A world’s first

Posten Norden was the host sponsor for June’s World Mail & Express Europe event in Copenhagen. Mail & Express Review editor John Modd took the opportunity to talk with Lars G Nordstrom, President and Group CEO. Born in 1943, Lars Nordstrom joined the postal industry after an extensive career in the private sector, primarily in financial services. Amongst many senior positions he has been an Executive Vice President with SEB group and Nordbanken; and Head of retail banking at Nordea, where he subsequently became Group CEO. Nordea was the result of a merger of Nordbanken (Sweden), Merita (Finland), Unibank (Denmark), and Christiniana Bank (Norway).

His background in successfully managing mergers led to his appointment as President and CEO of Posten AB in July 2008, as a precursor to taking over the top job in Posten Norden in June 2009 after the formal merger between the Swedish and Danish posts.

Posten Norden had 47,319 employees in 2009 with over 55% coming from Sweden.

The Swedish side of the business handles around 4.5bn items of mail per year (addressed and unaddressed), and Denmark 1.1bn. Around 500,000 parcels per day are also collected and delivered.

Nordstrom confirms that 2009 has been a tough year. Net sales excluding currency and structural changes fell 7%.

Before talking more about market conditions I asked about the merger itself.

Anatomy of a merger

“The merger of Post Danmark A/S and Posten AB is a well timed offensive move. Conditions in the communications and logistics markets are changing due to liberalisation, technological development, internationalisation and environmental issues. The market is facing a structural transformation that will have major consequences for market participants. The merger makes Posten Norden more competitive, thereby arming it to meet the challenges of tougher competition and weakening letter volumes while maintaining high quality postal services in Denmark and Sweden,” Nordstrom explained.

The parent company Posten Norden AB is a Swedish company, owned 60% by the Swedish state and 40% by the Danish state, but with 50:50 voting rights.

The EU required some divestment of Danish parcels operations, which were sold to GLS.

The CEO emphasised that “the two businesses, Mail Sweden and Mail Denmark, will continue to focus on their local markets, but with a clear Nordic offer. Logistics and Information Logistics have a Nordic organisation with a distinct Nordic offer”. At the group level legal, communications, finance, business information solutions (IT), business development, production development, and human resources, are shared.

Nordstrom expressed himself generally pleased with progress to date. “We have made a good start in forming our organisation, finding measures for a joint business planning process, and securing identified synergies.” The business has achieved this “whilst not losing focus on our daily operations and serving our customers well. Our quality has improved from an already high level. Our customers are more satisfied. Our employees are more motivated.”

For the medium term, the focus is on service reach and quality at reasonable prices, and on the development of new services. “We need to be aware that the communications landscape is changing. We have the knowledge and edge to be the best provider of competitive solutions in the Nordic region.”

Managing through the recession

“Our operations have been impacted by extremely low market activity. Our customers have suffered from falling demand, meaning we have had fewer mail items to deliver. The increased focus on costs has also meant that people communicate less and rely more heavily on digital communications channels. This has led to sharply declining volumes and to pressure on prices”, Nordstrom told me.

Posten Norden had seen the signs of market weakening back in the late summer of 2008 and moved forward already planned cost cutting measures as well as identifying new opportunities. Costs were reduced by 4% after adjustment for currency and restructuring charges. SEK1bn of restructuring costs enabled reductions in production capacity, modernisation of the service network, and rationalisation of administration.

Nordstrom added that “the sale of Post Danmark’s share in Belgium Post De Post-La Poste produced a capital gain of SEK2.2bn, allowing us to maintain our stable financial position as we laid the foundations for future essential structural measures and investments. Earnings before tax of SEK2.4bn, although considerably lower than last year, represent a reasonably good result under the circumstances.”

Strategies in communications

On future challenges, Nordstrom explained: “Letter volumes are bound to decrease over a longer period of time. It is our job to find strategies and appropriate means to meet the new market conditions.”

My understanding is that the core Posten Norden strategy is to operate in the wider communications market, not just physical mail: taking input data in any form, providing delivery in any format, and operating across the whole value chain directly and through subsidiaries such as Stralfors.

Nordstrom confirmed that this is indeed the case, arguing “it is actually a logical step. Combining digital and physical solutions increase efficiency for us and for our customers. However, margins are lower and competition is tough … We also have interesting solutions in the Danish E-boks. They provide e-solutions for Danish customers and have had a very good start.”

This leads on naturally to a wider discussion about e-commerce and parcels.

Providing Nordic solutions

“Possession of an attractive, cohesive distance selling offer is a distinct growth area” Nordstrom believes. “This involves being able to manage messaging and logistics flows for businesses as well as meeting buyers’ needs for reliability and ease in receiving their ordered items, and, where necessary, offering a simple, secure, returns process. In Posten Norden, we offer a unique infrastructure for businesses in e-commerce … they can reach customers in all the Nordic countries except Iceland.”

This Nordic wide approach applies also to the B2B parcels business: Posten Norden is aiming for “further development of an integrated Nordic logistics offer”, whilst also serving the needs of local markets.

Nordstrom also sees the post’s retail outlets as convenient pick up points for parcels. Unlike many posts he has no plans to extend into financial services. It is not a natural part of the core business.

Whilst some parts of the company operate on a global basis, it is clear from our discussion that the Nordics is the primary focus. “A growing number of logistics purchasers view the Nordic region as one market, geographically large but with limited volumes due to a relatively low population … It will be of increasing strategic importance to have the capacity to capture flows from other parts of the world into the Nordics via strategic European hubs, and to offer corresponding solutions from the Nordics”, is how the CEO summarised the approach.

Competition and trust

I am particularly interested in Nordstrom’s views on competition, given that the Swedish mail market has been fully liberalised for almost 20 years, and Citymail has been a high profile competitor.

“First of all it is important to know that …. Bring Citymail is owned by the Norwegian state-owned Posten Norge which holds a monopoly in its home market”, is his forthright opening statement. “Faced with ‘liberalisation’ or deregulation, new national regulations for European postal markets are being formulated. There is a significant risk that these regulations will show greater consideration to satisfying national special interests than in ensuring fair market conditions and a level playing field. Such an outcome would benefit neither our customers nor postal operators and their owners.”

So what advice would he offer to posts facing full liberalisation?  He told me “they need to describe the actual market situation and what short term and long term effects they foresee. Not only are we facing a dramatic change in the market, but also we risk being discriminated through new regulations that will for sure impede sound development.”

A major theme from the World Mail & Express Europe conference was trust, so I asked Nordstrom how important he sees this as an attribute for his organisation. His response: “Trust is a clearly defined customer benefit. We deliver it through continued high quality and reliability throughout the value chain, by providing environmentally efficient solutions, and through fulfilling the universal service obligation.”

Priorities

As the interview came to a close, I asked what are the three major priorities for Posten Norden during the next stage of its development.

Nordstrom describes three orientations: customer, performance and profit.

Posten Norden has to “listen to our customers and meet their communications and logistics needs with the highest standards of quality and cost efficiency”.

Performance orientation means “we must always act in our customers’ best interests, resulting in excellent service for our customers and ensuring Posten Norden’s short and long term competitiveness”.

And finally, the focus on profit: “Posten Norden can offer its customers attractive communications and logistics services thanks to the strong cost consciousness that pervades the whole group. This serves as the basis for stable financial development that in turn yields good returns for the owners and enables investment in new technologies, new services, and climate efficient distribution solutions.”

I was left in no doubt that Posten Norden, led by Lars Nordstrom, is focused on success.

This article was published in June 2010’s Mail & Express Review.  To subscribe to the industry’s leading quarterly publication, please click here