Carrot juice - Poland's future in the EU?
By Hilary Davies
The Polish fruit juice market is a playing field dominated by domestic brands, on which even giants like Coca Cola have failed to make much of an impression. Meanwhile, none of Poland's domestic players have more than a trace of export sales in branded juices. Recent mergers, moves and shakes on the juice scene, though, suggest that change may be on the distant horizon.
The ongoing merger between Sonda and Agros-Fortuna, whose quantitative market shares for fruit juices and nectars in 2002 were 13.2 percent and 9.2 percent respectively, is hailed by some as a move that will change the face of the Polish scene, in which at present, there are at least six players big enough to mention. According to Ryszard Wojtkowski of Enterprise Investors, which owns a 90 percent share in Agros-Fortuna and a 23 percent share in Sonda, the move will, "Transform the fruit-juice market, bringing about a Western European model where two brands control the market."
The main competitors at present are Hortex and market leader Maspex, which in 2002, through clever marketing and product development, increased its quantitative share to almost a third of the total market, largely at Hortex's expense. Can we expect either of these two to become the other controller?
"Prospective winners will be companies with a whole portfolio of brands," says Jacek Kozłowski of Agros-Fortuna. "On the Polish juice market there are probably eight or nine important brands, of which four are ours, two belong to Maspex and only one to Hortex."
At Hortex, however, which has recently been through a restructuring program and now hopes to regain market positions lost to Maspex, they are questioning the numbers. "Why two?" says CEO Tomasz Kurtis, "Why not three - or even four? There will be consolidation, yes. But in the sense that those three or four companies which now control 70 percent of the market will fight for the other 30 percent."
He also puts a damper on some of the hype surrounding the merger. "Mergers are often very painful processes. Both Agros-Fortuna and Sonda have been losing market share for the last few months, and combined, they have less than the sum of what each had before."
Agros-Fortuna's ambitions, however, remain undaunted. They even have designs on the European Union. EI partner Ryszard Wojtkowski, responsible for the merger, recently told the press, "The Polish agri-food industry could become a speciality."
It's a view confirmed by Kozłowski, who suggests that carrot and carrot-fruit juices, for example, currently strong in Poland but weak in Western Europe, could become a Polish 'best-seller' on EU markets.
Meanwhile Hortex is looking in the other direction. Emerging from financial difficulties and a limbo created by investor disagreements, the company, now 92 percent owned by the Bank of America, is putting aside any expensive Western ambitions, instead consolidating its already strong position on the frozen agri-food market in the ex-Soviet Union.
"In Russia, where we have a third of the market share in frozen vegetables, we are a brand name on the level of Hoover," explains Hortex's Maciej Gajewski. "Frozen vegetables for soups are commonly referred to as, simply, 'Hortex.' And although it's difficult to get reliable figures for the Ukraine, we know we have a very strong position there."
Although it's not necessarily the most profitable market at present, the Ukraine is considered to have future potential, and Hortex, who plans to double its sales there next year, want to be in place when that future comes. As Gajewski puts it: "We want to grow with the country."
At present Hortex's exports to Russia and the Ukraine are restricted to frozen foods. An entrenched tradition of tea and 'kompot' drinking, combined with small buying power, make these difficult markets for fruit juice. But this will change, says Gajewski. "In Poland we also drink less fruit juice than in Western Europe. But consumption patterns show that Central and Eastern Europe is following Western European habits."
Meanwhile, as Polish companies plan agri-expansion East and West, it's possible that before too long, big Western European players may get a break in Poland. As Kurpisz says, "Both Agro-Fortuna-Sonda and Hortex are in the hands of financial investors who will eventually exit. So it's not unlikely that then the key European players will move in."
