery market and we'll do all we can to achieve this. If we do not make an acquisition, we'll use the funds to develop our own services," said Domonik Czajewski, director of strategic management at Poczta.
Poczta will also keep developing its Pocztex service, which it recently moved to a newly created logistics service division.
