Building an empire
Acquisitions are at the heart of Emperia Holding's strategy as one of Poland's largest groups dealing in FMCG (fast moving consumer goods) in wholesale and retail. In line with this strategy BOS, a company which belongs to Emperia, has just acquired Mariola, a food and drink wholesaler located in the northeastern Polish city of Łomża
"Acquisitions of new firms are part and parcel of Emperia Holding's strategy. At the moment we are holding talks with other prospective companies," said Piotr Laskowski, director for distribution development and a member of Emperia's management board. "We still want to develop ourselves organically as well as through takeovers," he added.
Effects of scale
Mariola is the fifth company to be taken over by Emperia this year. In January, Emperia acquired Społem Tychy. Bartoszyce-based Centrum was brought into the group in May, Maro-Markety from Poznań was taken over in June and finally, in July, Wrocław-based Sydo and Alpaga Xema from Poznań joined Emperia.
"This all shows that the company is consistent in implementing its strategy and thus is seen favorably by the market and analysts," said Kamil Kliszcz, an analyst from DI BRE brokerage house.
Patrycja Ciosek from PMR Publications said that Emperia Holding wants to find its place among the leading retail companies in Poland via these aquisitions.
"The increasing number of companies entering Emperia Holding makes the number of the company's customers and partners grow," added Ciosek.
"The scale of operations translates into lower prices offered to small traditional grocers, who make up the largest group of the company's wholesale customers. This naturally raises Emperia's competitiveness on the market," says DI BRE's Kliszcz.
Step by step, company by company, Emperia will grow - such is the vision of Emperia's president, Artur Kawa. "We plan to continue the rapid consolidation of the FMCG market in Poland," he said.
Fragmented market
However, Poland's FMCG market is still extremely fragmented. "The fact that Metro Group, the biggest retail company in Poland, has as much as three percent of the total value of the market only proves how fragmented the market is," says PMR's Patrycja Ciosek.
Emperia is looking to take advantage of the situation, and wants to ask investors for about zł.200 million for further acquisitions.
"We are preparing ourselves for a second issue of shares on the Warsaw Stock Exchange. The money raised from the market will be spent on new takeovers," said Kawa.
"We are negotiating new deals and we hope we will soon be able to report new purchases. By the end of the year we are planning to complete a few acquisitions, and within the next three years at least a dozen or even several dozen new deals. This year we want to concentrate on small and medium-sized firms, whose revenues are in the range of zł.100-300 million," he added.
Looking abroad
Along with takeovers, Emperia Holding wants to use its experience in wholesale distribution, operating retail outlets, along with organizing franchising and partner networks to expand abroad.
"I believe we could take advantage of our experience abroad - generally in the East. Many Polish producers have encouraged us to go with them, since they need good distribution companies in Romania and Ukraine. It could turn out that we can take some of their experience and we will help one another," said Kawa. "We are not thinking of entering the German market," he clarified.
However, according to the president, expansion in foreign markets will not take place earlier than next year or even in two years' time.
"Entering foreign markets doesn't mean investing a couple of million złoty. I am not interested in such a small scale of operations. If we were to do it, the investment would have to be some zł.100-300 million, so we could transform it into a business worth a few times more within a few years," said Kawa.
Domestic success
Now the company wants to concentrate on the domestic food market, which, according to PMR Publications, will be worth some zł.211 billion by the end of 2007, nearly five percent higher than in 2006.
"The growth will result from the increase in the number of stores, particularly supermarkets and discounts penetrating less populous areas of the country," said Małgorzata Machnicka from PMR research. She also says the value will rise thanks to the improving situation on Poland's labor market - growing employment, as well as salaries and wages, will positively influence Poles' spending power.
Emperia wants to benefit from all these factors and increase its revenues by 10 percent by the end of 2007. This year's financial results have been bright so far. In H1 the company's revenues reached zł.2.18 billion, 227-percent higher compared to the first six months of 2006. Net profit amounted to zł.50.8 million and was 264.2 percent better than in the corresponding period last year.
"We haven't presented our prognosis concerning the net profit for the whole year. I can say we will definitely improve on last year. The plan to earn zł.4.4 billion in revenues will be achieved. However, that doesn't include the consolidated sales of firms that will be taken over by the end of the year," said Kawa.
