Canada Post selling off logistics business as part of effort to ‘transform’ Crown Corp

Canada Post selling off logistics business as part of effort to 'transform' Crown Corp

Canada Post’s Strategic Divestiture of SCI Group Inc.

Canada Post, the national postal service of Canada, is taking a significant step in restructuring its business model. The corporation recently announced the sale of its third-party logistics subsidiary, SCI Group Inc., to Metro Supply Chain, a Montreal-based firm. This move is part of Canada Post’s broader strategy to adapt to the evolving needs of Canadians and local businesses.

Financial Context and Operational Shifts

The decision comes against a backdrop of financial challenges for Canada Post. The corporation reported a substantial loss of $290 million in the third quarter of 2023, alongside a $26 million increase in operational costs. This financial strain is further emphasized by the fact that SCI Group Inc. contributed to less than three percent of Canada Post’s total revenue, as per the latest annual report.

The Future of Canada Post and SCI Employees

The sale raises questions about the future of the 3,000 employees at SCI, including 353 Unifor union members. While Canada Post’s spokesperson, Lisa Liu, emphasized the need for SCI to align with the corporation’s long-term goals, she deferred questions regarding the employees’ future to Metro Supply Chain, the acquiring company. Metro Supply Chain has yet to comment on the matter, maintaining that it is “business as usual” for both companies until the deal’s completion.

SCI operates as an independent entity within Canada Post, specializing in warehouse fulfillment, supply chain solutions, and transportation management. It handles over $1 billion worth of inventory daily across 75 warehouses nationwide. While successful in its own right, this business model no longer aligns with Canada Post’s future direction.

The Canada Post Group of Companies, which includes brands like Purolator and Innovapost alongside Canada Post and SCI, has experienced financial difficulties over the past five years. This sale is part of a broader effort by Canada Post to streamline its operations and focus on core postal services.

Canada Post chose to respond to inquiries about this sale through email rather than a direct interview, reflecting a cautious approach to public communication about this significant change.

The transaction’s completion is anticipated in the first quarter of 2024. Canada Post has assured that the sale’s details will be disclosed in its financial statements post-completion. For customers of Canada Post, the sale is expected to have minimal impact, ensuring that the primary postal services continue without disruption.

Canada Post’s decision to sell SCI Group Inc. is a strategic move to realign its business model and focus on its core competencies. The future of SCI’s employees remains uncertain, pending further updates from Metro Supply Chain. This sale marks a pivotal moment in Canada Post’s journey towards transformation and adaptation in a rapidly changing business environment.