TNT eyes new mail, express partnerships with China
TNT NV said it hopes to expand its express parcel services with China Post and develop a new partnership in its mail division to service a planned national direct marketing operation.
TNT chief executive officer Peter Bakker told XFN-Asia that he believes that express or parcel freight operations have the greatest growth potential in China for the Dutch company, which provides logistics, express and mail services.
'The biggest opportunity will be in express operations, the parcel freight operations,' he said in an interview, predicting it will eventually overtake the firm's current business leader — logistics — in importance.
TNT's express service in China was a stand-out performer in the group's interim results for the second quarter 2005, growing at over 27 pct compared to 12.8 pct recorded for express services across the rest of the world excluding Europe.
Bakker said that until now the company has not had its own international parcel service for China.
TNT has been delivering China Post's express mail abroad since 1999, and the Dutch company has been cooperating with the state-run service in small express parcel mail delivery in China.
But the CEO said that TNT is starting to build a domestic parcel operation within the country, adding that he wants the group to fill the gap that exists for reliable, scheduled delivery services in China.
As part of its growth, it is interested in extending its current partnership — China Post's express mail delivery business EMS, he added.
'If we can expand it, we will, but it's too early to tell when and how,' he said.
China Post is currently undergoing major restructuring as part of broader reforms of the country's massive, state-run enterprises.
Bakker said he believes that a split between the monopoly's regulatory and operational functions will occur by the end of this year.
He said that once that split is made the postal operator will be less restricted in forming partnerships and joint ventures, including one which could help TNT launch a new, national direct mail business in China.
Bakker said that the group is building a direct marketing database of local businesses for use by multinationals and others that want to target specific customer segments.
'Once we have piloted it in one or two cities, then we'll roll it out nationwide,' he said, indicating that the project should start up next year.
'We'll become a large customer of China Post and they will become an important supplier to us.'
Bakker said that the third and biggest arm of TNT NV's China business — logistics — would experience more 'organic' growth than express delivery or mail and include a new focus on the non-automotive sector.
The group took a 50 pct share in a logistics joint venture with China automaker Shanghai Automotive Industry Corporation Group (SAIC) that started operations in June 2002 with the aim of achieving annual turnover of 100 mln eur.
However, the automotive operation was the only one of TNT's contract logistics businesses in the rest of the world ex-Europe to see declines in the second quarter of this year, despite the joint venture's success in securing two contracts for spare parts logistics from Volkswagen China.
'We are developing the non-auto business as we speak,' Bakker said.
The chief executive, who has previously singled out China as one of TNT's biggest growth markets, said that the targets it set earlier for expansion in the country remain basically unchanged.
Last year, he said the group expects to be able to grow its sales in China to over three bln eur in 2010, increasing tenfold from the expected 300 mln eur in sales for 2004.
It also planned to quadruple its number of branches to 100 and increase its staffing levels by tenfold to 25,000 by 2010, compared to last year's levels.
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