Pension market means rivalry and dead clients
So what was the big difference between the startup Polish pension market and its original model in Chile and other Latin American countries?
"There, they had no insurance market," says Citibank's vice president of investments, Stanislaw Berkieta, and it was the banks that set the pace in marketing pension plans.
Here, the runaway leaders are insurance companies that had been on the ground for much of the 1990s: Commercial Union, Nationale-Nederlanden and the state insurer Powszechny Zaklad Ubezpieczen (PZU), who signed up 70% of the Poles going into privately managed pension programs.
"We underestimated the infrastructure they (insurance companies) had and their need to defend their insurance market. They recognized that there is a lot of synergy between life insurance and the pension market," Berkieta said.
Citibank's joint venture with Polish private insurer Warta didn't have the payoff the bank had expected partly because "Warta doesn't offer life insurance," Berkieta said, so the venture couldn't flirt with the cross-selling of pension reform and insurance annuities as he says the pacesetting insurers did.
"Cross-selling was not allowed by the law but, whatever they say, they were doing that," he said. Proving it was something else.
He also hinted that there were other difficulties with the Warta joint venture in terms of putting sales agents in place. "Dom," the Citibank-Warta pension plan, "had a maximum of 4,000 salespeople and in reality half of those were part timers," Berkieta said.
That compares with 40,000 salespeople at both Commercial Union and Nationale- Nederlanden and up to 70,000 at PZU.
But a large sales force doesn't guarantee smooth sailing. Several funds found they had clients but no payments. Some of these non-paying clients may be students who haven't had their first jobs yet. Others may be long gone. As many as 1.2 million of the 10.2 million pension signups could be dead bodies, signed up by over-zealous agents (to say the least).
Measured against that, Berkieta said, the Citibank-Warta fund does all right: "76% of our pension clients are actually paying."
Berkieta remains convinced that Poland's groundbreaking pension reform will be a long-term winner, providing billions of dollars in investment money for Poland and eclipsing its startup hurdles.
Robyn Treutle is busy as never before. She has run O&S Communications, a "below the line" marketing and advertising agency, since 1994. "We don't do TV but we do all kinds of promotions, events, and direct-mail product campaigns," Treutle said.
Right now, that means she's flying across Poland quite a lot, helping inaugurate a new-to-Poland "Open Door Day" series of themed events for Mercedes dealers and putting "soccer girls" in hypermarkets for a Philips Polska promotion tied to its sponsorship of the Euro 2000 soccer playoffs.
Working with Mercedes' marketing chief Nicholas Speeks, who came up with "Open Door" idea, Treutle's staff of 10 is putting in place about 40 events starting in March and going through October. It's a time of great change for Mercedes. The company recently went from being Mercedes Benz Polska to being Daimler-Chrysler Automotive Polska.
The campaign includes a "checkbook of coupons" for dealers, enabling them to give discounts on items such as summer tires, exhaust pipes, and car-cleaning materials as well as targeted entertainment on themes that ranges from travel (minivans) to men at work (transportation vehicles).
For the Dutch electronics giant Philips, she is working with marketing director Barbara Napiorkowska on a six-week promotional blitz for an Alessi-designed Philips electric hair clipper and on getting entries for a Philips Euro 2000 contest, whose prizes include 10 home video centers with TV-DVD surround-sound systems.
And when it comes to long-term client SmithKleinBeecham (SKB), Treutle has worked closely with marketing chief Jerzy Toczyski on symposiums and promotional materials for doctors. In addition, she has produced an array of product-support material for Relifex, an anti-arthritic drug which has sold so well here that it has made Poland SKB's second largest market globally.
For the past two years, Treutle also has headed the eight-year-old International Professional Women in Poland (IPWP) group, but she now says she's ready for a change, along with the estimated 100 business entrepreneur members. "People like the idea of IPWP but nobody shows up," Treutle said. "Everybody is too busy."
She will either turn the group over to someone else, close it down, or convert it to a less formal networking and experience sharing forum for the first generation of Polish and expat female entrepreneurs.
Arek Krasnodebski of Hunton & Williams says the recent 25% purchase of the Polaniec power plant by Belgium's Tractebel could have long-term price consequences for Polish consumers. To say nothing of opening the door for more investment in Polish power companies by foreigners, a decade after investment efforts began.
Between 1994 and 1998, most power plants signed long-term contracts with the Polish power grid, an expensive security blanket required to get badly needed investment money. The government was not giving "performance guarantees," since these levels of investment funds weren't available from banks.
As a result, however, "the situation now is that there is a huge output of quite expensive power in Poland, because of these long-term contracts. And the market is still regulated so end prices can't go up by more than 15%," Krasnodebski said.
The Polaniec deal breaks the mold, Krasnodebski added, because it is based on revised government policies adopted last year, which involve no assumption of renegotiations of long-term deals with the power grid.
"Polaniec is a new entity. We have 1,800 megawatts; we have a coal supply; we know the market demands and can go ahead and work on current arrangements with a contract until 2006. And, beyond that, they are willing to operate on a merchant plan. Polaniec is in quite good shape and generates cheap electricity," he said.
And, down the line, that will work its way into the overall electric power pricing that consumers pay.
