The Portuguese group, with over 500 years of history, started operating in Spain in 2005 with its entry in the express parcel delivery market and the acquisition of Tourline Express (created in 1996).
In a clearly expanding market, mainly due to the boost from e-commerce, CTT chose to develop an Iberian network focused on express transport and with a unique offering for both Spain and Portugal.
Although you've been present in Spain since 2005, a year and a half ago you changed your strategy in the Spanish market. What has the result been like?
In 2019, at the height of the e-commerce boom in Spain and with major possibilities for growth in Portugal, the CTT Group decided to continue promoting this idea and appointed a new management committee before embarking on a rebranding exercise. Tourline Express was renamed CTT Express (a Spanish branch of CTT Expresso, the CTT Group's parcel company in Portugal)
We then established ourselves as a powerful Iberian company that reasserted the commitment of the Portuguese group to the express parcel delivery market on the Iberian Peninsula, with a new brand, capacity and an efficient model to face the future with guarantees.
This year and a half has been an enormous challenge for us, since as soon as we entered the Spanish market we found ourselves in an unprecedented situation as a result of the pandemic. Even so, the result has been positive, and we can even say that we've achieved the goals we set ourselves. In figures, our level of activity in 2020 grew by 70% in Spain, meaning that we reached our two-year goal in half that time and increased our sales by 41%. And in terms of the group as a whole, the parcel business for Iberia grew by 41% and sales by 27%.
Sales in Iberia have grown by 50% so far in the first half of the year, compared to the first half of 2020. This represents an increase of 80% in Spain. We calculate that our Iberia business has grown by 60% (i.e. 36 million shipments). In terms of results, we reached the break-even point in Spain in the first half, and EBIT in the second quarter.
The fact that we have achieved these positive results in just one year gives us a very optimistic view of our position in the market, in which we aspire to become Iberian leaders in the express parcel delivery market.
With the boom in e-commerce, is the express parcel delivery industry now becoming an increasingly competitive market? What is the role of digitalization?
The situation in the market is very competitive; there are numerous companies in the industry and the growth of e-commerce and key shopping dates, such as Black Friday or Christmas, generate large peaks in demand. This means that express parcel delivery companies must be increasingly ready to ensure capacity, flexibility and efficiency. On top of that, the pandemic has led to a surge in online shopping, which demands very high service quality rates.
Technology is our best ally here. We have made a strong commitment to investing in technology and innovation. If a company wants to succeed in this industry, it must go digital. Tools and digitalization are what allow us to improve our work processes and offer high reliability at lower cost.
So at CTT Express we have established mechanization at our main centres, digital tools for our couriers to help them in their daily distribution work and other systems that improve communications and information with our customers and end recipients.
What investments are you making?
We are continuing with our strategic investment plan for now, backed by our latest results and aimed at positioning us as an Iberian benchmark in the industry and guaranteeing the best service quality for our end recipients and customers.
60% of the 12-million euro investment we announced over a year ago has so far been allocated to mechanising warehouses and new facilities, while the other 40% has gone into computer systems to enhance the new work processes: operational, commercial, last-mile distribution and other systems that allow us to control our distribution network, as well as systems to enable communications with senders and recipients.
In this last year and a half we have also been very active in opening new distribution centres that have served to support our investments in technology, automatic sorting methods and in ensuring control over last-mile distribution. This has enabled us to achieve very high rates of quality and reliability. We have opened more than 30 new centres in total, and we now consider that we have a perfectly consolidated national network to provide these levels of quality and distribution control.
In addition, with the implementation of our unique model based on our own distribution network and a network of franchises with high sales capacity, we have very high business growth expectations. Our new model specifically focuses on the commercial capacity of our franchisees. We have become very demanding in our choice of franchises in terms of their potential to attract customers, rather than their distribution or last-mile distribution capacity, as we believe that we can play a much more efficient and flexible role with our own distribution centres, and can even supply the substantial investments that franchises cannot afford on their own.
I am convinced that all this is paving the way for us to become Iberian leaders in the industry in terms of quality, even though we are competing with companies with a better starting position, which we must outmatch by growing faster and providing a better service.
Why the commitment to the Spanish market?
Spain and Portugal are presented as one in business terms, and we can offer total coverage on the Iberian Peninsula, with a high-quality service and clear competitive advantages. For customers, there is no difference between the two. In all my professional life in the industry, I have not yet met a customer who has asked me for an offer for Spain and France, for example. However, it is very common for Spain and Portugal to be understood and considered as a single market.
What are your expansion plans in Spain?
We will continue to roll out our business plan and investments, opening new facilities in strategic locations as a means of improving our services and achieving better financial results thanks to economies of scale. Without forgetting the commitment to technology and innovation in order to ensure the best service quality ratings in the industry.
Will the industry become even more dominant?
The scenario created by the pandemic has enhanced the role of companies in the express parcel delivery industry. We became a necessary link in the supply chain in this crisis situation. The continuation of our activity guaranteed supply to the entire population who were confined to their homes, and even allowed many businesses to carry on with their activity.
Shopping habits have now changed. E-commerce will continue to grow, but so will B2B, although possibly at a slower pace. That's not to say that it's not a very important segment, and our aim is for our new franchise model to be the most attractive in the industry, and the element that guarantees us significant growth in this segment.