Consultant Insight: Japan Post pares down once lofty goals for Toll Holdings

Australia-based Toll Holdings, which was once among the largest global logistics providers, was acquired by Japan Post in 2015 for about $5.1 billion, but it’s been no bed of roses for either company since the acquisition. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] “We have made a first step toward becoming a global logistics company,” Japan Post Holdings President Taizo Nishimuro said of the acquisition at the time. Combined, the two would be the world’s fifth-largest logistics group, according to Japan Post. Toll Holding’s revenue continued to falter due to rumored cultural differences between the two companies, the need to upgrade Toll’s operations, and rising competition that hampered any meaningful strategic guidance. Only two years into the deal, Japan Post had to write down the bulk of Toll’s value due to its weak performance. Then in 2020, COVID-19 made its global presence known and Toll was also hit with two cyberattacks, one Jan. 31, and another May 1. Following the string of difficulties, Japan Post decided in 2020 to sell parts of Toll Holdings, according to an August Reuters article. In November 2020, Japan Post began the sell-off with the U.S. warehousing and trucking operations of Toll divested to U.S.-based Taylored Services. Next up was Toll’s Australia and Asia-focused Global Express, which represented 41% of Toll’s group revenues for the fiscal year that ended in March 2020. This group was sold to Sydney-based Allegro Funds in a deal expected to close by June 30 for only $6 million, a large loss for Japan Post. "The divestment is consistent with Toll's strategy to focus on being a preeminent Asia-Pacific logistics provider through its core businesses in contract logistics and freight forwarding," Toll Chairman John Mullen said in a news release. Mullen’s statement is a confident one, considering that the Asia-Pacific contract logistics and freight forwarding market is riddled with providers, both global and regional. Toll will be reorganized after its Global Express sale to Allegro closes in a couple of months. What this new Toll will look like remains to be seen, but it will need to assure existing and new customers that its technology is safe and up to date to handle the bulk, freight and e-commerce requirements of customers. It will also need to differentiate itself from the competitive pack — and not by price alone. Entering a rate battle would harm Toll’s need to grow its profits, putting that strategy at odds with Mullen’s stated goal for the organization. The opportunity for a fresh start after the sell-off is great for Japan Post as it looks to compete with postal operators such as China Post and Singapore Post, which already have a leg up in international and regional e-commerce logistics. After divesting many parts of the original Toll, Japan Post will now be dependent on building partnerships for transportation and storage beyond ports and airports, particularly outside of the Asia-Pacific region. One possibility for Japan Post and Toll Holdings could be a partnership with an integrator, such as FedEx, to handle deliveries beyond a port or airport. This could be particularly attractive since a relationship between Japan Post and FedEx already exists; the two announced an enhanced collaboration in the area of international delivery services in 2015. However, if Japan Post wants to further its reach in Asia-Pacific in particular, perhaps a collaboration with a Chinese logistics provider such as SF Express may fit best, with SF’s ability to directly handle last-mile deliveries within China, the world’s largest e-commerce market. Time is not on Toll’s side to become a “preeminent Asia-Pacific logistics provider.” Market dynamics are changing rapidly and the question is not whether it can catch up, but whether it can surpass the likes of Kuehne+Nagel, DHL, Agility, CEVA and the other regional logistics providers that are quickly expanding globally.

Consultant Insight: Japan Post pares down once lofty goals for Toll Holdings

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