Time for a frank talk on spiralling post prices

There was a time when a post office chief executive would almost have to give a kidney to push through a rise in the price of a stamp. Last week An Post announced a fifth consecutive annual increase, bring the cost of a stamp to €1.65.

It says the hike is necessary to address what it calls “the inexorable decline” of core mail volumes, which have fallen 40 per cent since 2017. When the latest increase is implemented on February 27, the price of a standard stamp will have risen 130 per cent in the same period.

An Post is one of the most transformed businesses in the country. Freed of price regulation in 2017, it no longer needs anybody’s approval to raise prices, though the regulator, ComReg, can intervene if it feels postage is unaffordable, or its pricing is unfair or not transparent. ComReg clearly feels this is none of the above.

The mail services’ two main costs, labour and fuel, have increased steeply in recent years. Yet the prime driver of rocketing postal prices, globally, is falling demand. Right across the world the response is the same.

Pockets of An Post’s domestic mail service are actually quite profitable. In fact, it made €23 million in 2023. Metered mail volumes, basically business accounts, rose 7.6 per cent and thanks to a chunky price increase, revenues climbed 17.6 per cent.

Stamped mail, on the other hand, fell 16 per cent on the year. Volumes have halved since 2017, hence the big rise in the price of a stamp.

A persistent problem for An Post is the losses it makes on international mail. Customs problems due to Brexit drove down volumes from the UK, while it has been forced to charge uneconomic rates on the booming trade in packets arriving from China. International losses reached almost €30 million in 2018, and were pared to €16 million in 2023.

An Post argues that its stamps are among the cheapest in Europe. The UK, by comparison, charges roughly €1.97 for its first-class mail.

Yet one still has to be uneasy about an effective monopoly with the freedom to set its own prices. With the luxury of cost recovery, where is the incentive to reduce cost? And at what point will this all become a self-fulfilling prophecy as the high cost of stamps drives down volumes ever further?

In the UK, the Royal Mail operates both first-class (next-day delivery) and second-class mails (within three days). In each case, the company is obliged to make deliveries six days a week.

Its regulator, Ofcom, is proposing that second-class mail will be delivered on alternate days, and not at all on Saturdays. It says the proposal would save the Royal Mail hundreds of millions of pounds a year and bring down the cost of postage. It also plans a price cap on second-class stamps.

Most stamped mail is not urgent. So, with no second-class mail in Ireland, users are likely to be paying ever-increasing prices for a service that they do not really need: next-day and daily service.

Since 2020, the Belgian post office delivers non-priority mail only twice a week, compared with five times a week previously. It has not prevented price increases, but it has slowed them down.

Falling volumes, rising costs and astronomical price hikes are the perfect ingredients for a death spiral. It might be time for ComReg to at least start a dialogue.

Kerry shares stay local

Dublin wealth managers will be pulling out Google Maps this weekend to get a fix on the exact location of Lixnaw, Duagh and Scartaglin. Last week Kerry Group filed a return with the Companies Office detailing the distribution of Kerry Co-Op’s shares in the global food company to its individual members. No fewer than 90 co-op members received more than €1 million worth of Kerry Group shares in the spin-out.

Not all co-op members are farmers. As a grey market in the co-op shares was held through stockbrokers Davy, it was open to others to buy into the co-op. It has been long speculated that Davy executives or related parties snapped up the stock. Lo and behold, some €1.8 million worth of shares are listed as held by the wife of Brian McKiernan, the former Davy chief executive.

Over €1 billion worth of stock is being distributed to the co-op shareholders in Co Kerry. No doubt financial advisers will be keen to pontificate on how this wealth should be diversified. Mind you, following the spin and the co-op agreeing to buy the group’s dairy processing arm, Kerry shares are up a healthy 13 per cent this year. It might be hard to prise the shares out of the Kingdom.

brian.carey@sunday-times.ie