Ice cream makers gel
The merger of ice cream makers Ekko and Augusto, which together are expected to become the No. 2 producer on the market, signifies the beginning of sector consolidation, industry observers said last week.
"Trends show that smaller companies won't have a chance (of surviving) on this market," said Janusz Moroz, sales director of Algida, whose 20% market share makes it the country's No. 1 ice cream producer. Algida is owned by international giant Unilever.
Szczecin-based Ekko and Augusto, which is based in Kalisz, each have about 8% of the market.
"The main reason for the merger is that the ice-cream market in Poland is very dispersed," said Magdalena Marzec-Mroz, PR specialist for Ekko.
In second place after Algida is German ice-cream maker Scholler, with about a 15% market share. Polish producer Zielona Budka has 10% while Koral has less than 10%.
Marzec-Mroz said that the merger shouldn't come as much of a surprise since company President Artur Zlotnicki announced more than a year ago that Ekko was interested in finding a strategic investor. In the last year, Ekko talked to various Polish producers before deciding to merge with Augusto, she said.
Unlike in other countries, ice cream is a typically seasonal product in Poland: Poles only really gobble it up in the summer when temperatures are high.
This year, ice cream producers recorded strong profit figures for April, but sales dropped in July due to the unexpectedly cool weather.
"This year, sales dropped by 15% compared to the previous year," Algida's Moroz said.
Marzec-Mroz said the weak sales also influenced Ekko's decision to merge.
While Moroz said that smaller domestic producers would likely continue to merge, the road to consolidation won't be easy.
"Mergers will come to nothing if the brand is not strong enough," he said.
But not all smaller players believe in the adage that strength lies in numbers.
Zielona Budka, the most well-known Polish ice cream brand, which has been on the market since the 1940s, isn't looking for a partner. The company said it doesn't need to.
"There are huge multinational companies and smaller companies that also can operate," said Zbigniew Grycan, the president of Zielona Budka. "We're able to operate well now." According to Grycan, what Zielona Budka has to do is keep making good ice cream and maintain its market position.
Nevertheless, Grycan agreed that weather is one of the most important factors affecting ice cream sales.
"If the weather is bad, any merger will help," he said. Grycan added that this past July was "incredibly bad," the worst in 26 years. "The Polmoses (Polish liquor producers) had better sales than ice cream producers," he joked.
With a 16% market share, Ekko and Augusto would nudge past Scholler into the No. 2 sales slot. Algida isn't intimidated by the merger.
"There is no threat to us," Moroz said. "We have our own strategy and it won't be changed because of any market mergers."
According to the deal, Ekko will be incorporated into Augusto, but neither firm would reveal details on the merged company's plans, which are to be released this week.
Marzec-Mroz would only say that the new company, whose name is still unknown, would make ice cream in Kalisz.
"The plant in Kalisz was chosen for logistical reasons," she said, adding that a significant number of Ekko employees would find jobs in the new company.
