by Paul Needham
Mega-deals, B2C growth and uncertain economic trends have been the major themes in the worldwide courier, express and postal industry in 2015, when CEP-Research also celebrated its 10th anniversary. The outlook for next year is mostly positive.
This year has certainly been dominated by quite a few major acquisitions. The most prominent by far is FedEx’s forthcoming takeover of TNT but UPS was also on the acquisition trail, while Japan Post snapped up Australia’s Toll Group in an expensive deal and Alibaba increased its stake in Singapore Post.
Three international express giants
In April, FedEx surprised many observers by announcing the agreed takeover of TNT for €4.4 billion, little over two years after the European Commission had blocked UPS’ bid for the Dutch company. Although Brussels conducted an in-depth investigation it did not issue any objections and, at the time of writing, looks set to give a formal okay by early January, enabling the mega-deal to be completed in the first half of next year. The deal will transform the international express market by reducing the number of global players to three (DHL Express, UPS and FedEx-TNT) – although FedEx and TNT are already largely complementary given FedEx’s relatively small presence in Europe which is TNT’s core region. European shippers even welcomed the deal as generating more competition through a strong third supplier (FedEx-TNT) alongside the two market leaders (DHL and UPS).
There were also important acquisitions in the USA and Asia. In the US, FedEx completed the $1.4bn acquisition of returns logistics specialist Genco early in the year. UPS extended its contract logistics capabilities with the takeover of Coyote Logistics for $1.8 billion and made several other small acquisitions. Pitney Bowes moved into e-commerce with the $395 million takeover of Borderfree, regional parcel operator Eastern Connection was bought by Canada’s Dicom Group while another regional firm LSO expanded geographically by acquiring Express Courier International.
Cross-border deals in Asia
The other really big international deal of the year, however, was in Asia where Japan Post splashed out US$5.1 billion to take over Australian logistics company Toll Group just a few months ahead of its mammoth IPO, which raised $12 billion. The deal, which turns Japan Post into one of the largest logistics suppliers in Asia with a large business in Australia, could be followed by more acquisitions in the future, Japanese officials have said.
One of the most closely-watched tie-ups is between fast-expanding Chinese e-commerce giant Alibaba and Singapore Post. Alibaba bought a larger minority stake in the listed postal operator, and the two companies are working on a joint e-commerce logistics business to cover Asia and potentially other regions as well. For its part, SingPost bought several regional logistics and e-commerce players in Asia and North America to create what it labelled ‘a global e-commerce logistics network’.
Back in Europe, there were some other significant M&A deals this year. Amazon made headlines with news that it would take majority ownership of French B2C parcels firm Colis Privé. Geodis bought US logistics firm OHL to expand its North America business, France’s La Poste invested in various small freight and parcel companies, and also re-branded its European parcels business as ‘DPDgroup’ while Royal Mail acquired a courier firm and several technology companies. On a different financial note, Poste Italiane finally achieved its long-held ambition of becoming a listed company with the flotation of a 40% stake in October, raising €3.4 billion for the country’s government.
E-commerce drives CEP market growth
Amid this wave of strategic activities, the CEP market continued to grow this year, driven mostly by the continuing e-commerce boom which is forcing many operators to invest heavily in capacity expansion and new delivery models.
In the B2B sector, mixed economic trends and low growth in international trade held back overall growth rates, leaving the international express players to compete intensively with each other. For example, DHL Express increased daily time-definite international shipments by 8.5% from January to September 2015 while UPS’ international export volumes increased by only 4.3% on a daily basis over the same period. FedEx Express, with a different fiscal year, had a low 1% rise in international export packages in the year ending May 2015 and a 2.5% decline from June to November 2015.
The real boom business remains the B2C parcels sector which is generally growing at high single-digit rates in many markets around the world, as e-commerce continues to generate strong volume growth. Spectacular online shopping events such as Black Friday, Cyber Monday and China’s Singles Day provided an additional, if operationally challenging, boost.
The main beneficiaries are the postal operators and specialist B2C parcel firms with their extensive final-mile delivery networks. However this market is being disrupted on several fronts by Amazon’s expansion of its own delivery services and the emergence of ‘crowdsourced’ start-up delivery firms specialising in same-day (or even faster) city deliveries. These trends are most apparent in the USA but are rapidly spreading to Europe and, to a certain extent, to Asia as well.
Positive outlook for 2016
Against this dynamic background, most CEP firms will be going into 2016 fairly optimistically. The US economy is doing well, Europe is performing better than in the recent past and Asia continues to be the big growth region, even though China’s growth has slowed significantly. These are positive indicators for the international express business next year. In the B2C parcels sector, e-commerce will continue to drive growth, especially as cross-border sales steadily increase. Competition, however, will remain intense in many areas as existing rivals launch new products and services while additional competitors enter lucrative markets around the world. More big M&A deals could be on the cards next year as well.
