Canada Post increases the price of its stamps: what future for the state-owned company?

Canada Post increased the price of its stamps by 25% on Monday, a measure that was announced last September, well before the state-owned company, which was already experiencing financial difficulties, was shaken by a 30-day strike. An increase as risky as it is ineffective, however, experts believe.

The federal Crown corporation is increasing the price of its stamps whether they are purchased in booklets, sheets or rolls. With the approval of the legislature, which was necessary for such an increase, the stamps will now cost $1.24 per unit, whereas they previously cost $0.99.

According to a spokesperson for the organization, this measure was necessary to better align the price of stamps with the increasing cost of postal delivery to all Canadianswhile the price of the Canadian stamp was among the lowest in the world.

Canada Post predicts that this measure will generate an additional $80 million in gross annual revenue for the year 2025, a negligible sum compared to the $3 billion that the federal corporation has accumulated in losses since 2018.

In its defense, the company says the increasing cost of deliveries, combined with the growth of the Canadian population, have both weighed on its finances. Canada Post’s mandate requires the company to be able to deliver mail to all addresses across the country.

In November, the company reported quarterly losses reaching more than $300 million. It attributed them to the erosion of its share of the parcel market and, in part, to the financial repercussions of the strike. The workers have returned to work, but negotiations with their union continue towards a new agreement.

It will be a very different organization

Canada Post has long held a monopoly on letter delivery. However, their volume has decreased by 60% over the last 20 years, according to the state-owned company.

Since the pandemic, its market share in the more profitable parcel delivery sector has also been eroded by private couriers and delivery giants such as Amazon, which rely on a low-cost workforce. cost.

The price rise is a somewhat dangerous path for Canada Post, which would like to go too far in individual competition with other suppliers, because fundamentally, it will not be able to do so as profitably as the othersanalyzes Sherena Hussain, professor at the Schulich School of Business at York University.

It is not yet known whether the labor conflict led to an exodus of Canada Post customers to other private delivery companies.

However, this market share was up for grabs and certain lower-cost players were able to offer their services and establish a form of trust while Canada Post was not thereexplains Ms. Hussain.

That said, their rates are generally higher than those of Canada Postshe adds.

Price increases applied on Monday are a solution bandage which will not solve the Canada Post problem, believes Ian Lee, professor of management at Carleton University who studies the postal service.

There is a future. It will be a very different organization. It will be much smallerenvisages the researcher.

A future version of Canada Post could be subsidized by taxpayers, he added, and serve primarily rural and remote communities – regions that are neglected by private, for-profit couriers, whose appetite is focused on major metropolitan areas of Canada.

According to Mr. Lee, there could also be a scenario in which Canada Post delivers directly to independent franchises that exist in grocery stores and pharmacies, rather than delivering directly to the home address.

Loblaws, [Pharmaprix] and convenience stores will compete fiercely to obtain these franchises, because they will be guaranteed to have customers at their doorhe said.

The sector will be restructured. The only question is when and to what extent, and what will be the proposal offered during the restructuringbelieves Ian Lee.

With reporting from CBC’s Jenna Benchetrit News