Nova Post at a Time of War: Following the Ukrainians and Growth No Matter What
Logistics is the lifeblood of any country. This statement becomes even more true during the war, when the supply chains finetuned over years get disrupted and the approaches proven to be effective at a time of peace no longer work. And yet, extreme challenges are a true test of resilience for a business. Nova Post, Ukraine's leading express delivery provider, is living proof that any challenges should be taken as opportunities. It is during serious crises that the company has repeatedly launched new business areas. In particular, during the Russian Federation’s full-scale military invasion, Nova Post significantly expanded its presence in international markets.
Oleksiy Katasonov, Tax, Legal, and People Services Leader at PwC Ukraine, and Volodymyr Popereshniuk, Co-Founder of Nova Post Group, spoke about how logistical business has been developing during the war and why growth is the best crisis management tool.
Volodymyr Popereshniuk
Nova Post Group
Co-Founder
Oleksiy Katasonov
PwC Ukraine
Partner
Volodymyr, this is not the first time Nova Post has worked at a time of war. Following Crimea's annexation and beginning combat in Donbas in 2014, the company lost about 20% of its outlets. The company’s response then was to launch a volunteering programme - Humanitarian Post of Ukraine - and eventually an international delivery service in 2015. Was the experience from 9 years ago of any help during the full-scale invasion?
“Nova Post needs to be a pillar of strength for people, and businesses play a tremendous role in the country's survival at a time of need”
In our 22 years, we have indeed gained extensive experience working during Ukraine’s hardest trials, and the company has been able to use each new crisis as an opportunity to strengthen its business. This was the case during the 2008-2009 credit crunch, when we emerged stronger with a 30% increase in sales, The same can be said about the 2014 events. Following the Russian invasion and the occupation of Crimea and some areas of the Luhansk and Donetsk Regions, we lost our outlets in those territories, meaning that our chain had shrunk by 20%. And yet, we understood that we simply did not have a right to stop. So we decided to open outlets in other locations to make up for all the losses. For example, we expanded to a new market - Moldova - and launched an international delivery service worldwide through Nova Post Global that covers the US, China, Europe, etc.
The other core lesson we learned after 2014 is that Nova Post needs to be a pillar of strength for people, and businesses play a tremendous role in the country's survival in a time of need. In 2014, Ukraine stood strong and stopped the occupant thanks to the joint efforts of the military and millions of volunteers, donors, businesses, and ordinary people. Nova Post launched the Humanitarian Post of Ukraine, a project where the company covers deliveries from volunteer organizations to the military and people affected by the war. After 24 February 2022, the Humanitarian Post of Ukraine has significantly expanded and has been transformed into a standalone humanitarian branch at Nova Post Group. Before 24 February, we worked with 85 charities as part of the project, now we have 1,610 of them. For the duration of the project, we have covered deliveries of 1 million parcels for the military.
Can you please share what impact has the war had on any decisions to further expand abroad and launch outlets in Europe?
“We set a goal to follow the Ukrainians displaced to Europe to remain their pillar of strength even when abroad”
When the full-scale war began, we set a goal to follow the Ukrainians relocating to Europe to remain their pillar of strength even when abroad. We decided to become the major logistical link between Ukraine and the EU countries.
During the initial months, displaced Ukrainians desperately needed delivery of parcels with personal belongings from and to Ukraine. As things stood, people were taking off in a rush, with no time to pack, leaving behind many things dear to them. Nova Post rose to meet this need and offered a new service, Parcel from Home, with discounts of up to 85% across Europe. The service was effectively designed from scratch.
And as soon as October 2022, we became the first Ukrainian business to expand to the EU market during the full-scale invasion.
Poland became the first geography where we opened our outlets under the Nova Post brand. Fast forward to today, we have opened 34 outlets across Poland’s biggest cities, provide courier delivery services throughout the country, and have linked partner parcel lockers to our delivery service.
Lithuania became the second EU country where we opened, in March 2023. Now we have two outlets, in Vilnius and Kaunas. We offer courier deliveries to any urban or rural location across Lithuania, even where there are no outlets yet. And then, as soon as June, we launch our business in the Czech Republic, Romania, and Germany. We always start by entering a market with outlets and then expand our service offering with courier delivery and delivery to parcel lockers. By the end of the year, we expect to expand to Slovakia, Hungary, Latvia, and Estonia.
Do you think our companies should now consider growth outside of Ukraine? Which jurisdictions would be among the most attractive?
“It is a real challenge for an entrepreneur to learn how to earn profits in new conditions at the same level as - or even better than - in the parent market”
There is no one-size-fits-all answer to whether our businesses should expand abroad. Such a decision means risks that business owners are or are not prepared to accept. Everyone needs to decide for themselves what their answer to that question would be, and then test that decision.
As for Nova Post, we decided to expand and we are now moving at a rapid pace. Yet, one needs to keep in mind that expansion to any new market cannot be a goal and victory in and of itself. To learn how to earn profits in new conditions at the same level as - or even better than - in the parent market, that's where a real challenge lies for an entrepreneur.
Nova Post decided to expand; after all, we have already become leaders in Ukraine. By expanding to Europe, we are now able to move to the next level. It is our chance to test our model, to get a feeling of how viable it is outside normal conditions. Therefore, our opinion would be that it makes sense to at least try.
As for the jurisdiction, there is no one-size-fits-all advice here, just the same - but what I would definitely be prepared to advise is to leave any pre-existing bias behind. If you first decide to open your business in Poland, you should ask yourself, why Poland? Why not Dubai or, say, Kenya? Of course, the amount at stake plays a role. One may think that expanding to Moldova vs. expanding to the US are polar opposite scenarios. And yet it is often the case that if you choose the second option, the amount at stake will be comparable. You will spend minimal extra managerial time and resources, but at the same time, you will gain a dramatically bigger market.
Nova Post went where our Ukrainian customers went. Therefore we focus, first of all, on the countries with the biggest numbers of Ukrainians. And to this end, we plan to cover the entire EU market.
At the moment, nearly 6 million Ukrainians are based in the EU, and they welcomed Nova Post’s arrival in these countries. How are newly opened offices of Ukrainian businesses generally received abroad? Do you agree that our country has become a distinct international brand with its own brand philosophy? Does it help you develop your business or, vice versa, does it get in the way?
“Once it comes to cash, all the sentiment stemming from wearing a traditional Ukrainian embroidered shirt is suddenly gone. No one will give you money or share the local market just because you are Ukrainian”
We haven't had any special treatment; Nova Post gets exactly the same kind of reception as any new business that has yet to make itself a name and a reputation in the service market. Certainly, Europeans stand with Ukraine in its fight against the enemy, and it is hard to overestimate the scale of help that our country has received from people and partner states.
Yet, business is business. I can say with enough certainty, that once it comes to cash, all the sentiment stemming from wearing a vyshyvanka (traditional Ukrainian embroidered shirt) is suddenly gone. No one will give you money or share the local market just because you are Ukrainian - just forget it. You are on your own.
By the way, our arrival is an opportunity rather than a threat to local businesses. We come to the previously non-existent segment (deliveries between Ukraine and Europe) and help them also make money off our customers by making an additional volume of parcels available to them. This is why we build our relationships with local businesses as a win-win partnership. For example, we work with Inpost in this manner for deliveries to parcel lockers, with DPD and GLS for home deliveries and courier pickups for parcels going to Ukraine, until we are in a position to do this in-house.
I can agree that no one will help us do business simply because we are Ukrainian. So it takes us twice as much effort to deliver results during the war.
Can you also share your experience working with various countries? If you compare the process of launching a business in Ukraine and, say, in Poland or Germany, what is the biggest difference? What, in your opinion, should Ukrainian entrepreneurs focus on in considering expansion abroad?
“Expansion strategies need to include more time for legal and bureaucratic formalities”
What we have experienced in nearly every European country is that they all are dramatically different from Ukraine as far as establishing a legal entity is concerned. In Ukraine, the entire registration process with preparation for starting the business would take up to 3 weeks. In the EU, we are talking about months. Our record is preparing for our launch in Germany, which took us 6 months, whilst in Lithuania, for example, it took 3 months. In Germany, just opening a bank account alone took us two and a half months. So to answer your question about what needs to be taken into account - I would say that expansion strategies need to include more time for legal and bureaucratic formalities.
Also, we found out that it was significantly harder to find space for our outlets in city locations than it would have been in Ukraine.
If you have a service or retail brick-and-mortar business involving the need to have a lot of your own space, this factor also needs to be considered.
In terms of available services that are typical in Ukraine, COD (cash on delivery) or what we call post-payment is far less common in Europe. People here are used to prepayment in their transactions. However, we see certain potential demand for such a service, so we are already working to enable NovaPay to provide it in Europe. This will create new opportunities for international e-commerce.
As a lawyer, I have to agree with many points you made about establishing a legal entity in various jurisdictions. Only recently, my colleagues and I made a thorough analysis of legal requirements across 20 European countries as part of a client engagement. At the moment, we are in constant contact with over 20 European PwC offices and are well aware of the differences between them, whether in practice or in legal form.
What I would like to discuss with you is logistics. Previously, Nova Post didn’t have its own air fleet and worked in partnership with one of the leading global operators. What are your plans to develop Supernova Airlines?
“Supernova Airlines is the first and only Ukrainian company to receive an air operator certificate during the war”
In 2021, Nova Post launched Supernova Airlines to make sure that international parcels were delivered to its customers promptly and on time. It was the first and only Ukrainian company to receive an air operator certificate during the war. Our first flights were in Europe on the Riga - Rzeszów route. We have completed 14 flights and delivered 250 thousand international parcels. As soon as autumn 2023, Supernova Airlines expects its first transatlantic flight from the US to Europe.
Impressive accomplishments, considering the present condition of Ukrainian aviation. Looking at Supernova Airlines’ performance, I can't help but ask this: what will your growth strategy be like in Ukraine after the victory?
“Making our contribution to the victory is the first and the greatest component of our strategy”
First of all, we have to win this war. For our business, it is as much of a challenge as it is for every Ukrainian. This means that the company and each employee must do everything in their power to bring the victory closer. This is now the first and the greatest component of our strategy.
The second component is the challenge we have created for ourselves in April 2022, which is international growth. We have prepared an expansion plan up to 2025 - I hope Ukraine will win by this time, but this part of the strategy will stand in any case. This is a surreal project. It requires significant changes across all areas of our business, considering that, when abroad, we have found ourselves amid entirely different market rules. We learn from our own mistakes; sometimes we fail, but we keep growing.
And finally, the number three component of our strategic plan is to never forget about Ukraine. This is our parent market, it remains our number one market and it never goes away.
Despite the war, Ukrainians remain exacting and demanding customers. They require top-quality services.
There is a lot of talking about recovery, but I believe that recovery is in progress as we speak. Nova Post now works better than pre-war, and this is what recovery is about. We see new coffee shops, restaurants, and small businesses open, we see someone relocate their factory back from Poland; all of this is also recovery. So recovery will not happen in London or Lugano; instead, Ukrainian entrepreneurs will recover Ukraine.
And therefore, Nova Post will not stop growing in Ukraine, not even for a single moment. We continue investing here, building automated sorting hubs, expanding the chain of outlets, installing new parcel lockers, and improving our digital services such as the mobile app, business account, and parcel tracking functionality. This is what we are doing now and will continue doing after the victory.
Volodymyr, thank you for such an engaging conversation and valid points, and I hope victory comes soon for all of us, and Nova Post climbs many more peaks and claims a well-deserved spot among global express delivery leaders.
Thank you and Glory to Ukraine!
Nova Post at a time of war
- Nova Post Group was established in 2001 and now includes Ukrainian and international businesses, in particular: Nova Post Ukraine, Nova Post international offices in Moldova, Lithuania, Poland, Czech Republic, Romania, Germany, Nova Post Global, Supernova Airlines and finance company NovaPay.
- The chain comprises 10,200 outlets and 14,100 parcel lockers. The volume delivered for 6m2023 is 170 million parcels and cargo deliveries.
- On 26 February 2022, the volume of deliveries shrank to 2% of the pre-war level. However, the company managed to fully recover the volumes by September.
- In December, the company equipped its terminals, depots, and urban outlets with power generators. The company also ordered 650 Starlink stations in the locations where Internet service providers struggled to provide uninterrupted connections to enable the operation of digital services.
- In the summer 2023, the company announced the plans to open parcel collection and drop-off locations in stores, petrol filling stations, pharmacies, etc.
- Based on 2023 performance, shareholders expect a 7% growth over the pre-war 2021.
- 388 outlets have resumed work in deoccupied territories in Kharkiv, Kherson, and Donetsk Regions.
