Polish parcel delivery sector attractive for global giants

Another courier company is planning expansion in Poland. TNT Express wants to double its domestic market share in two years by extending its branch network or taking over one of its competitors. There are two courier companies in Poland, which will certainly attract attention of investors. They are Opek and Siodemka. TNT does not reveal the target of its potential acquisition, however it should be expected that the company be interested in one of them.

"We are analysing the possibilities of taking over one of Polish courier companies. If it worked, our incomes would increase by ZL70-80m annually. The final decision concerning the transaction will be made at the turn of January and February," said Robert Mianowski, TNT's general director in Poland. It is worth reminding that Poczta Polska post office was also interested in Opek. "Recovering our position on the courier market is still one of our priorities," stated Marcin Anaszewicz, Poczta Polska's spokesman. "There is no other way of winning market share quickly than by taking over one or two companies," said a manager from one of TNT's competitors.

Taking over a competitor is not the only way of increasing incomes from services offered in Poland by TNT. The company can also increase its value by itself. It has planned that it will expand its subsidiary network in Poland, prepare a new offer for its clients and increase spending on marketing. Next year TNT is planning to open up six new branches in Poland, whilst in 2007 further five. The company will spend ZL9m on the expansion altogether. But why does the company known for international deliveries want to increase its sales in Poland so quickly?

Table. Performance of courier companies Value of sales in 2004 Market share Sales dynamic (in mln zloty) in 2004 (%) (2004/2003) DHL 596 36.8 122 Stolica 192 11.9 105 TMT 160 9.9 127 Other 147 9.1 121 UPS 128 7.9 123 Masterlink 120 7.4 133 GLS 106 6.6 124 Siodemka 60 3.7 134 Opek 57 3.5 127 Pocztex 52 3.2 108 Source: Rzeczpospolita

"Competition is growing and the prices are falling. That is why we want to strengthen our domestic market position," said Mianowski. Currently the company only has a 5 percent share on the domestic delivery market. In 2005 the sales of these services should bring around ZL40m of incomes. TNT's position on the international delivery market is much stronger. The company controls a 41 percent market share, taking value criterion into account. Last year its share amounted to 37 percent. If the company decides upon a competitor takeover, it will search for funds in its headquarters. Nonetheless the funds needed for its own network expansion are in the Polish subsidiary. TNT is going to launch a reloading centre for domestic and international shipments in Warsaw in October next year. It will service deliveries from Poland and other Central and Eastern European states. The cost of the operation is estimated at EUR6.5m.

The prices of courier services in Poland have fallen by a few percent this year. The profit margins are also falling. Companies earn between 2 and 5 percent on domestic deliveries. In case of international ones, the margins are about three times higher, but preparing an international offer requires large financial background. There are over 110 courier companies in Poland. In most cases they are small entities, which provide uncomplicated services at low costs. The market potentates are unable to compete with them in prices. But they can compete on the field of service quality. Specialised services are mainly bought by large companies. That is why TNT expects that thanks to its new offer it will win clients from the motor, pharmaceutical and new technologies sectors. Let us remind that UPS, which is the owner of Stolica, is to present a new offer at the beginning of the year too. "The plan is for the company to deliver economic shipments on a large scale and simultaneously offer specialised logistic services for very demanding clients," said recently Krzysztof Zdziarski, UPS's general director for Poland.