By HUSNIYE GUNGOR
AUSTRIAN POST, which has been waiting quite a long time to finalize a deal with Aras Kargo, finally purchased a majority stake this summer. Europe’s first standardized postal service, established in 1490, Austrian Post believes pays its biggest international investment in Aras Kargo is strategically important, its newly-appointed chairman in Turkey, Peter Umundum, states. Having just arrived from Austria, Umundum explained how he would pursue a new strategy for the future of the company.
The negotiations to increase Austrian Post’s share in Aras had been ongoing for some time and in August this year an agreement was reached between. Austrian Post increased its share in Aras Kargo to 80%; Baran Aras maintained his 20% stake. Turkish private equity firm Is Girisim sold its 20% stake in Aras Kargo to Austrian Post in 2013, only two years after it acquired the minority stake.
Once the acquisition of the majority stake was completed, a new board of directors was appointed, with Peter Umundum taking the chairman post and Baran Aras becoming the vice chairman. Umundum has been with Austrian Post since 2005 and has been a member of the board since 2011, responsible for parcel logistics globally. He will be travelling back and forth between Vienna and Istanbul. Already a frequent visitor, Umundum even made a full tour of Aras branches in Anatolia in 2015 and 2016 and is no foreigner to Turkey or the company.
He plans to repeat the trip as chairman when the pandemic is over. With a medium-term plan to grow Aras Kargo in the region, Umundum will prioritize domestic expansion. The focus will be on current business, sustaining growth and Aras Kargo’s pioneering position with the new management structure. Digital transformation, which started in 2016, will continue and a TRY 1bn (EUR 100m) investment will be made in the next 5 years. If the market goes well, there will be additional investments.
Aras Kargo was one of the first parcel delivery players in the Turkish market. Six major brands in the industry together cover the majority of capacity. Aras Kargo shares the top position with one of its competitors, enjoying a 26-27% market share, according to the chairman.
“We are already working on a market survey, with results expected in January 2021, to find out what the real share in the market is,” Umundum says. “Thanks to recent automation investments, handling capacity has increased three-fold, creating the highest hourly processing capacity in the industry.”
There are very strong competitors in the Turkish market and new players are also entering as e-commerce activity booms, he notes.
“Our biggest customers are becoming our competitors. Amazon, for example, has started a parcel delivery business in the UK, Germany and Austria. We expect the same development in Turkey as well. So, there is a very strong movement in the market.”
Aras Kargo can stay at the top and compete with the new players if it can raise up the quality and the standards in the industry, Umundum adds.
FOCUS ON NATIONAL BUSINESS
Currently, Aras Kargo is strongly focused on increasing volume and revenue. There is also the idea of developing the international connection as Austrian Post is part of international networks and has parcel delivery businesses in Slovakia, Hungary, Croatia and Bulgaria. The goal is to connect Aras Kargo with these countries and to Germany via other partners like DHL. There is a good possibility to improve business in both directions, imports and exports, according to Umundum.
“But before that there is still a road to be taken in the national business,” he says.
The plan is to initially have a strong nationwide network, meaning no specific city has strategic privilege in terms of investments. However, hubs in the big cities will be expanded, as was done in Ankara recently. “There are ongoing investments in Istanbul, where the volume is big. Izmir and cities in the south will also follow,” the chairman says.
The second but most important investment on the agenda is expanding sorting facilities. Developing the car fleet with bigger and greener cars will follow. In parallel with investments in sorting centers, additional employment will be needed. During the pandemic, employment already increased and Aras Kargo reached one million parcel deliveries daily and Umundum thinks this figure will be constant, projecting to close the year with a total of 200 million parcel deliveries. The company shipped about 126 million parcels last year including 20 million document deliveries.
PREPARED FOR E-COMMERCE BOOM
The pandemic caused sharp changes in consumption habits, giving e-commerce a boom. B2B deliveries dropped due to less stationary retail while B2C went up. Volume doubled compared with the previous year. The number of addresses visited increased by 90%, prompted by the increase in e-commerce, Umundum notes. The size of cargo packages also shrank and the share of small packages under five kilograms increased by 2.5 times compared to five years ago.
“Thanks to big investments such as IT infrastructure and automation in the renewed Ikitelli Hub and our employees, we got through the pandemic successfully. There were delays in some locations due to the increased demand and volume at the beginning of the pandemic, but employees continued to ensure the continuity of the supply chain.”
Aras Kargo implemented seasonal workforce solutions and developed new alternative business models to meet the demand, such as the “Esnaf Kurye” (shopkeeper courier) system. “We are ready for the new restrictions with higher (three times bigger) capacity, a wider branch network and increased knowhow,” Umundum says.
Since it was relatively small to begin with, the pace of e-commerce growth in Turkey has been high, according to the chairman. This has resulted in double-digit growth for the last three to six years. Based on Aras Kargo data, retail and hardware, especially clothing and cosmetics (hygienic and health products) gained momentum in the e-commerce channel.
TRY 2BN TURNOVER IN 2020
Looking at the company’s figures, Aras Kargo maintained double-digit growth for the last three years, increasing its revenue by 50%. The company posted a turnover of over TRY 1bn in 2019. In the first eleven months of 2020, it recorded 65% revenue growth and expects to see TRY 2 bn in the year-end results. Sustaining the double-digit growth figures is the target for 2021, as the strategy document is still in progress, Umundum notes.
What’s next for Aras Kargo? Umundum says that same day delivery is an emerging trend and they are following it closely in terms of their own strategic plan. But turning into a larger logistics company is not on the company’s short-term agenda. They have a chance to do business in air and marine cargo with the authorization certificates they have. But it will be on the agenda when there is a demand. “Industry ’s potential is high,” says Umundum, adding that they continue to strengthen the brand’s dynamic position in the market with Austrian Post’s global experience in the cargo industry and investing in customer-oriented solutions.
What is high on the agenda for Aras Kargo today is to develop alternative distribution models and to create a supply chain that will meet the increasing demand in the market, according to Umundum, who says the company also wants to evolve from an operation company to technology company. “All projects aimed at improving our technological infrastructure excite us. People and employees are the most important factors in our business. Only with them we can reach these targets,” he concludes.
ARAS KARGO’S 5-YEAR PLAN
>> Greater importance will be given to making automation investments, strengthening infrastructure and making processes more efficient, in line with the increasing e-commerce volume and changing consumer demands.
>> A total of TRY 1bn will be invested in distribution infrastructure, including all operations such as hubs and branches
>> Following the metropolises, it will focus on increasing capacity at hubs in Anatolia as of next year
>> A “Route Optimization” project to manage the increasing address and customer data will be completed in 2021, making deliveries even faster
>> Focus will be on growing Aras Kargo. If potential acquisitions may strengthen the company, it will look into such opportunities but currently it is not on the company’s agenda 4.500 VEHICLES
COFFEE WITH MEDIUM SUGAR
Most of them for work, Peter Umundum, Aras Kargo Chairman of the Board of Directors and Austrian Post Board member, has travelled to Turkey nearly 40 times. He likes Istanbul and favors the Sunset restaurant. As a coffee drinker, he likes Turkish coffee with medium sugar. Every kind of fish is good for his palate. With two sons aged 25 and 32, Umundum has also been a grandfather for the last three weeks.
SUSTAINABILITY AMONG CORE PILLARS
Sustainability is one of four core pillars of the company. It has the biggest e-vehicle fleet in Austria, with 2,000 e-vehicles out of a total 8,000. Aras Kargo also started using electric vehicles in 2011. Today, Aras Kargo has the largest electric commercial vehicle fleet in Turkey, planning to increase it further. Through these, the company was able to save an average of 10% fuel every month. The company also wants to produce its own electricity from solar cells on the roof of its sorting centers.
Up to now, 25% of energy was saved with the use of LED lighting and photocell systems in Aras Kargo hubs. Cargo packages are also biodegradable. The platform called “NatureFriendly Aras People”, created in 2014, has been cleaning Turkey’s shores for four years with the help of volunteers among Aras employees and in cooperation with TURMEPA (Clean Sea Association). A strategy document within the company, setting targets on sustainability and other areas, is still in progress.