A cutthroat business
More firms such as Beef-san and Agros Koszalin, which have the potential, but not the cash, to meet EU standards, will be on a last-minute hunt for investors, while market fallout will provide lucrative opportunities for those few firms whose EU credentials are already in place. Those which have no hope of survival, however, will not be giving up without a fight.
Of the country's 3,326 meat processing companies, just 97 have so far implemented EU technical veterinary and sanitary standards. When Poland joins the EU in four months time, the largest branch of the domestic food economy, the meat industry, which employs around 7 percent of the country's total workforce, may be more than halved in size.
Only the 3 percent of meat concerns that are currently categorised as class A are in a position to sell on the European market. Some of the 1,444 now in class B1 could make it into class A before May 1. Of the 242 companies now in class B2, some might move into the category of class B1 processors, allowing them to sell products on the domestic market during a transitional period until 2006 (albeit under labels clearly announcing their second-rate status.) The 1543 firms in category C have little chance of survival.
Of the 1000 or so B class companies which are anywhere near obtaining all the qualifications required to sell in the EU, only 300 or so have actually declared that they intend to do so before the end of 2006. And, according to Radosław Solan, analyst at stockbroker BDM PKO BP, "If these 300 or so companies are going to make it, they'll have to raise a lot of money somehow," he says.
Hence the declarations in early January, when B class processor Beef-San announced that the company is considering a share offer to fund an zł.8 million investment. This was followed almost immediately by rumors that one of Northern Poland's largest processors, Agros Koszalin, may have found an investor to provide the zł. 4-5 million it needs to restructure in line with EU norms.
Analysts say more such moves by B class producers are likely, though as not all of them will make the grade, massive B and C class market fall out is also anticipated. Shares in market leader Sokołow, which currently controls 20 percent of the domestic market, meanwhile, are on a high not seen for four years, as investors are counting on the company cashing in on the troubles of its rivals. Although there may be some mergers among medium sized companies, the few big firms on the market, such as Sokolow, Duda, and Animex, are expected to pick up much of the post May market share. As Radosław Solan puts it: "They will really have no competition among local firms."
They will, however, face plenty of competition from big concerns within the current EU. Director Wiktor Stanisławski of Sokol-ex, Sokołow's export arm, is afraid that, ".....as domestic prices rise to near those in the current EU, Poles won't be able to afford quality meat products, so instead they'll be buying cheap western rubbish, often made out of the leftovers of the slaughtering process."
Despite the hopes of Stanisław Zięba, general secretary of the Association of Meat Producers, Exporters and Importers (PZPEIM), that 'Made-in-Poland' will become an EU brand-name, breaking into the cut-throat markets of the current 15 will not be easy either.
Some of the big local firms, such as Animex, with its brand Krakus, Morliny with its brand Balcerzak, or Sokołow itself, which have active export channels to the existing EU, are indeed expecting big profits. Wiktor Stanisławski, for example, expects to raise sales in the current EU 15 from about zł.140 million (30 million euro) in 2003 to around zł.187 million (40 million euro) this year.
Yet export director Elżbieta Barańska at Duda ZM, which currently holds 5 percent of the disparate domestic market, and exports all over the ex-Soviet union, admits that the company has yet to create much of a presence in the EU. "We're starting to promote ourselves in the EU but I have to admit that we haven't yet got much of a client base," she says.
"We have the quality. The problem is the vast resources necessary for marketing and promotion," says Stanisław Zięba. In his view this will make it very difficult for even meat concerns which have their class A credentials to a find a foothold in the West.
All agree, however, that Poland can't hope to compete with the European giants on the mass market for cheap meat products.
"The only future for domestic firms is in quality branded products," says Radosław Solan. "Duda, for example is trying to make a name for itself with quality fine meats, while Animex already has a niche exporting high class bacon to Ireland and the UK."
The big unknown, however, is what desperate measures need to be taken by the 2000 or so firms which won't survive past May given the hard times that lie ahead. According to Radisław Solan, many firms looking at bankruptcy in the near future, will be exploring all ways and means of feathering their nests before doom day.
"Firms that can't sell after May 1 may rush to dump their products on the market before then, causing prices to plummet. And a lot of firms will definitely be buying up raw meat on credit from big concerns, processing and selling it quickly, and moving profits into new accounts as bankruptcy approaches," he says.
The few big domestic firms who are set to take over after May, therefore, may find that life in the EU starts with a lot of unpaid and unpayable holes in their accounts.
Of the country's 3,326 meat processing companies, just 97 have so far implemented EU technical veterinary and sanitary standards. When Poland joins the EU in four months time, the largest branch of the domestic food economy, the meat industry, which employs around 7 percent of the country's total workforce, may be more than halved in size.
Only the 3 percent of meat concerns that are currently categorised as class A are in a position to sell on the European market. Some of the 1,444 now in class B1 could make it into class A before May 1. Of the 242 companies now in class B2, some might move into the category of class B1 processors, allowing them to sell products on the domestic market during a transitional period until 2006 (albeit under labels clearly announcing their second-rate status.) The 1543 firms in category C have little chance of survival.
Of the 1000 or so B class companies which are anywhere near obtaining all the qualifications required to sell in the EU, only 300 or so have actually declared that they intend to do so before the end of 2006. And, according to Radosław Solan, analyst at stockbroker BDM PKO BP, "If these 300 or so companies are going to make it, they'll have to raise a lot of money somehow," he says.
Hence the declarations in early January, when B class processor Beef-San announced that the company is considering a share offer to fund an zł.8 million investment. This was followed almost immediately by rumors that one of Northern Poland's largest processors, Agros Koszalin, may have found an investor to provide the zł. 4-5 million it needs to restructure in line with EU norms.
Analysts say more such moves by B class producers are likely, though as not all of them will make the grade, massive B and C class market fall out is also anticipated. Shares in market leader Sokołow, which currently controls 20 percent of the domestic market, meanwhile, are on a high not seen for four years, as investors are counting on the company cashing in on the troubles of its rivals. Although there may be some mergers among medium sized companies, the few big firms on the market, such as Sokolow, Duda, and Animex, are expected to pick up much of the post May market share. As Radosław Solan puts it: "They will really have no competition among local firms."
They will, however, face plenty of competition from big concerns within the current EU. Director Wiktor Stanisławski of Sokol-ex, Sokołow's export arm, is afraid that, ".....as domestic prices rise to near those in the current EU, Poles won't be able to afford quality meat products, so instead they'll be buying cheap western rubbish, often made out of the leftovers of the slaughtering process."
Despite the hopes of Stanisław Zięba, general secretary of the Association of Meat Producers, Exporters and Importers (PZPEIM), that 'Made-in-Poland' will become an EU brand-name, breaking into the cut-throat markets of the current 15 will not be easy either.
Some of the big local firms, such as Animex, with its brand Krakus, Morliny with its brand Balcerzak, or Sokołow itself, which have active export channels to the existing EU, are indeed expecting big profits. Wiktor Stanisławski, for example, expects to raise sales in the current EU 15 from about zł.140 million (30 million euro) in 2003 to around zł.187 million (40 million euro) this year.
Yet export director Elżbieta Barańska at Duda ZM, which currently holds 5 percent of the disparate domestic market, and exports all over the ex-Soviet union, admits that the company has yet to create much of a presence in the EU. "We're starting to promote ourselves in the EU but I have to admit that we haven't yet got much of a client base," she says.
"We have the quality. The problem is the vast resources necessary for marketing and promotion," says Stanisław Zięba. In his view this will make it very difficult for even meat concerns which have their class A credentials to a find a foothold in the West.
All agree, however, that Poland can't hope to compete with the European giants on the mass market for cheap meat products.
"The only future for domestic firms is in quality branded products," says Radosław Solan. "Duda, for example is trying to make a name for itself with quality fine meats, while Animex already has a niche exporting high class bacon to Ireland and the UK."
The big unknown, however, is what desperate measures need to be taken by the 2000 or so firms which won't survive past May given the hard times that lie ahead. According to Radisław Solan, many firms looking at bankruptcy in the near future, will be exploring all ways and means of feathering their nests before doom day.
"Firms that can't sell after May 1 may rush to dump their products on the market before then, causing prices to plummet. And a lot of firms will definitely be buying up raw meat on credit from big concerns, processing and selling it quickly, and moving profits into new accounts as bankruptcy approaches," he says.
The few big domestic firms who are set to take over after May, therefore, may find that life in the EU starts with a lot of unpaid and unpayable holes in their accounts.
