By Acquiring City Express, Croatian Post Will Become a Leader in Courier Services

City Express is not the only player in the game; we are also conducting preliminary talks with other courier companies. This acquisition will significantly reduce the risk of competition entering the market, but, of course, not at any cost. It is important to increase market share and return the investment.

Interviewed by: Željka Laslavić and Miodrag Šajatović
Photo: Željko Jelenski

The CEO of Croatian Post, Robert Jukić, is the first leader of the company to agree to an interview in the last three years. He reflected on his first 100 days in office, relationships with the owner, the upcoming liberalization, and the announced acquisition of the fiercest competitor – City Express. Youth, energy, determination, and even a certain arrogance are his characteristics that could help him maintain his leadership position until the end of his four-year term, unlike his three predecessors. Especially if it is true that he has the green light from the owner – the Republic of Croatia – to finally engage in investments and acquisitions.

• You are the first CEO in the history of Croatian Post who did not come from the postal system but from outside. How did you react when you became acquainted with all the problems that have accumulated in HP over the years?

– I arrived at the position in the Post from the position of CEO of Daruvarska Brewery, where I had to ‘collect’ for salaries every month; the competition was so strong and larger than us that we had to fight for every liter sold in the market and every centimeter of shelf space. Croatian Post is a completely different environment. The company is not in debt at all, there is no real competition, in full force, on the market yet, salaries and jobs are secure. The biggest surprise was that the organizational climate I came from was much more pleasant than the one I found. Settlements through newspapers, factional struggles, a sense of passivity, and a lack of optimism, because all that we are talking about has already been tried by someone before, marked my first working days. The fact that nothing has changed in the Post for decades weighed heavily on both the company and the employees. It was immediately clear that this would be my first and perhaps most important battle.

• Were you discouraged by the fact that the Supervisory Board changes several HP leaders every year?

– It is not good for the owner to constantly change management, but none of the previous ones structurally initiated the organization. My main concern was to ensure full support from the owner for the work that awaits us. The first 100 days showed that there is no reason for fear. Furthermore, I wanted to ensure continuity with the help of the mandates of the members of the Management Board, which we did not change. Today, the Management Board consists of people who together have about 50 years of experience in the Post, which compensates for the fact that I came from outside. Likewise, people who come from outside can sometimes see problems more clearly. We have a quality combination of experience and professional capabilities. The ratio of the potential I encountered here and our goals is very good.

• The Ministry of the Sea, Transport and Infrastructure confirmed to us that the company City Express is currently undergoing a deep analysis, which HP intends to purchase. It is rare in Croatia for a state company to buy a private one. Who made that decision, how will this acquisition be financed, and what specific benefits will HP gain from buying CE?

– The decision was made by the Supervisory Board at the proposal of the Management. Croatian Post will become a leader in courier services. There are many reasons why this is good for the Post, perhaps the most important being that it is easier to enter the market through acquisitions than through organic growth from scratch. City Express is not the only player in the game; we are also in preliminary talks with other courier companies. This acquisition will significantly reduce the risk of competition entering the market, but, of course, not at any cost. It is important to increase market share and return the investment. Previous newspaper articles have been unserious. At the same place where the contract for the start of the deep analysis of the business and its evaluation is mentioned, the value of the company is also stated, which is not logical. We have engaged two reputable companies for this job – KPMG and Zagrebačka Bank. In its acquisitions, Croatian Post will be an opportunist with return on investment as the only measure. Financing is not a problem. Look at our balance sheet, and everything will be clear to you. Croatian Post actually has a lot of cash, but it needs to create additional value so that the financial potential it has does not continue to decrease. Additional value will be created through acquisitions, joint ventures, or greenfield projects. In any case, you can start getting used to the news that state companies are taking over private ones.

• Why did you eliminate discounts for customers and in a way gift them to the competition?

– We eliminated discounts because it was not logical to lose 130 million kuna annually on them due to competition, which is their annual income.

• The Management and directors of postal offices recently adopted a strategic plan at a seminar that includes separating the entire HP activity into three companies – Express, Network, and Post. Is this the beginning of the privatization of all activities except the core one?

– The framework for the strategic plan is the result of our first hundred days of work, a portfolio of concrete projects that have already begun to be implemented. The government has not set goals regarding the privatization of Croatian Post, but it wants to see a company operating with a profitability rate at the level of Western European operators, between three and five percent. Today it is at -3.7 percent. How we will achieve that is our problem. From our actions, it is evident that we are not spinning off parts of the business, but rather the opposite – acquisitions.

• A year and a half ago, the consulting firm Roland Berger compiled a Strategy for the Development of the Postal Services Market and an action plan according to which the key development strategy of HP should be completed by the end of the year. How much does your strategy align with theirs?

– We are behind the deadlines in that document, and we take that quite seriously. We are aware that HP currently does not have a permanent operating license and that it is an obstacle to Croatia’s entry into the EU. Unfortunately, we are not behind in the last hundred days, but in the last few decades. The strategic framework we have adopted should fully address the challenges from the Roland Berger study in real-time frames.

• The R&B strategy also showed that HP has about two thousand surplus workers. Some believe that there is no surplus workforce in the Post, but that it is misallocated. What did you agree on with social partners at the seminar?

– I agree with you that the Post does not have a surplus when we talk about people or offices. We own the largest distribution network and sales force in Croatia, and that is our greatest strength. In boxing terminology, we are hitting weaker than our weight, and we need to change that. We must invigorate and activate our channels with new products and services or new activities.

• True competition may not have fully entered yet, but it is eagerly waiting at the door. How do you view the upcoming market liberalization?

–  HP has not had a proper business intelligence system nor has it had information about potential competition in the international market that can also serve as a model for us – the German, Austrian, and Dutch posts. I will not say that I came to HP with a grand vision. I came with extensive business experience to connect the potential of the company with the experience of international competition. We have thoroughly researched the operations of our models and created a strategy that will bring us closer to them. Public operators in Europe have penetrated all directions of business: marketing, printing, postal production, market research, database creation, and have imposed themselves in the segment of marketing activities. They have become leaders in distribution, diversified in their core business, and incorporated banking and insurance businesses. Now we can see all the complexities of variations that have occurred in Europe and begin our own diversification.

• However, with each entry into a new activity, you are actually creating problems for a certain lobby.

– A good part of the ‘noise’ in the Post arises precisely from that.

•  Are you planning to intensify cooperation with Hrvatska poštanska banka, which currently has no effect because HP only performs some administrative tasks for the bank?

– We expect that cooperation with HPB will be redefined; there is readiness on both sides for that. HP’s strategy is to activate the space in front of the counters and on it. This certainly means entering banking and insurance businesses, where we view our investment, from the position of the strongest distribution network in Croatia, as an investment in the capital of the bank or the capital of the insurance company, and we expect the same rates of return.

• After liberalization, HP will be obliged to allow other operators access to the postal network (its offices, centers, boxes, equipment, and vehicles). How will you enable such access?

– The first step in preparing for liberalization is the informatization of the entire system. The Post today does not know how to separate reserved and unreserved areas of postal services (letters lighter or heavier than 50 grams) or individual process phases in its value chain. Once we resolve that, we will be able to provide access to competitors at all points where the regulator will require it from us.

• Will you redistribute and reduce postal offices? Currently, 246 branches on the islands are operating at a loss.

– Reducing postal offices is not part of our strategy. Furthermore, there are only 13 postal offices in our network in Croatia today, which are unnecessary given the current regulations. Our main problem, as my colleague Mateo Beusan calls it, is the black selection of postal offices. The locations of the offices do not support the lifestyle of our service users; for example, we are not in shopping centers. Shelves and counters are empty because there are not enough products and services on them. We have aged a bit, and it is time for a ‘face-lift’ so that our spaces turn into attractive sales points. Our advantage is that we must have our offices on Croatian islands, unlike other corporations that do not need to have them but still want to be represented with their products and services. I believe that we will find mutually profitable solutions in light of that fact.

• HP urgently needs a new distribution center, an investment of about 300 million kuna. Given that relocating the sorting center from Branimirova Street in Zagreb, which has only 60% utilization, has proven necessary, will a new one be built near Jastrebarsko or as part of a new logistics center near the Ranjirni station?

– The distribution center is a prerequisite for optimizing processes in the future HP division. Today we sort mail at 22 locations in Croatia, and that is, besides being endlessly expensive and complicating the process, one of the main problems that affect the quality of our services. We are considering a location near Zagreb Airport due to international postal traffic at a site of approximately 100,000 square meters. Our activities are focused on centralizing mail sorting, and this should be the first major project we will initiate.

• Your predecessor, Andrej Sardelić, once stated that HP, if it does not manage to restructure by the complete liberalization in 2013, should not fear a foreign partner. Is this a kind of introduction to the entry of Austrian Post into the ownership structure of HP?

– As the CEO, I would never dare to speak on behalf of the owner, the Republic of Croatia. My role is executive, and it is up to the owner to decide which of the possible scenarios they want to realize. We consider Austrian Post a serious competitor, not a strategic partner.

• Many in HP say that you have the energy and strength to initiate the long-announced change in the system. How much does political interference in your management decisions hinder you?

– If we talk about politics in terms of the promises of the owner, they have so far proven to be entirely true. The Management of Croatian Post has been given full support and allowed freedom in its work, with an insistence on results. I speak on behalf of all of us when I say that we are grateful for that.