Polish furniture, home furnishings, and window and door exports have been growing steadily in recent years. The ongoing construction boom and the abundant supply of raw materials are both contributing to the sector’s expansion. However, producers still have work to do on design, innovation and brand awareness
By Kamila Wajszczuk
Poles seem to be flocking to interior decor stores and collectively refurbishing their homes. The country’s furniture market registered a 5.8 percent growth in 2014, reaching a value of $5.67 billion, according to data from Euromonitor International. Analysts believe that the situation reflects the improving GDP growth and an increasing willingness to spend money on the part of consumers. Moreover, the number of households in Poland increased to 13 million in 2014, fueling demand for furnishing products.
As the economy expands, the trend is likely to continue. During the period 2014-2019, sales of home furnishings are expected to grow by one percent year-on-year (at 2014 prices), according to a Euromonitor forecast. “It is worth noting that stricter regulations regarding credits, which may hinder the demand, are likely to be implemented. On the other hand, even in tough times, Poles demonstrated a desire to refresh their interior decor, which is relatively easy with such a wide offer of less expensive products. This will certainly contribute to the further development of the home furnishings market,” said Justas Gedvilas, industry analyst at Euromonitor International.
Another analytical firm, PMR, expects the retail market for home furnishings (including furniture) to grow by 4 percent and reach a value of PLN 13.2 billion in 2015. Its analysts point to both the economic situation, and the increased sales of new property. As residential real estate development companies continue to announce new investments, especially in large cities, there is ground for optimism.
Construction and refurbishing activity is also fueling the growth of the window and door market in Poland. In 2014 it grew by 8 percent y/y and the same growth rate is expected for 2015, according to PMR. Windows sold better than doors, largely due to high exports. Sales of windows on the domestic market grew by 8 percent y/y in 2014, while for doors the figure was 6 percent. When both domestic and export sales are considered, the growth rates were 10 percent and 8 percent respectively.
The general good condition of the economy and the ongoing improvement in the housing construction industry contributes to the growth in the sector just as much as the trend for more expensive, energy-saving products. A large number of customers are now replacing older windows and doors with more energy-efficient products, PMR analysts said.
The Polish Windows and Doors Association (POiD) believes that in the near future, the main driver for the sector will come from refurbishing work in existing housing and not from new construction. Its members are working to promote modernization and energy-efficient projects, which could bring an increase in both volume and value. EU funding also plays a role in the industry’s expansion. In recent years, hundreds of millions of złotys have been invested by window and door producers thanks to the subsidies.
PMR expects the aluminum door and window segment to grow the fastest, followed by less dynamic expansion in the PVC, wood and steel segments. POiD, on its part, expects customers to look towards the premium segment, including doors, windows and fittings chosen for their high energy efficiency. The same trend could mean higher sales of exterior coverings, which are useful in extreme temperatures.
A characteristic trait of the Polish furnishings market is the dominance of local firms, which account for 75 percent of all companies in the sector. The same is true of the window and door market, 86 percent of the biggest window producers and 78 percent of door producers are owned by Polish shareholders. Nevertheless, a number of international giants are also present in these sectors. What is worth noting is that even the foreign-owned companies usually produce their goods in Poland.
In the future, the industry may see further consolidation, especially as acquisitions are included in the plans of the biggest players, PMR analysts said. Only time will tell who will control major market shares but it seems clear that Poland will remain a major player in the sector.
There’s room outside
Development in the domestic market translates into growth abroad. According to B+R Studio, an analytical unit specializing in the sector, furniture exports grew 7 percent in the first half of 2015 (€4.3 million) compared to the corresponding period of 2014.
The company’s analysts expect that in 2015 the value could reach €8.64 billion following a growth of 8 percent. Germany is by far the biggest export market – with an attributed value of €3.06 billion in 2014. In the same year, Polish furniture producers sold €624 million worth of goods to the UK. B+R Studio expects sales to those three countries to grow by 5 percent and 16 percent respectively in 2015.
However, the fastest growing export markets for Polish furniture are less obvious countries. Sales to Romania grew by 24 percent in the first half of 2015 and sales to Slovakia and to the US – by 21 percent each. Window and door exports grew by 8.2 percent y/y to PLN 5.2 billion in 2014, according to ASM – Market Research and Analysis Centre.
Windows and doors made of plastic materials represented 44.1 percent of total exports, while wooden windows accounted for 31.9 percent and wooden doors – for 9.9 percent. Products made of aluminum (7.7 percent) and steel (6.4 percent) were less significant in volume. Exports have been increasing for the past few years and since 2009 Poland has recorded a trade surplus in the sector.
Products from the sector are sold largely to western economies. The biggest export market for Polish windows and doors is Germany (33 percent of exports), followed by the UK and France (20.6 percent of exports, jointly). Other major buyers are Italy, Belgium, the Czech Republic, Slovakia, Norway, Sweden, Denmark and Lithuania.
For both sectors, competitive prices, moderate production costs and a strong local supply of raw materials (abundant raw wood reserves, strong plastics and metallurgy industries) play a part in establishing a steady presence on foreign markets. There are also, of course, challenges.
In previous years experts have pointed out that Polish furniture exports are high in volume but not in value. According to B+R Studio, the ratio is improving. In 2015 the average value is seen growing to €268 per kg compared to €251 per kg in 2014.
Looking for recognition
The outlook seems optimistic but the sector is not without challenges. Polish furniture is usually sold abroad under a foreign brand name, so Polish producers are hardly known outside their country of origin. “Building their own brand and brand awareness abroad is a pressing challenge for Polish furniture manufacturers,” Gedvilas said. He also pointed out that the Polish furniture industry is lagging behind international competitors in terms of design and innovation in research and development, which, if left unaddressed, may hinder export growth in the future.
According to Gedvilas, Polish producers should think of a better way to compete than through low costs and consider some way of increasing productivity. “Even though wages in Poland are relatively low, the wage growth is outpacing labor productivity growth, resulting in increasing labor costs for Polish furniture manufacturers,” he said.
POiD is convinced that awareness and recognition of the “Made in Poland” brand is growing, despite the fact that foreign markets are demanding and there is an abundance of competition. “In recent years, Polish window and door producers have invested large funds into modern factories and production lines. Now the sector can benefit from those activities,” the association’s analysts said. In the foreseeable future, currency trends may support the industry. “The weakening of the PLN against the euro is also expected to provide a positive impulse to Polish furniture exports. The PLN exchange rate against the euro is currently the highest it has been since May 2012. As the Polish furniture industry mainly targets the needs of euro zone markets, the depreciating PLN will help furniture exports to grow,” Gedvilas said.