Fat of the land
By : Justyna Wrobel
It's no secret that Poles love their ice cream. Even the hated long lineups are sweetened by the prospect of a favorite brand on a baking summer's day.
Eating ice cream is a tradition that goes back to the days when Poland still had an aristocracy, who used the cool dessert as a palliative against the summer heat. But while the aristocracy died, dispersed or was dispossessed, ice cream remained king. Even when the communist regime was busy smashing private enterprises in the 1940s, Zielona Budka (The Green Hut), a private company, was allowed to set up its first ice cream kiosk in Warsaw.
Since then, ice cream consumption has increased each year, although producers complain that the vagaries of Polish weather have an adverse effect on the number of ice creams sold. This summer's wet and windy July, saw sales plummet for example.
Cruel, cold summer
It's this weather factor that's worrying ice cream manufacturers the most, especially when other countries eat it all year round.
"In general, Poles like eating ice cream only in the summer," said Janusz Moroz, the sales director at Algida, part of international giant, Unilever. "Temperature and rainfall strongly influence ice cream consumption."
He said that fluctuations in sales vary week to week by up to 50% depending on the weather. "Eating ice cream is still considered something of a luxury in this country," Moroz said.
Worldwide statistics of ice cream eating habits tend to confirm this. On average, Americans eat about 22 liters a year, while Europeans consume around six liters a year. Scandinavians put away about 12-13 liters. Poles lag far behind at about three liters, which translates to about 110 million liters a year, Moroz said.
And not every nation adjusts its level of affection for ice cream according to the weather. Russians, for example, eat ice cream summer and winter. They also eat one-third of what they do in the summer during the winter, while Poles are down to only one-tenth of their summer ice cream intake during the cold months, according to Andrzej Feder, Zielona Budka's financial director.
Nevertheless, ice cream consumption is increasing, if not by a huge amount. "There is a slight increase," said Bogdan Workiewicz, the general director at Koral, an ice cream producer from Nowy Sacz. "But it's only a 3-4% growth a year."
Dividing the ice cream pie
Algida is the market leader in Poland. According to Algida's Moroz, the company's market share is about 23-25%, while runner-up Scholler, the Warsaw-based outlet of a German ice cream producer, has about 15-17% of the market. Koral is neck in neck with Zielona Budka, whose market share Moroz estimates at 15%. Moroz also said Szczecin-based Ekko and Kalisz-based Augusto also have a similar share of the market: about 9%, according to Ekko. The remainder of the market is taken up by smaller brands.
Zielona Budka's Feder estimates his company is increasing its bite of the market by about 2% each year. A year ago its share was about 10%, while this year it's about 12%, Feder said.
Feder puts the recent successes of the Zielona Budka down to its distribution network. Between 1994-1996, the number of wholesale partners working with Zielona Budka increased to 70. The company also has five of its own distributors handling the sale of ice cream directly. The larger number of distributors and last year's strong advertising campaign helped boost the company's 1999 revenue to zl. 80 million ($ 18.6 million), up 50% from the previous year.
"It's a difficult market for estimating the main players' market shares," said Tomasz Towpik, the general director of Augusto, which has been producing ice cream since 1992.
Piotr Marciniak, the sales director at Ekko, said his company had 9% of the market since adjusting its prices to a market mean and doubling the number of its wholesale partners. He said companies such as Ekko, Koral, Augusto and Zielona Budka had reached similar market positions, although Koral was ahead by a slight margin.
Ice cream producers divide their portfolios into three main areas: high street impulse buys, family pack and gastronomic. The first type of ice cream is sold in small cones, the second, in half-liter containers and the third, to restaurants.
While high street cones, usually bought from kiosks, have always been the most vital market, the family and gastronomic sectors are increasing in importance. "Hypermakets have a big influence on shaping the consumer's taste," Ekko's Marciniak said.
He said about 60% of sales are from high street ice cream, 35% from family packs and only 5% from gastronomic ices.
Marciniak said the current battle to win over consumers is about pricing and not quality. "It's a price war," he said. "For instance, Algida is not saying its ice cream is delicious, but that it's cheap."
Algida's Moroz said much of his company's success is based on continuing innovations. "We use market research companies and try to adjust (our products) to suit the clients' needs," he said. He added that the competition could copy his market approach with branding, but standards, ingredients and flavors could not be imitated.
Algida's branding approach involves dividing its ice cream products into more expensive, upscale brands such as Magnum and Solero, and cheaper cones and cornettos for mass consumption.
Although Algida has the biggest share of the market, the company is aware of the competition. "We feel our competitors breathing down our necks," Moroz said. "There is nowhere in the world that there are so many strong companies competing on the market." Moroz predicted there would be a drop in profits for many companies this year because of the weather. "It's a bad year for ice-cream companies in general. But even we felt a slump in sales in July," he said.
Meanwhile, other companies look to other market opportunities. "We try to offer ice cream to everybody," said Ekko's Marciniak. He said Ekko offers children's portions at zl. 0.40-zl. 0.50, and larger portions for less than zl. 1. The one-liter family containers are zl. 4.95. Ekko's top of the range product is a one-liter container that costs zl. 6.80.
Zielona Budka hopes to capitalize on its modest profits through its recent investment in what is the country's most modern ice cream manufacturing plant in Mielec. "We are able to produce about 200,000 liters of ice cream every 24 hours," said Janusz Szwaracki, general director at Zielona Budka's Mielec factory. He said the factory's production volume would help the company boost its sales by 25% in 2000.
Green theme
Zielona Budka has a long history of struggling to keep its products on the market in the face of stiff opposition. In 1947, two friends, Edmund Plewicki and Kazimierz Koziol, established a kiosk to sell their ice cream on the corner of ulica Pulawska and ulica Madalinskiego in Warsaw. The kiosk was painted green (hence the name) because along with red, that was the color available during those harsh, post-war years. So even the company's distinctive brand was invented through adversity.
Today's owner, Zbigniew Grycan, became the company's managing director in 1980. He sold some of the company's shares to French-based bank Paribas in 1998.
Financially, it was a crucial decision: the company had to expand in the face of competition. In the same year, the company started construction of its Mielec factory, which is located near Rzeszow in the southeast. The plant started full production this March.
Feder said Grycan's new recipes (he's from a long line of confectioners) have been behind the company's recent success. But despite Zielona Budka's long pedigree, Feder admits Algida is a hard act to beat. "Algida is a company with a long tradition and it's famous for its high-quality ice cream," he said. Algida also has a wealthy parent with a huge marketing team, he said. The company started selling imported ice cream in 1992, and purchased a plant in Banino near Gdansk in 1993.
Algida's sales rose by 10% in 1999 compared with figures from the previous year. The company also took a cold-weather gamble and began selling its products earlier in the year in April.
"This year, despite this (cold) summer, we had good sales in April and May, and that's why last year's result will almost certainly be reached this year," Moroz said.
Algida's success can also be attributed to its own distribution system. About 90% of its products are being delivered by its own distributors, and the remaining 10% are in the hands of Algida's wholesale partners.
Ready to make the change
When the Russian crisis hit in 1998 and damaged consumer confidence, the company contemplated strategic changes. "We changed the profile of our consumers, and we needed wholesale partners for that," Moroz said. "We had to reach a different consumer and that's why we worked out a cheaper product portfolio."
But market share aside, Poles have a soft spot for Zielona Budka. With its history, it's considered a solid Polish brand. "Zielona Budka is pretty good and that's why I usually buy its products," said Katarzyna Rembelska, a 24-year-old student and self-styled ice cream connoisseur. "Sometimes I also buy Algida and Scholler."
Rembelska said she was tempted into buying Scholler and Algida products because of their TV advertising campaigns, but until recently, she and her family ate only Zielona Budka ice cream.
