Brewing up strong business
In the world of coffee, you are what you drink it seems. Young female professionals will most likely be lured to Coffeeheaven. Students opt for mainstream Café Nescafé bars, while Tchibo customers reportedly have a "stabilized professional situation" and are satisfied with their financial status.
Fashionable taste
Around Poland, coffee bars are fighting for customers to capitalize on the new 'coffee-drinking' fashion, with up to 80 coffee shops opening up across the country every year. Apart from the large chains, which each have at least 20 outlets, smaller cafés are flourishing along the length and breadth of the country.
At present, analysts estimate that there are some 300 modern coffee bars in Poland, mainly packed on to high streets or in shopping malls. Enthusiasts suggest there is tremendous room for growth, pointing to the UK as an example of the potential. There are now some 1,800 café brands in the land of tea, where none existed 15 years ago.
Poles are still behind most of the EU in terms of coffee consumption and are importing and drinking more of the caffeine-packed beverage as their incomes increase. Nevertheless, sales in coffee bars are just a tiny percentage of overall trade.
With sales of 3.3 kilograms of coffee per capita per year, Poland stands in its own right on the world map of the dark bean trade. For now, however, Poles take their caffeine at home, and it is mostly the inexpensive sort, namely ground and roasted, which constitutes 80 percent of the coffee trade volume in the country, according to the marketing information company AC Nielsen.
Home brew
Pour-and-drink instant products still remain a luxury. Middle-shelf producers dominate the market as the four largest, Tchibo, Kraft Foods (Jacobs brand and others), Prima and Elite, account for more than 70 percent of sales.
The instant coffee market might be just 20 percent, but, as recent trends show, it is no less attractive. Mokate, a manufacturer of pour-and-drink coffee products, which sells almost three quarters of the country's instant cappuccino, lost a legal battle with Nestlé and its subsidiary Nescafé. The Swiss accused Mokate of illegal brand image use on Café Classic and Café Instant products and the court agreed. In fact Mokate's jars and labels were very similar and used the official logo of Nescafé - a red mug. The Polish company will not miss its products much after withdrawal, however, as cappuccinos and other mixed coffees are its core business.
Coffee clash
Meanwhile, as the giants clash, smaller players have been taking care of the more coffee-conscious Poles.
If the price on a jar of instant coffee is often too much, it's hard to believe that a zł.150 one-kilogram bag would attract many eager buyers. However, a small, Warsaw-based business selling these gourmet delicacies is not complaining.
Gourmet beans
"This is competition for mass coffees," says Katarzyna Janiszewska from the Coffea company which runs an internet store and services offices. After a few years in business, Coffea boasts a list of 140 companies that use some 200 of its espresso machines. The firm runs its own roasting room, buys green seeds at coffee markets in Bremen and Rotterdam, and counts major foreign and Polish companies that are tired of paper-cup vending machines as its main clients.
"People are traveling around the world and want to try a good quality product [at home]," says Janiszewska. The company's financial reports remain for the owners' eyes only, but Janiszewska compares the idea of producing Polish coffee to "hitting a home run."
The 'now' drink
From high-street fashion bars to chain stores in shopping malls, coffee outlets are mushrooming everywhere - it is one of the fastest-growing segments in the catering business. The largest chains, such as Tchibo, Nescafé and Coffeeheaven, all have more than 20 branches, with the latter having 30 in Poland, the Czech Republic, Latvia and other CEE countries.
"Our dynamic is 10 new openings a year; this is how much the market allows," says the channel marketing manager in charge of bars at Nescafé, Radosław Drabik. Among the large chains, Nescafé is the only one that relies on the franchising model. Future coffee entrepreneurs need to pass a qualification program and have access to, depending on the place and size of the branch, zł.150-300,000. Drabik explains that gastronomy will never become a priority for Nestlé and only serves marketing purposes. That is why operations and profits are fully outsourced to third-parties, from smaller companies to multiplex operators such as Cinema City and Helios. The headquarters hires mystery shoppers and implements tight quality procedures to ensure the brand is represented by franchisers at an appropriate level.
Branching out
But franchising has yet another consequence, because every outlet needs to show profits - otherwise the operator might go bankrupt. Unlike Nescafé, Tchibo tackles the coffee-bar market without franchise partners, but, just like both of its competitors, it remains confident that it will have 50 stores in 2007.
"We profited from the company's experience in other countries," claims regional coffee-bar manager Artur Garnczarek, adding that Tchibo operates some 1,000 shops across Europe. Naturally for Tchibo, which has the largest market share of domestic roasted coffee (23.4 percent), the bar business is just a small number on the balance sheets. Nevertheless, the company wants a slice of the very promising pie.
"The rise in popularity of drinking coffee in fashionable, stylized places such as coffee bars, result in high expectations about the business from investors," says Garnczarek. Despite that, with the exception of Mercer's bar manager in Warsaw, Magda Pelczyńska, none of our interviewees could brag about major profits.
Pole position
Coffeeheaven, a CEE business financed and listed in the UK, prides itself as the sole and by far the largest venture of the big three dedicated entirely to gastronomy. Propelling growth, however, has its demands, says the company's CEO, Richard Worthington.
"When you're growing at the rates we are growing you'd almost have to defy gravity to record significant pre-tax profits," he says. The Coffeeheaven group reported a zł.2.79 million loss in the financial year ending March 31, despite a healthy profit margin of 12-20 percent per store.
In all, with the three major chains aiming at 50 stores by 2007, and smaller networks such as Stoney Point Java, Mercer's or Daily Coffee expanding regionally, the industry is up for a fight in the near future. Some specialists predict no more than three chains operating across the country with niche, one-of-a-kind stores filling the gaps. Nevertheless, it is still about store placement, with the best high street and mall spots booked up to two years in advance.
The daddy of drinks
Coffee bars, just like any other industry, have their legendary market leaders, and in this case the name is Starbucks. The global retailer and business model leader is already present in seven European countries.
"We currently have no definitive plans for future market openings," says Starbucks' vice president of marketing for the EMEA region, Geert Van Kuyck. He adds, however: "This is constantly in review." This kind of talk has lead to a number of rumors on the coffee grapevine, and analysts mention an alleged pre-sale agreement, that was signed by Coffeeheaven and Starbucks in the UK. Others suggest that Coffeeheaven is overpaying for the best sites at malls to become the most attractive buy on the market.
Bitter taste
"That's nonsense," replies Worthington, whose firm is also looking for something to buy. Still, Starbucks' L55 (zł.400) million buyout of Seattle Coffee, which had not even made a profit in the UK, is in the back of everyone's minds. Starbucks bought the chain to enter the country quickly.
"Such revelations have appeared in Poland for several years but they have no actual consequences," says Garnczarek from Tchibo. Starbucks may in fact be more concerned about developing its network in Western Europe than eyeing up less significant destinations.
So the days of 'big coffee' in Poland seem far off. Though the country is being flooded with fashionable coffee houses, a trendy latte will set you back around zł.12 - less than a full meal in McDonald's. While Poland is certainly becoming more affluent, indications are that the average Polish customer will still choose fries over frappe for several years to come.
Mercer's mix
The manager at Mercer's, Magda Pelczyńska, likes her coffee with a dollop of atmosphere.
The main reason why coffee-bar clients spend zł.12 on a cup is not always the distinguished taste. They just like to sit there, and this is how you make them want to.
Décor
At Mercer's, final decisions are up to the company's boss, who picks up new trends during travels. Wallpaper* magazine is resourceful on lifestyle issues as well.
Pelczyńska describes Mercer's interior design as "non-confrontational". Music is also set not to interfere with conversations and the company's choice, mostly peaceful ambient jazz tunes, remains the owner's predilection.
People
Staff members are a variety of characters. Uncommon hairstyles and interesting personalities can be found among the main recruiting criteria. The manager says there is no customer-service handbook, except one rule: "Serve as you would like to be served." No one forces over-the-counter conversations, unless a client seems willing to chat.
"It is not a problem for me to order dry cleaning, if a client spills coffee on his clothes," says Pelczyńska, as the customer is always right.
Teasers
Since leading dailies are available even in McDonald's, Mercer's goes for a fuller scope - at least 10 titles every morning, including international newspapers. In addition, in compliance with the American coffee-bar model, clients had the option of plaing chess or cards, although this idea backfired somewhat early on and was later abandoned: "People were coming in, taking the scrabble board and sitting for hours without ordering," explains Pelczyńska.
Fashionable taste
Around Poland, coffee bars are fighting for customers to capitalize on the new 'coffee-drinking' fashion, with up to 80 coffee shops opening up across the country every year. Apart from the large chains, which each have at least 20 outlets, smaller cafés are flourishing along the length and breadth of the country.
At present, analysts estimate that there are some 300 modern coffee bars in Poland, mainly packed on to high streets or in shopping malls. Enthusiasts suggest there is tremendous room for growth, pointing to the UK as an example of the potential. There are now some 1,800 café brands in the land of tea, where none existed 15 years ago.
Poles are still behind most of the EU in terms of coffee consumption and are importing and drinking more of the caffeine-packed beverage as their incomes increase. Nevertheless, sales in coffee bars are just a tiny percentage of overall trade.
With sales of 3.3 kilograms of coffee per capita per year, Poland stands in its own right on the world map of the dark bean trade. For now, however, Poles take their caffeine at home, and it is mostly the inexpensive sort, namely ground and roasted, which constitutes 80 percent of the coffee trade volume in the country, according to the marketing information company AC Nielsen.
Home brew
Pour-and-drink instant products still remain a luxury. Middle-shelf producers dominate the market as the four largest, Tchibo, Kraft Foods (Jacobs brand and others), Prima and Elite, account for more than 70 percent of sales.
The instant coffee market might be just 20 percent, but, as recent trends show, it is no less attractive. Mokate, a manufacturer of pour-and-drink coffee products, which sells almost three quarters of the country's instant cappuccino, lost a legal battle with Nestlé and its subsidiary Nescafé. The Swiss accused Mokate of illegal brand image use on Café Classic and Café Instant products and the court agreed. In fact Mokate's jars and labels were very similar and used the official logo of Nescafé - a red mug. The Polish company will not miss its products much after withdrawal, however, as cappuccinos and other mixed coffees are its core business.
Coffee clash
Meanwhile, as the giants clash, smaller players have been taking care of the more coffee-conscious Poles.
If the price on a jar of instant coffee is often too much, it's hard to believe that a zł.150 one-kilogram bag would attract many eager buyers. However, a small, Warsaw-based business selling these gourmet delicacies is not complaining.
Gourmet beans
"This is competition for mass coffees," says Katarzyna Janiszewska from the Coffea company which runs an internet store and services offices. After a few years in business, Coffea boasts a list of 140 companies that use some 200 of its espresso machines. The firm runs its own roasting room, buys green seeds at coffee markets in Bremen and Rotterdam, and counts major foreign and Polish companies that are tired of paper-cup vending machines as its main clients.
"People are traveling around the world and want to try a good quality product [at home]," says Janiszewska. The company's financial reports remain for the owners' eyes only, but Janiszewska compares the idea of producing Polish coffee to "hitting a home run."
The 'now' drink
From high-street fashion bars to chain stores in shopping malls, coffee outlets are mushrooming everywhere - it is one of the fastest-growing segments in the catering business. The largest chains, such as Tchibo, Nescafé and Coffeeheaven, all have more than 20 branches, with the latter having 30 in Poland, the Czech Republic, Latvia and other CEE countries.
"Our dynamic is 10 new openings a year; this is how much the market allows," says the channel marketing manager in charge of bars at Nescafé, Radosław Drabik. Among the large chains, Nescafé is the only one that relies on the franchising model. Future coffee entrepreneurs need to pass a qualification program and have access to, depending on the place and size of the branch, zł.150-300,000. Drabik explains that gastronomy will never become a priority for Nestlé and only serves marketing purposes. That is why operations and profits are fully outsourced to third-parties, from smaller companies to multiplex operators such as Cinema City and Helios. The headquarters hires mystery shoppers and implements tight quality procedures to ensure the brand is represented by franchisers at an appropriate level.
Branching out
But franchising has yet another consequence, because every outlet needs to show profits - otherwise the operator might go bankrupt. Unlike Nescafé, Tchibo tackles the coffee-bar market without franchise partners, but, just like both of its competitors, it remains confident that it will have 50 stores in 2007.
"We profited from the company's experience in other countries," claims regional coffee-bar manager Artur Garnczarek, adding that Tchibo operates some 1,000 shops across Europe. Naturally for Tchibo, which has the largest market share of domestic roasted coffee (23.4 percent), the bar business is just a small number on the balance sheets. Nevertheless, the company wants a slice of the very promising pie.
"The rise in popularity of drinking coffee in fashionable, stylized places such as coffee bars, result in high expectations about the business from investors," says Garnczarek. Despite that, with the exception of Mercer's bar manager in Warsaw, Magda Pelczyńska, none of our interviewees could brag about major profits.
Pole position
Coffeeheaven, a CEE business financed and listed in the UK, prides itself as the sole and by far the largest venture of the big three dedicated entirely to gastronomy. Propelling growth, however, has its demands, says the company's CEO, Richard Worthington.
"When you're growing at the rates we are growing you'd almost have to defy gravity to record significant pre-tax profits," he says. The Coffeeheaven group reported a zł.2.79 million loss in the financial year ending March 31, despite a healthy profit margin of 12-20 percent per store.
In all, with the three major chains aiming at 50 stores by 2007, and smaller networks such as Stoney Point Java, Mercer's or Daily Coffee expanding regionally, the industry is up for a fight in the near future. Some specialists predict no more than three chains operating across the country with niche, one-of-a-kind stores filling the gaps. Nevertheless, it is still about store placement, with the best high street and mall spots booked up to two years in advance.
The daddy of drinks
Coffee bars, just like any other industry, have their legendary market leaders, and in this case the name is Starbucks. The global retailer and business model leader is already present in seven European countries.
"We currently have no definitive plans for future market openings," says Starbucks' vice president of marketing for the EMEA region, Geert Van Kuyck. He adds, however: "This is constantly in review." This kind of talk has lead to a number of rumors on the coffee grapevine, and analysts mention an alleged pre-sale agreement, that was signed by Coffeeheaven and Starbucks in the UK. Others suggest that Coffeeheaven is overpaying for the best sites at malls to become the most attractive buy on the market.
Bitter taste
"That's nonsense," replies Worthington, whose firm is also looking for something to buy. Still, Starbucks' L55 (zł.400) million buyout of Seattle Coffee, which had not even made a profit in the UK, is in the back of everyone's minds. Starbucks bought the chain to enter the country quickly.
"Such revelations have appeared in Poland for several years but they have no actual consequences," says Garnczarek from Tchibo. Starbucks may in fact be more concerned about developing its network in Western Europe than eyeing up less significant destinations.
So the days of 'big coffee' in Poland seem far off. Though the country is being flooded with fashionable coffee houses, a trendy latte will set you back around zł.12 - less than a full meal in McDonald's. While Poland is certainly becoming more affluent, indications are that the average Polish customer will still choose fries over frappe for several years to come.
Mercer's mix
The manager at Mercer's, Magda Pelczyńska, likes her coffee with a dollop of atmosphere.
The main reason why coffee-bar clients spend zł.12 on a cup is not always the distinguished taste. They just like to sit there, and this is how you make them want to.
Décor
At Mercer's, final decisions are up to the company's boss, who picks up new trends during travels. Wallpaper* magazine is resourceful on lifestyle issues as well.
Pelczyńska describes Mercer's interior design as "non-confrontational". Music is also set not to interfere with conversations and the company's choice, mostly peaceful ambient jazz tunes, remains the owner's predilection.
People
Staff members are a variety of characters. Uncommon hairstyles and interesting personalities can be found among the main recruiting criteria. The manager says there is no customer-service handbook, except one rule: "Serve as you would like to be served." No one forces over-the-counter conversations, unless a client seems willing to chat.
"It is not a problem for me to order dry cleaning, if a client spills coffee on his clothes," says Pelczyńska, as the customer is always right.
Teasers
Since leading dailies are available even in McDonald's, Mercer's goes for a fuller scope - at least 10 titles every morning, including international newspapers. In addition, in compliance with the American coffee-bar model, clients had the option of plaing chess or cards, although this idea backfired somewhat early on and was later abandoned: "People were coming in, taking the scrabble board and sitting for hours without ordering," explains Pelczyńska.
