TNT will target new markets such as standard parcels, B2C deliveries and freight transportation forgrowth over the next five years in response to lower customer demand for premium express services,
executives said yesterday. Its mail business also faces a major transformation.The new ‘Vision 2015’ strategy presented yesterday represents a bold move away from thetraditional image of TNT as ‘a premium express’ carrier and will make it into more of an all-roundplayer in the express, parcel and freight sectors by broadening its previously ‘narrow’ expressfocus. It will thus compete more widely with DHL, UPS and FedEx, more directly with operators suchas DPD and GLS, and more often with freight forwarders such as DB Schenker, Kuehne + Nagel andPanalpina.
After completing its ‘Focus on Networks’ strategy between 2005 and 2009 with internationalacquisitions, development of road transportation networks and various new services, the Dutch grouphas reassessed its positioning in the light of the massive slump in demand for express over thelast year and what it described as the “blurring boundaries” between integrators and standardoperators in both the parcel and freight markets.
Its response is to focus on five strategic areas, four of which are growth areas while theremaining one (mail) requires a transformation of the business model. The overall aim, according toCEO Peter Bakker, is to target average annual revenue growth of 10% in the day-definite deliverymarket, and an Ebitda of 12%, and to cope with an average annual revenue fall of 4-6% in MailNetherlands while maintaining a 16% cash Ebitda level.
In the European Parcels market, TNT will focus more on standard parcels and also seek todevelop its e-commerce activities. TNT Express currently has an 18% share of the ‘narrow’ €21billion European B2B Express market, ahead of DHL, UPS and others, Marie-Christine Lombard, head ofExpress, told analysts. But it only has 2% of the €20 billion ‘standard parcels’ market.
By 2015, TNT expects the total European express/parcels market to grow to €50 billion, withmoderate growth in express to €23 billion and stronger growth for standard parcels to €27 billion.The seven largest parcels markets are expected to grow from €15.5 billion revenues to €21 billionby 2015. TNT aims to capture 15% of the ‘relevant’ €10.5 billon section of these markets,generating an additional €1.6 billion from standard parcel revenues.
TNT will target the “high-end” B2C market, offering value-added services such as evening andweekend delivery, flexible delivery options and pre-notification, and by using own resources orsub-contractors, Lombard said. High-tech customers such as Apple wanted TNT not only to deliver towholesalers and retailers but also directly to consumers, she commented. The company alreadydelivers about 20% of its European volumes to home addresses rather than to businesses, shenoted.
In Freight, defined as shipments over 70kgs, the company wants to build on its European roadnetwork to offer more day-definite freight services and gradually create a separate Freightnetwork. TNT sees the potential to offer higher-quality transportation than what is currentlyavailable, Lombard explained. For intercontinental freight, TNT will develop its existing China –Europe services and build up freight traffic to Europe from other markets such as the USA.
In Emerging Platforms, TNT wants to benefit from its ‘first mover’ advantage in markets suchas China and South America and continue to develop its road networks in Asia, Middle East/Africa.TNT is now second to DHL in the Asia Pacific B2B Express market and the clear leader in SouthAmerica following acquisitions in the two regions, she said.
In response to analysts’ questions, Bakker said TNT did not want to become the largest playerbut the cost leader in its markets. “We are not going to get into massive volume with low costs butwe must be low-cost in our own areas,” he commented. While TNT saw opportunities to grow instandard parcels, it also saw operators such as DPD and GLS moving upwards in service levels, henoted.
On the Dutch mail business, Bakker said TNT would develop a three days a week deliveryservice parallel to the universal service offer using part-time, lower paid workers. Regardingpossible sales in the European Mail Networks business, he said TNT Post UK is well-positioned andTNT would like to strengthen it, but the company is open to talks with a potential buyer. InGermany, TNT expects to seal its partnership with publishers to create “an unrivalled secondnetwork” behind Deutsche Post.
Bakker rejected a theoretical split-up of TNT into its component mail and transportationbusinesses, which he said would not “address the challenges and opportunities” that face thecompany.
