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UPS (US)

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UPS is America's largest package delivery company and a leading global provider of specialized transportation and logistics services. It has operated its own dedicated airline since 1988, and now ranks among the ten largest air carriers worldwide, with 625 aircraft of its own or under charter. Although the majority of its revenues are still generated in the US, the group has an extensive global network, and is attempting to develop both its range of services and its international presence through acquisition. In 2012, it agreed terms for the acquisition of European rival TNT Express for €5.2bn. However that deal met with strong objections from EU regulators, forcing UPS to withdraw its offer at the beginning of 2013. UPS is also comparatively weak in the fast-developing Asian market, which it serves mostly through affiliates.

Advertising

UPS's US advertising was handled from 2001 to 2010 by The Martin Agency, which developed several campaigns from 2002 onwards under the tag line of "What can brown do for you?", a reference to the company's familiar logo colour. UPS launched its first worldwide campaign in 2005 under the slogan "Deliver More". The first ads used French actor Jean Reno. A new campaign launched in 2007 in the US with a set of spots presenting a whiteboard illustration of key UPS services. The "whiteboard guy" was actually the ads' director Andy Azula. Martin lost the account in 2010 to Ogilvy, whose approach has been to highlight the company's strength in logistics. Click here for agency account assignments from adbrands.net.

Competitors

See Business & Consumer Services Sector for other companies

Brands & Activities

During 2013, the group delivered a total of 4.3bn pieces - equivalent to a daily average of 16.9m items - to almost 8m consignees in 220 countries worldwide. Despite competition from arch-rival FedEx (about three-quarters its size by revenues) and the US Postal Service, UPS still dominates its home market with around 50% share of all ground-delivery letters and packages. It However that lead is under pressure from local carriers as well as newer entrants such as Deutsche Post DHL, the leader in global delivery services outside the US. Time-definite delivery is UPS's biggest business but it also offers a growing range of related logistics services, such as "less-than-truckload" freight transportation, customs brokerage, fulfillment, returns, financial transactions and even repairs. The group's domestic business accounts for as much as 85% of package volumes, a daily average of 14.4m items in 2013, generating combined revenues of $34.1bn.

Despite the much smaller package volumes (a daily average of 2.5m items in 2013), international delivery is proportionately more profitable for UPS than domestic, and is the area in which the company is most keen to expand, not least to see off the competition from Fedex (higher international volumes of 3.9m packages daily) and European giant DHL. In 2005, the group acquired US-based freight service Overnite, now UPS Freight; and also regional delivery services Stolica of Poland, and Lynx Express in the UK. In Feb 2012, it launched an unsolicited bid to acquire European rival TNT Express. An initial offer was declined, but TNT agreed to begin negotiations, leading eventually to an agreed price of €5.16bn. That deal came under intense scrutiny from European regulators. Several offers of concessions failed to appease EU concerns, forcing UPS to withdraw its bid in January 2013.

Access to the UPS service is provided via a network of around 157,000 delivery points, including its own drivers, drop-boxes and other authorised shipping outlets. Its fleet of over 625 aircraft ranks UPS among the world's top ten airlines. The group also controls a worldwide chain of retail outlets under the UPS Store and Mail Boxes Etc brands. In additional to shipping, these offer a wide variety of other business services aimed at small business and home office users, such as printing, copying and faxing. There are more than 4,800 outlets worldwide, all operated under franchise by independent owners. Virtually all outlets in the US adopted the UPS Store brand in 2003. In 2012 the group acquired Kiala, an ecommerce platform for online retailers in continental Europe which provides convenient parcel collection points via third-party retailers. That business is being rebranded as UPS Access Point.

The group sponsors NASCAR and the Ferrari Formula 1 team under the UPS Racing banner. It also supports the Masters and Open golf tournaments, and has ongoing relationships with the Olympic Games, NCAA college sports and entertainment promoter Live Nation to supply transportation and logistics.

Financials

Group revenues have increased steadily every year, hitting a new high of $55.44bn in 2013, up 2% on the year before, as a result of an increase in volumes. Average daily package volumes rose by 4% year-on-year, but that increase was offset by a 0.6% decline in revenue per piece to $10.76. After a dramatic slump in 2012 caused by one-off changes in pension benefits, net income soared from $807m to a best-ever $4.37bn. Domestic package deliveries accounted for 85% of volumes and 61% of revenues, international packages for 22% of revenues and supply chain and freight for the remaining 17%. The group's most significant area of expansion over the past decade has been international delivery. Even so, the company still generates almost three-quarters of its total revenues from the US.

Background

UPS was founded in 1907 by enterprising teenager James E Casey in Seattle, Washington. Originally known as the American Messenger Company, Casey employed the services of other teenagers to run local errands within the city, delivering packages, baggage and even trays of food from restaurants. Gradually the business grew, acquiring motorcycles, then automobiles. It expanded to California in 1919, changing its name to United Parcel Service of America, then to the East Coast in 1930. In the 1950s the company went into direct competition with the US Postal Service for the first time, gradually acquiring rights, often through the law courts, to deliver packages in selected US states between all private and commercial customers.

It wasn't until 1975 that the company was finally able to piece together full national coverage across the US. Limited local service launched in Germany in 1976, and the company established international air service between the US and six European markets in 1985. In the late 1980s, the group rapidly extended its international network, linking in to local operators where necessary. In 2001 the group acquired Mail Boxes Etc, a US business launched some 20 years earlier with the aim of providing a convenient alternative to the US Post Office network. Virtually all US Mail Boxes Etc outlets adopted the UPS Store brand in 2003. In 2004, the group bought out its local partner to take full control of UPS Yamato Express in Japan, and also acquired US freight forwarding service Menlo. It bought out its Chinese joint venture partner in 2005.

Last full revision 8th August 2014

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