Dry humor and sticky products help Atlas build market share

One of Poland's most successful and well-known companies started off with a joke. In 1991, the year that the construction-adhesives producer Atlas Group was established, the "joke" was that the firm launched its core product, dry mortar, with package labeling in German - not Polish. "Poles thought German products were better than Polish (ones)," said Andrzej Walczak, 44, one of Atlas's three cofounders and presidents. Since then, Atlas has become known for its "jokes," as Walczak calls them, especially its corny advertisements featuring its famous white stork mascot. This year's Atlas joke, he said, involved the company's introduction of plasterboards used in the construction of interior walls as its new product. But business is no laughing matter at Łódź-based Atlas, Poland's largest producer of adhesive materials for the building industry as well as one of the top 10 manufacturers of dry cement mixtures in Europe. Atlas, which eventually started offering its products with Polish-language packaging after being awarded the Teraz Polska (Poland Now) promotional product emblem, now boasts one of the most successful brands in the country and controls more than 50% of the domestic market for dry mortar. The firm sold more than 780,000 metric tons of the product in 2001, though it was a 7-8% decrease from the previous year, Walczak said, while overall market demand in Poland tumbled 21%. This year, he expects Atlas's sales of dry mortar to drop by only a few percentage points.

Competitors chip away Increased competition is one reason why the market for chemical additives for the construction industry has decreased during the past two years, according to Piotr Ciborowski, the sales and marketing manager of Ceresit, the construction-adhesives unit of German chemical and cosmetics concern Henkel, and a main competitor of Atlas. The fact that people don't buy replacement walls for buildings every 10 years - as often as they purchase new cars - is another, according to Walczak. Despite the growing competition from both multinationals and dozens of garage-based operators, plus the stagnant demand for construction adhesives, Atlas has managed to consecutively increase its revenues during the past three years. Its profits have dipped slightly, but seem to be recovering. Last year, Atlas's turnover hit zł. 1.02 billion ($249 million), up from zł. 816.6 million ($199 million) in 2000 and zł. 636.5 million ($155 million) in 1999. Corresponding net profits were zł. 177 million ($43 million) in 2001, zł. 170 million ($41 million) in 2000 and zł. 182 million ($44 million) in 1999.

Building Eastern markets Yet, tight competition and static domestic demand in Poland have forced Atlas to increasingly focus its strategy on exports to the East. Exports now account for 10% of the firm's production, including 5.5% to Russia, Atlas's largest export market. Until last year, Walczak said, Poland was the firm's only important market, but now it has also started shipping to Belarus besides trying to beef up its exports to Estonia, Latvia, Lithuania, Ukraine, the Czech Republic, Slovakia and Portugal. Russian exports reached $30 million of the firm's total sales in 2001. Atlas's sales activities there have been boosted by a huge promotional campaign so successful that the firm now faces competition from a spate of fake Russian Atlas products, Walczak said. But unlike other Western European firms that headed east after tanking in their home markets during the 1990s, Atlas has implemented its eastern expansion strategy, particularly in Russia, as "an effect of our intense growth," Walczak said. "This is not a way of escaping into lower labor costs. This is the effect of development and experience."

Next year, Atlas will begin dry mortar production at a new $15 million factory in Dubna, about 100 kilometers from Moscow, which should produce about 100,000 metric tons within a year - the output that the factory needs to be profitable. Given its expansion efforts, Walczak didn't rule out that Atlas could even supply construction adhesives to companies within a 2,000-kilometer (1,240-mile) radius of Łódź by 2007. But Atlas's activities in its foreign markets have not all fared as well as in Russia. Efforts in Germany, where Atlas has a one-person satellite office, have not yet turned a profit, Walczak said. Likewise, exports to Portugal have been unprofitable. And sales in the Czech Republic, where Atlas has another small office, have been weak. On the home front, Atlas is busy reorganizing its corporate structure by pulling together its scattered production facilities and its quartz, gypsum and anhydrite quarries under one legal entity. During the next two to three years, the private firm that employs 2,100 people will consolidate its various production sites, which are now independent entities with their own directors. Under the new scheme, the firm's headquarters in Łódź will serve as the group's center for research, sales and technical support.