UK Royal Mail to regain delivery monopoly as Express quits

Royal Mail will regain its monopoly on delivering household post following a decision by Express Dairies to pull out of the postal delivery business.

Express Dairies, the milk business owned by Arla Foods, the Danish group, has been delivering small parcels, magazines and catalogues to the nation's homes using its fleet of milk floats since 2002. Although other companies have contemplated setting up a full residential mail delivery service, so far Express has been the only competitor to Royal Mail in this market.

But earlier this month Express wrote to its business customers informing them that it would wind up its delivery operation at the end of November.

In the letter, it blamed changes in postal pricing for the move. Royal Mail's planned move to size-based pricing, which would make heavy items such as catalogues cheaper to post, and a new promotion to win back magazine and catalogue customers, was squeezing Express out of its niche market, it said. Size-based pricing is due to be introduced in September 2006 following a multi-million pound marketing campaign.

The postal market is due to be liberalised fully from the start of January but competitors to Royal Mail have so far found it hard to make a dent in its market share.

Last June, Express Dairies formed a partnership with TNT Mail, the UK arm of TPG, the Dutch postal group, to expand its delivery business. It is understood that TNT Mail now plans to establish its own end-to-end delivery service but it is not clear how long this would take to set up. Until then, Royal Mail will again have the monopoly on doorstep deliveries.

DHL Global Mail, the UK arm of Deutsche Post, offers an end-to-end service for business mail, and there are several companies focusing on niche business deliveries. But most of Royal Mail's rivals have chosen to pursue the so-called "access model".

Companies such as TNT Mail, DHL Global Mail and UK Mail – a subsidiary of Business Post – collect mail from business customers, sort it and give it to Royal Mail to deliver the "final mile" to households. This is a reflection of the fact few companies want to invest in setting up a rival network of postmen and women.

According to Postcomm, the postal regulator, Express Dairies was delivering be-tween 5m and 6m items of post a year. Although a relatively small amount – Royal Mail delivers 80m items a day on average – the regulator expressed regret that a competitor to Royal Mail was pulling out of the market.

Postcomm has awarded eight companies licences to operate in the UK bulk mail market: Royal Mail; Express Dairies; TNT Mail; DHL Global Mail and UK Mail; as well as DX Services, a logistics business demerged from Hays; Mail Plus, subsidiary of La Poste, the French postal service; and Datarun, an alternative mail and parcels delivery service.

Royal Mail still has exclusive rights to deliver non-bulk mailings of letters weighing less than 100g, where fewer than 4,000 items are sent at once, but from January 1 2006 all parts of the postal market will be open to competition.

TNT Mail plan hit by Dairies post pull-out
Precision Marketing, p 2 09-23-2005
TNT Mail's plans to offer an end-to-end delivery service to rival Royal Mail have been dealt a blow by Express Dairies' decision to axe its household delivery service later this year.

The postal operator signed the deal with the Arla Foods'-owned milk business last year (PM June 11, 2004) to deliver addressed, heavier letters and packages to more than 6 million households.

But Express Dairies has written to customers to confirm it will scrap deliveries of small parcels, magazines and catalogues at the end of November. It cites changes in postal pricing and Royal Mail's drive to win back catalogue customers as reasons for the decision.

No one was available for comment at TNT as Precision Marketing went to press.

The news is a disappointment to industry regulator Postcomm, which is preparing to open the postal market to competition from January 1. Postcomm chief executive Sarah Chambers says: "It is disappointing. In a market where there is a very substantial operator, almost a monopoly, it is important that there is competition. Express Dairies was the only company competing in the area of delivering to residential customers."

Express Dairies has been operating the service since 2002, using its fleet of milk floats to distribute mail from 100 depots across the country. There will be about 75 job losses among its 1,400 staff.