A Fish Story Rings True
"I said, why don't you guys move some of your operations here?" recalls Tim Fenton, country manager for McDonald's Polska. "So on Feb. 28 they opened their plant in Koszalin and on March 1 we began serving Fish Macs," he said.
Fish Macs, using Polish cod processed by 85 Polish workers in Koszalin, dramatize how multinational businesses here are leading to creation not just of new jobs but of higher-technology industries as a whole, from food processing to auto supplies.
Under state socialism, the technology and managerial developments that add value to raw material often were ignored. Raw materials were exported: apples to Germany, where they were processed in concentrate and sold worldwide, cod to Denmark, where they were deboned, cut into filets and frozen for sale throughout Europe. Germany and Denmark, in these cases, reaped the greatest benefits of selling apple concentrate and frozen fish fillets that had originated in Poland.
New Markets
But now, multinationals, such as McDonald's, Ford or General Motors are creating new business options for Polish suppliers. Increasingly, these companies are developing technologies here that had previously been done by foreigners, especially in food processing. This means more jobs and higher sales that are added to Poland's economy. The developing technology also enables Poland to export processes and products, to countries further east as well as within Central Europe and, potentially, back to Western Europe and other Western markets.
Made-in-Poland products for McDonald's may have been put on a faster timetable three years ago. That's when the government slapped import duties on many items that the multinationals were bringing in, including meat used by McDonald's and cotton fabric used by Levi Strauss.
That meant in-country production would cost far less. When local suppliers did not always seize the moment - or could not, in terms of access to both money and technology - joint ventures were forged between Polish manager-entrepreneurs and Westerners with track records as fast-food suppliers.
Mac's model
Dissecting how McDonald's has expanded its local supply network illustrates how this can work.
McDonald's recently opened its 27th store and expects to open another 13 before year-end. Fenton predicts that within 10-15 years there could be up to 300 McDonald's outlets.
This year, he is spending up to $25 million on supplies from about 300 companies; 70% of those are within Poland, compared to only 25% when he opened the first McDonald's two and a half years ago. Lettuce and tomatoes always were bought locally, for instance, but French fries, meat patties and most other products were imported at first, an issue which caused a furor at the opening news conference and sparked questions about whether McDonald's was exploiting Poland by not using its raw materials such as potatoes and beef.
Fenton said then that when the Polish fast-food market was large enough to make it worthwhile for business owners to invest several million dollars for French fry processing machinery, or for a state-of-the-art hamburger patty processing plant, someone would do that and McDonald's would buy from them. Until the local products that could meet their quality and size specifications were available, they would import what they needed.
That's what has happened.
Home grown
Rather than shipping sides of beef from Poland, in a freezer truck, to be deboned and processed into meat patties in Germany, a Polish beef processing plant opened here in April 1993, in a joint venture with a German firm.
A Polish bakery entrepreneur who didn't have the capital or technology to equip a bakery production center large enough to supply buns for McDonald's was nurtured along with a rare financial investment from McDonald's Polska and a joint-venture partner - with the bakery opening in September 1994. A Dutch company that had been supplying McDonald's from the Netherlands opened a joint venture Farm Fritz potato processing company near Gdynia last year growing the larger Idaho potatoes and then processing and freezing them into the long-and-lean French fries to be shipped to each restaurant.
They buy from specific suppliers rather than buying on the open market "because we need to know what day, on what field, in which batch these potatoes were grown, in case anything would happen," Fenton said, referring to health hazards where "we have to be accountable. We have to monitor our suppliers carefully ... and that is why it is difficult to start with 100% local suppliers."
The bakery, for instance, is required to be equipped with metal detectors for all the buns produced there. That's standard practice to screen out everything from rocks, to nails, to razors that might get into the flour.
Last year, McDonald's signed on Polish suppliers for almost every category of food - cheese, ketchup, ice cream and other dairy products. By year-end, Fenton expects even the paper cups now imported from Finland to be made in Poland.
Some of the products, and processes, are totally homegrown. That is true for a talented interior design firm run by two brothers, Andrzej and Boguslaw Lis. Fenton said their initial work finishing off the public space in one McDonald's was so spectacular that he wanted to commission more, immediately, but he said the Poles were reluctant.
They weren't sure they could handle it. He said he was sure they could. And they have. In 1994, the Lis Meble firm produced more than DM 700,000 ($510,948) of furniture for McDonald's Poland and exported it as well to McDonald's in Latvia and Estonia.
Initially, Fenton said, he equipped McDonald's with contemporary bent-wood chairs imported from Austria. "They fell apart in two months. Now we have the furniture made here - and in fact it is exported back to Austria."
Last year, Jozef Kosciarz's chair-manufacturing company Jasienica produced DM 60,000 ($43,795) in chairs for McDonald's in Poland, Austria, Hungary, Latvia and one soon-to-open in Estonia.
Another significant supplier makes all the equipment to outfit the stainless-steel kitchens of each McDonald's restaurant. That is $250,000 per restaurant. The Franke-Gastopol firm in Gdansk, a German-Polish joint venture produced kitchen equipment in 1994 for McDonald's in Poland, Germany, Switzerland, France, Latvia, Estonia - and still is expanding.
One of the few imported products that is likely to continue is the apple pie turnover made at the high-tech McDonald's "city" in Moscow, Fenton said, who claims it is more succulent and crispier than its counterparts in the United States.
By year-end, however, almost everything else will be made in Poland.
The fish market
The flaky cod fillets for Fish Macs, for instance, are produced by a Danish-Polish joint venture, Espersen Polska, with a $2.5 million investment in equipment and facilities remodeling. So far, they are selling at about the projected level, of 8% of the overall McDonald's sales, Fenton says, but that means a lot of cod and a heavy investment in technology and training at the fish processing plant.
"It's a great product - boneless, flaky cod. But it is a very labor-intensive process. They have to fillet the fish and put it in blocks. It takes a lot of training to know how to do it," he said.
Espersen Polska expects a first-year "projected turnover of $5.5 million," Fenton said. "They plan on producing 1,000 tons of cod fillet blocks in 1995, of which 200 tons would be for Fish Macs in Poland, Hungary and the Czech Republic.
"Hungary had been getting the fish fillets from Denmark so now it will be cheaper to import from Poland. And we will expand into Estonia and Latvia later this year, to the McDonald's already open in Riga and to the one opening in Tallinn, May l," he said.
Four-fifths of the cod fillets processed by Espersen Polska will go to retail and other products, Fenton said, including commercial supermarkets that will give consumers a quick frozen-fish dinner option that has been commonplace in most of the western world but rarely available here.
Espersen production manager Anton Buel says that "most of the production in the past had been cutting the fish and then exporting those fillets out of the country. There are other fish factories in Poland but none this specialized."
Over the years, McDonald's managers and franchisees have suggested products that ultimately became part of the chain's core products. A Catholic manager suggested Fish Macs, called Fillet o' Fish in the United States, as an option to hamburgers or cheeseburgers, for Lent. Another manager in Pittsburgh suggested the Big Mac, something steelworkers could get their hands around.
The latest innovation has come from McDonald's Polska's marketing manager, Dariusz Czarnecki. It is a waffle ice cream cone with the big "M" baked onto the side. It's now standard across Poland.
Fish Macs, using Polish cod processed by 85 Polish workers in Koszalin, dramatize how multinational businesses here are leading to creation not just of new jobs but of higher-technology industries as a whole, from food processing to auto supplies.
Under state socialism, the technology and managerial developments that add value to raw material often were ignored. Raw materials were exported: apples to Germany, where they were processed in concentrate and sold worldwide, cod to Denmark, where they were deboned, cut into filets and frozen for sale throughout Europe. Germany and Denmark, in these cases, reaped the greatest benefits of selling apple concentrate and frozen fish fillets that had originated in Poland.
New Markets
But now, multinationals, such as McDonald's, Ford or General Motors are creating new business options for Polish suppliers. Increasingly, these companies are developing technologies here that had previously been done by foreigners, especially in food processing. This means more jobs and higher sales that are added to Poland's economy. The developing technology also enables Poland to export processes and products, to countries further east as well as within Central Europe and, potentially, back to Western Europe and other Western markets.
Made-in-Poland products for McDonald's may have been put on a faster timetable three years ago. That's when the government slapped import duties on many items that the multinationals were bringing in, including meat used by McDonald's and cotton fabric used by Levi Strauss.
That meant in-country production would cost far less. When local suppliers did not always seize the moment - or could not, in terms of access to both money and technology - joint ventures were forged between Polish manager-entrepreneurs and Westerners with track records as fast-food suppliers.
Mac's model
Dissecting how McDonald's has expanded its local supply network illustrates how this can work.
McDonald's recently opened its 27th store and expects to open another 13 before year-end. Fenton predicts that within 10-15 years there could be up to 300 McDonald's outlets.
This year, he is spending up to $25 million on supplies from about 300 companies; 70% of those are within Poland, compared to only 25% when he opened the first McDonald's two and a half years ago. Lettuce and tomatoes always were bought locally, for instance, but French fries, meat patties and most other products were imported at first, an issue which caused a furor at the opening news conference and sparked questions about whether McDonald's was exploiting Poland by not using its raw materials such as potatoes and beef.
Fenton said then that when the Polish fast-food market was large enough to make it worthwhile for business owners to invest several million dollars for French fry processing machinery, or for a state-of-the-art hamburger patty processing plant, someone would do that and McDonald's would buy from them. Until the local products that could meet their quality and size specifications were available, they would import what they needed.
That's what has happened.
Home grown
Rather than shipping sides of beef from Poland, in a freezer truck, to be deboned and processed into meat patties in Germany, a Polish beef processing plant opened here in April 1993, in a joint venture with a German firm.
A Polish bakery entrepreneur who didn't have the capital or technology to equip a bakery production center large enough to supply buns for McDonald's was nurtured along with a rare financial investment from McDonald's Polska and a joint-venture partner - with the bakery opening in September 1994. A Dutch company that had been supplying McDonald's from the Netherlands opened a joint venture Farm Fritz potato processing company near Gdynia last year growing the larger Idaho potatoes and then processing and freezing them into the long-and-lean French fries to be shipped to each restaurant.
They buy from specific suppliers rather than buying on the open market "because we need to know what day, on what field, in which batch these potatoes were grown, in case anything would happen," Fenton said, referring to health hazards where "we have to be accountable. We have to monitor our suppliers carefully ... and that is why it is difficult to start with 100% local suppliers."
The bakery, for instance, is required to be equipped with metal detectors for all the buns produced there. That's standard practice to screen out everything from rocks, to nails, to razors that might get into the flour.
Last year, McDonald's signed on Polish suppliers for almost every category of food - cheese, ketchup, ice cream and other dairy products. By year-end, Fenton expects even the paper cups now imported from Finland to be made in Poland.
Some of the products, and processes, are totally homegrown. That is true for a talented interior design firm run by two brothers, Andrzej and Boguslaw Lis. Fenton said their initial work finishing off the public space in one McDonald's was so spectacular that he wanted to commission more, immediately, but he said the Poles were reluctant.
They weren't sure they could handle it. He said he was sure they could. And they have. In 1994, the Lis Meble firm produced more than DM 700,000 ($510,948) of furniture for McDonald's Poland and exported it as well to McDonald's in Latvia and Estonia.
Initially, Fenton said, he equipped McDonald's with contemporary bent-wood chairs imported from Austria. "They fell apart in two months. Now we have the furniture made here - and in fact it is exported back to Austria."
Last year, Jozef Kosciarz's chair-manufacturing company Jasienica produced DM 60,000 ($43,795) in chairs for McDonald's in Poland, Austria, Hungary, Latvia and one soon-to-open in Estonia.
Another significant supplier makes all the equipment to outfit the stainless-steel kitchens of each McDonald's restaurant. That is $250,000 per restaurant. The Franke-Gastopol firm in Gdansk, a German-Polish joint venture produced kitchen equipment in 1994 for McDonald's in Poland, Germany, Switzerland, France, Latvia, Estonia - and still is expanding.
One of the few imported products that is likely to continue is the apple pie turnover made at the high-tech McDonald's "city" in Moscow, Fenton said, who claims it is more succulent and crispier than its counterparts in the United States.
By year-end, however, almost everything else will be made in Poland.
The fish market
The flaky cod fillets for Fish Macs, for instance, are produced by a Danish-Polish joint venture, Espersen Polska, with a $2.5 million investment in equipment and facilities remodeling. So far, they are selling at about the projected level, of 8% of the overall McDonald's sales, Fenton says, but that means a lot of cod and a heavy investment in technology and training at the fish processing plant.
"It's a great product - boneless, flaky cod. But it is a very labor-intensive process. They have to fillet the fish and put it in blocks. It takes a lot of training to know how to do it," he said.
Espersen Polska expects a first-year "projected turnover of $5.5 million," Fenton said. "They plan on producing 1,000 tons of cod fillet blocks in 1995, of which 200 tons would be for Fish Macs in Poland, Hungary and the Czech Republic.
"Hungary had been getting the fish fillets from Denmark so now it will be cheaper to import from Poland. And we will expand into Estonia and Latvia later this year, to the McDonald's already open in Riga and to the one opening in Tallinn, May l," he said.
Four-fifths of the cod fillets processed by Espersen Polska will go to retail and other products, Fenton said, including commercial supermarkets that will give consumers a quick frozen-fish dinner option that has been commonplace in most of the western world but rarely available here.
Espersen production manager Anton Buel says that "most of the production in the past had been cutting the fish and then exporting those fillets out of the country. There are other fish factories in Poland but none this specialized."
Over the years, McDonald's managers and franchisees have suggested products that ultimately became part of the chain's core products. A Catholic manager suggested Fish Macs, called Fillet o' Fish in the United States, as an option to hamburgers or cheeseburgers, for Lent. Another manager in Pittsburgh suggested the Big Mac, something steelworkers could get their hands around.
The latest innovation has come from McDonald's Polska's marketing manager, Dariusz Czarnecki. It is a waffle ice cream cone with the big "M" baked onto the side. It's now standard across Poland.
