Welcome to a new corporate battleground where we will see Toll Holdings managing director Brian Kruger taking on the might of the chief executive of Australia Post, Ahmed Fahour.
Much of the future growth of Toll, which yesterday posted a 30 per cent jump in full-year net profit but a flat revenue result, will come from that looming battle as Toll challenges Australia Post’s dominance of the retail internet purchase delivery market.
In challenging Fahour head on, Kruger is taking a risk because Toll is going into a new market against the established player. We saw how dangerous this can be when Woolworths lost a fortune challenging the dominance of Wesfarmers' Bunnings, which continues to go from strength to strength (Woolworths finds itself in a hardware quagmire, July 18).
Delivering internet purchases to households around Australia is an industry Kruger’s predecessor, Paul Little, looked hard at but decided not to enter. Little is a co-founder of Toll and is still the company’s largest shareholder with just over 5 per cent. Little, who is now president of the embattled Essendon Football Club, fashioned Toll around corporate and governmental distribution and warehousing. Little could see a growth market in taking the next step and going to household delivery but decided not to go down that path. Toll’s main rival, Lindsay Fox and his Linfox, group made a similar strategic decision.
When former National Australia Bank executive Ahmed Fahour became Australia Post chief early in 2010, one of his first decisions was to seize the digital economy opportunity. He had the advantage of already being in direct home delivery via the mail and having a network of post offices where parcels could be left if no one was at home. No other player had such a network.
To challenge Australia Post, Toll has signed an agreement with newsagents who are not post offices to start the Toll network, and has plans to bring other groups to the collection network. Toll hopes to be able to offer customers the choice of using the Toll collection network as a first delivery point, or as a second point should no one be home to collect the parcel.
Toll believes it has a big advantage over Australia Post in that it can take goods from, say, China, to the door of the consumer. Retailers like Myer, Kmart or Target do not then need to warehouse the goods in Australia. Australia Post picks up its deliveries in Australia, rather than China.
Nevertheless this is a very new role for Toll. Ahmed Fahour's Australia Post now has an incredible 80 per cent share of the market. Toll has just 10 per cent so there is a long way to go. Brian Kruger came to Toll from BHP and later BlueScope. He needs to show that he can do a lot better than Woolworths in taking on the market leader.