Inflation and rising energy prices: Swiss Post to adjust parcel prices for major customers from 2023
Rising energy and fuel prices as well as general inflation are leading to much higher costs in parcel logistics. Swiss Post is likely to incur additional costs of around 30 to 40 million francs in the parcel business for 2022. Swiss Post will bear these additional costs for 2022. From 2023, however, moderate price adjustments are unavoidable in order to pass on some of the costs. Swiss Post will be introducing a variable energy surcharge and an inflation surcharge for parcels from 2023. This will affect some 3,500 business customers who have individually agreed prices. Business customers who have list prices and private customers will not be affected. The inflation surcharge will be 1.9 percent of the parcel price. The energy surcharge is variable and is based on the average monthly prices for diesel, petrol and electricity.
Stefan Regli, Head of Domestic Letters & Parcels at Swiss Post, answers the most important questions.
Stefan Regli, in specific terms, how is Swiss Post feeling the effects of higher energy prices?
Energy prices for sources such as electricity, petrol and diesel have risen substantially in recent months. Diesel costs alone increased by 32 percent between July 2021 and July 2022. With a fleet of over 10,500 delivery vehicles, higher energy and fuel costs are being felt.
And to what extent is Swiss Post affected by inflation?
The Swiss Federal Statistical Office’s inflation forecast for 2022 as a whole is currently around 2.5 percent. Inflation means that we have to pay more for the maintenance of our machines, for example. Even plastic containers or roll boxes, which we use in the sorting centers by the thousands, have become more expensive. However, inflation will also lead to higher costs of up to 20 percent for our construction projects for new regional parcel centers. For 2022 as a whole, we expect additional costs of around CHF 30 to 40 million in the parcel business due to inflation and higher energy costs.
But Swiss Post has just announced a good interim result with higher profit than in 2021. Isn’t the price increase a bit premature, or even not needed at all?
Not at all! The prices for electricity, petrol and diesel have risen sharply in recent months. On top of that, as I already mentioned, there’s inflation. We are feeling the huge impact of all of this. In the Logistics Services unit as a whole, Swiss Post’s result was CHF 36 million lower in the first half of 2022 than 2021.
What does this mean in concrete terms for the parcel market?
Profit margins on parcels are under pressure due to increasing competition across the market. In addition to this trend, rising energy costs and inflation are weighing on our profitability in the parcel business. That’s why we have been forced to make the decision to pass on some of the costs to our customers from 2023. Unfortunately, this measure is inevitable for us.
Why are parcel processing expenses so high for Swiss Post?
We have a universal service obligation. We deliver everywhere – whether in the city or the countryside, and to the remotest valleys of Switzerland. This means we have a very high proportion of fixed costs, which also puts pressure on our parcel margins.
By introducing surcharges, Swiss Post is weakening the Swiss economy at a delicate moment…
We, too, are part of the Swiss economy. Companies in Switzerland rely on us to deliver parcels to their customers – and to all regions of Switzerland at the same conditions. As I said, we deliver not only to the easily accessible urban centers, but also to the remotest valleys in Switzerland. However, in order to keep this up in the long term – and using our own financial resources – we must continue to make a profit.
Are surcharges the only solution?
No, they’re not the only one. Our investments in new regional parcel centers and new technologies are ensuring that we’re becoming more efficient every year. But that doesn’t just happen overnight. Energy surcharges are also common in the logistics sector.
So Swiss Post is doing things just like everyone else…
Other parcel service providers have been levying such surcharges for a long time or introduced them at short notice in 2022. It’s important to bear in mind that if energy and fuel prices fall again, our energy surcharge will also fall. It may even amount to 0 centimes. And even with the surcharges, Swiss Post will be bearing some of the additional costs itself from 2023. So we’re not transferring them to our business customers on a one-to-one basis. For 2022, we’ll be assuming the additional costs completely, and, by doing so, we’ll be supporting the Swiss economy.
The variable energy surcharge and inflation surcharge are a first for Swiss Post. How will major customers still be able to plan?
By doing so, Swiss Post will remain reliable. That’s very important to us. This is precisely why we informed our 3,500 major customers very early on about a measure that won’t apply until 2023. The development of our prices is transparent. For example, we’ll be informing our contract customers about the applicable energy surcharge at the beginning of each month. We’ll be publishing the surcharge scale publicly.
What does the announcement mean specifically? How much more expensive will parcels be for major customers from 2023?
Besides the inflation surcharge of 1.9 percent, there would be an energy surcharge of 12 centimes per parcel at the current prices for diesel, petrol and electricity. But as I said, the energy market is turbulent. And this means our energy surcharge can vary. We’re also keeping an eye on general inflation and reserving the right to make adjustments – even downwards, if necessary.
Are parcel prices for private customers also increasing now?
No. Private customers and business customers with list prices won’t be affected by the price adjustments. We’re adhering to the agreement we have with the price regulator to maintain the list prices for letters and parcels at the current level until the end of 2023. However, the agreed surcharges for major customers will help us. The parcel volumes of the major customers affected account for about 80 percent of our parcels, which we sort and deliver every day.
How does Swiss Post calculate surcharges?
The inflation surcharge and the variable energy surcharge only apply to Swiss Post business customers who have individually agreed conditions. Swiss Post informed them by letter on 22 August 2022.
Inflation surcharge: Swiss Post will respond to rising inflation, which is above all impacting the company when it comes to machinery maintenance and large investments in construction projects, by applying an inflation surcharge of 1.9 percent on the parcel price as of early 2023. In doing so, Swiss Post relies on the Confederation’s economic forecasts. The forecasts made by the Confederation’s expert group “Economic Forecasts” anticipate that the National Consumer Price Index for all of 2022 will rise by 2.5 percent.
Variable energy surcharge: Swiss Post will be applying an updated energy cost index on a monthly basis as of 2023. The index determines the surcharge for all parcels charged in that month. The energy cost index is based on the average prices of diesel, petrol and electricity for the previous month according to the official National Consumer Price Index (LIK) and Swiss Post’s current energy mix for vehicle operations in the Logistics Services unit. This makes the index calculation fully transparent and comprehensible, and it directly reflects the development of energy costs. It means that the index-linked surcharge in centimes per parcel is based on Swiss Post’s actual additional costs from energy prices.
More information from Swiss Post can be found at www.swisspost.ch/price-development.