Polish exporters are powering ahead and drove GDP growth in 2013. But which companies are the industry leaders and what are their perspectives for the future?
by Remi Adekoya
In 1989, when communism collapsed in Poland (and started crumbling elsewhere), it meant the 35 percent of Polish exports which had previously found ready markets in the Soviet Union and its satellite states, suddenly had nowhere to go.
What had passed for a quality product in the Soviet Union was usually met with scant enthusiasm in Western Europe and other developed markets. Many Polish firms suddenly found themselves in a rut. A massive reorientation and modernization push was needed. Some firms did not survive the transformation process and legendary brands like the Polonez, a Polish-made car, simply ceased to exist.
Blood, sweat, tears
But thanks to technological know-how acquired via privatizations, plus a lot of blood, sweat and tears, Polish companies are now firmly back in the game. In 2002, Polish exports were worth $40 billion. By 2012 that number had swollen to $184 billion and it’s estimated that some $200 billion worth of Polish products were exported last year. That trend is expected to continue.
In October 2013, HSBC released a report in which it stated that after years of weak economic activity among many of Poland’s major trading partners (which are almost all in the European Union), “these partner countries are beginning to stabilize and eke out a gradual recovery, meaning the outlook for Polish trade is brighter now than for some time.”
Continued growth ahead
It is also expected that Poland will increase its trade with developing countries in the coming years. Between 2016 and 2020, Polish exports will increase by a total of 55 percent, gaining an average of 9.1 percent per year, according to analysts at HSBC and Oxford Economics.
So which companies are driving this growth? The top five Polish exporters in terms of revenue in 2012 include three of Poland’s industrial giants: oil-firms PKN Orlen and Lotos, as well as copper and silver producer KGHM.
But these are state-controlled behemoths that largely thrive because of their monopolistic positions on the Polish market. It is the smaller, privately-owned companies that have really refined and gotten their act together in the past two decades and are making Poland proud today.
Poland is now the fourth-largest exporter of furniture in Europe and the seventh largest in the world. In 2013, $9.4 billion of Polish furniture headed abroad, while that figure is expected to hit $10 billion this year, according to B+R Studio, a sector analyst. Which firms are leading the way?
“Companies like Black Red White, Forte, Nowy Styl, Fabryka Mebli, Meble Wójcik and Szynaka are among the biggest players and exporters on the scene. Their competitive advantage is their quality to price ratio, flexible delivery capabilities and payment arrangements,” said B+R’s Tomasz Wiktorski.
Another advantage Polish furniture companies have is that their production capacity is unequalled anywhere in Western Europe. When it comes to sheer volume, Poland is second only to China in terms of furniture production. It produces some 3 million metric tons of furniture every year compared to the 2 million tons German or Italian firms manufacture.
Some 83 percent of Poland’s exported furniture goes to EU markets because as Wiktorski said, “Europeans spend much more on furniture than anybody else, including Americans, and that situation is likely to continue in the near future.”
Furniture maker Nowy Styl, whose chairs can be found in South African football stadiums, Greece’s Summer Olympics games venues and the French finance ministry, was established by two brothers in 1992.
“When we first started our business, we simply wanted to make a living,” Adam Krzanowski, the company’s founder and co-owner said. In the beginning, the whole Krzanowski family used to be engaged in the production process supervising everything from the assembling of the chairs to their loading and delivery coordination. Profits were reinvested and the family lived modestly.
In 1995, Nowy Styl presented its first offer to an international audience at a trade fair in Moscow. By 2011, what had started as a small family business was now producing 8 million chairs a year and selling them all over the world, and to some pretty demanding clients at that. For example, Nowy Styl provided chairs for the VIPs at the 2011 G20 summit in Cannes.
Although Wiktorski said Polish furniture companies are going to face some very stiff competition on the European market from Chinese firms (and not only) in the coming years, if they continue developing their product range and quality as they have in recent years, they should still do well.
Although HSBC expects industrial machinery and transport equipment to remain at the forefront of Polish exports from now till 2030, the most significant jump in export volume is expected to come from Information and Communications Technology (ICT), which is expected to overtake textile and woods manufacturers, and processors of animal products to become the third-biggest source of Polish exports by 2030.
Its contribution to the overall growth of Polish exports is expected to stand at 12 percent between 2013 and 2015.
Poland already has some strong exporters in this sector.
“Software producer Comarch is already well-known abroad for its products of which about a third are destined for exports. It has already carried out a series of contracts abroad and delivered successfully,” said Paweł Olszynka, industry analyst at PMR Research.
Delivering on the first big foreign contract is a must for Polish companies who want to export their products. It’s only after this that they have the necessary “references” to convince others abroad that they are up to the task. Comarch has proven to be a particularly ambitious company.
“They roll out their own data centers in countries like Germany and France, develop their own software platform systems for telecoms operators as well as CRM and ERP solutions,” he added.
Comarch was set up in 1993 by Janusz Filipiak, a former engineering professor and IT specialist, who is now one of the richest men in Poland. Comarch is largely Filipiak’s one-man show and there is no denying he has built Comarch into one of Poland’s most impressive software companies to date.
Another ICT company Olszynka mentions is Ericpol, which he says receives a “vast majority” of its revenue from exports. “They offer outsourcing services mostly for the telecoms sector. They have a very professional staff with good software development skills and they can compete on price, as is the case for most CEE companies,” Olszynka said.
“Like most of the other successful Polish exporters they delivered on their first big foreign contract. Most Western companies would never award a big contract to a Polish firm without references from other Western companies so that first break is key,” he added.
Then there is Talex, which specializes in financial and banking outsourcing services, and cooperates with the likes of Credit Agricole. Talex has also set up its own data center in Poznań and have very good perspectives for the future, according to Olszynka.
Paradoxically, the financial and economic crisis that swept through Western Europe from 2008-09 gave Polish firms the opportunity to get in on the ground floor with their products, which were often of good quality and sold at lower prices than their Western competitors were offering. However, Poland must work on diversifying its export destinations, which it appears to be doing, as being dependent only on EU markets carries too much risk. The government of Donald Tusk realizes this, which is why it has embarked on ambitious programs to boost exports to developing markets especially in Asia, the Middle East and Africa.
Another issue Polish companies need to tackle is branding. Right now, there are many Polish companies which export products but under foreign brands in fear that the “Made in Poland” label would do more harm than good. While that may be true today, this also adds to Poland’s dependence on its Western partners. There are too few strong Polish brands on global markets and companies must invest the necessary resources to change this.
After all, the aim should be for a “Made in Poland” label to one day represent added value and not something to be ashamed of.