Kross's cross-country bike ride
Kross, the country's largest bicycle producer, is gearing up for a debut on the bourse to finance foreign expansion. And when the float takes place this fall, the firm hopes to pedal away with zł.50 million.
The firm, based in Przasnysz, some 60 miles to the northeast of Warsaw, plans to dish off around a third of its stock to investors, with CEO Zbigniew Sosnowski staying in the saddle after the IPO. Like many Polish firms at the moment, Kross is looking to the East, identifying Russia as the market where funds raised from the flotation would be most profitably invested.
"The market there is not very mature, and therefore has more potential for us," says Michał Rogatko, Kross' marketing director, who adds, though, that the Polish market at present is not completely saturated.
Currently commanding 40 percent of the domestic market, Kross, whose profits leaped astronomically from 2002 to 2003 as a result of increased exports to the UK and France, hopes its exports will rise by 10 percent by 2005, making foreign sales account for half of the firm's business. Furthermore, Kross expects an increase in sales this fall that will boost profits beyond last year's post tax figure of zł.7.8 millon.
The price of domestic labor and the inflation that has tainted the past few months have also played a role in Kross's decision to set out east, with a pool of cheaper labor and fewer regulations making Russia an obvious choice for expansion.
Heading east makes sense for Kross in other ways as well. One of the main factors is the fierce competition coming from China and Taiwan. Currently, the EU has anti-dumping tariffs that protect European bicycle producers, but, Rogatko says, "there have been rumors among producers all over Europe that the tariffs could disappear." Should that happen, the firm would be "very vulnerable," so setting up shop futher east would ensure a diversified market for Kross outside the EU.
However, Omnibike, one of Russia's largest bicycle distributors, controlling 20-25 percent of the market, says that Kross may be in for a tougher ride than originally thought. "Labor costs for producers here are quite high," says Anton Ivanov, Omnibike's marketing director. Furthermore, he adds that most bikes in Russia come from China and Taiwan. So it would appear that no matter how fast Kross pedals, it is in for an uphill struggle if it wants to stay ahead of cheaper Asian competitors.
The firm, based in Przasnysz, some 60 miles to the northeast of Warsaw, plans to dish off around a third of its stock to investors, with CEO Zbigniew Sosnowski staying in the saddle after the IPO. Like many Polish firms at the moment, Kross is looking to the East, identifying Russia as the market where funds raised from the flotation would be most profitably invested.
"The market there is not very mature, and therefore has more potential for us," says Michał Rogatko, Kross' marketing director, who adds, though, that the Polish market at present is not completely saturated.
Currently commanding 40 percent of the domestic market, Kross, whose profits leaped astronomically from 2002 to 2003 as a result of increased exports to the UK and France, hopes its exports will rise by 10 percent by 2005, making foreign sales account for half of the firm's business. Furthermore, Kross expects an increase in sales this fall that will boost profits beyond last year's post tax figure of zł.7.8 millon.
The price of domestic labor and the inflation that has tainted the past few months have also played a role in Kross's decision to set out east, with a pool of cheaper labor and fewer regulations making Russia an obvious choice for expansion.
Heading east makes sense for Kross in other ways as well. One of the main factors is the fierce competition coming from China and Taiwan. Currently, the EU has anti-dumping tariffs that protect European bicycle producers, but, Rogatko says, "there have been rumors among producers all over Europe that the tariffs could disappear." Should that happen, the firm would be "very vulnerable," so setting up shop futher east would ensure a diversified market for Kross outside the EU.
However, Omnibike, one of Russia's largest bicycle distributors, controlling 20-25 percent of the market, says that Kross may be in for a tougher ride than originally thought. "Labor costs for producers here are quite high," says Anton Ivanov, Omnibike's marketing director. Furthermore, he adds that most bikes in Russia come from China and Taiwan. So it would appear that no matter how fast Kross pedals, it is in for an uphill struggle if it wants to stay ahead of cheaper Asian competitors.
