Poland's juice market - A Fruity Fortress
At present, two of the four largest producers on the market are controlled by financial investors who will both exit over the next two years, while nearly 20 percent of the market remains fragmented. But strategic investors should lay their plans well, say those in the business, as past attempts to penetrate the local market have humbled even giants such as Coca Cola.
Recent reports in the press that European-based fruit juice magnate Eckes-Granini might be buying up one of the market leaders, such as number three player, Hortex, were quickly refuted by Hortex CEO Tomasz Kurpisz. "We are not going to be bought by anyone," he said, "in the near future. Our shareholders are not planning an exit for another couple of years."
The news was confirmed by Ryszard Wojtkowski, partner at Enterprise Investors, a private equity fund that controls Hortex's nearest competitor, number two player Agros-Nova, who said, "I wouldn't be surprised if Eckes-Granini had approached the Bank of America (which controls 93 percent of Hortex stock) because almost everybody has. But the Bank of America isn't selling now, even though selling now would probably be in the interest of the other shareholders."
Others suspected of having shown an acquisitive interest in Hortex include Agros Nova itself, market leader Maspex and Coco Cola Helenic Bottling.
Enterpise Investors isn't planning 'out' for another couple of years either, having only just completed the merger of the two companies, Agros Fortuna and Sonda, that created Agros Nova last year. But that hasn't stopped the flow of interest in the company's three processing businesses, namely those for jams, preserves and juice, according to Wojtkowski.
"We're constantly approached by huge concerns wanting one of the pieces of Agros Nova," he says, adding, "CCHBC, for example, wanted the fruit juice business."
Market leader Maspex is owned by a group of six partners, none of which plan to dispose of their shares in the firm, while number four, Sokpol, also a locally owned private company - which has cut its slice of the market largely through private label (in which 60 percent of its sales are contained) - could prove an interesting option for investment. However, according to some sources, Sokpol's ongoing attempt to develop its own brands is not enjoying much success. And, furthermore, its shareholders are apparently not interested in sell up, either.
Meanwhile, the 18 percent of the market that remains fragmented does not present any real attractions. "[The firms] are all to small, while setting out to bundle a few of them together would not be a sensible strategy," Wojtkowski explains. "There are too many brands, none of which are that strong. It would just be unmanageable," he continues.
Unless the Bank of America changes its mind in the near future, it looks as if European players might just have to be patient. Meanwhile, those on the ground warn that foreigners shouldn't expect easy profits anyway, judging by the past record of attempts to take the market by strategic investors.
"I'm surprised at how unsuccessful Eckes-Granini has been," says Wojtkowski, referring to the company's acquisition of tiny local juice producer Aronia, which has just three percent of the market. "They didn't feed Aronia with know-how and capital," he adds.
Coca-Cola, which spent zł.350 million on seven plants when it first came to Poland, has still only two percent of the market for fruit juice, and its share of the fizzy drinks market has also lost out to price competitive local producers.
The reason for the notable failure of internationals on the local fruit juice market so far, say market watchers, is that they have come with their own international brands and international prices, instead of building up cheaper - but good-quality - local brands.
"Fruit juice is a commodity," Wojtkowski explains, "and consumers will only pay up to 30 percent more for quality."
In stark contrast, for example, is the success of the three international beer companies that, by developing local brands, have now taken over 80 percent of the market between them, and are enjoying growth rates of an average of eight percent.
Meanwhile, the biggest change that EU entry will bring to the locally owned companies concerns export opportunities. Wojtkowski, for one, expresses surprise at how slow Western retailers in the food and drink business have been to see the coming opportunity of importing cheaper but good quality Polish produce. "It seems strange to me, for example, that it's still easier to buy Polish gas in Germany than it is to buy Polish jam," he comments.
Jason Holway, a consultant at UK-based food and drink consultancy Zenith International, however, points out that although Polish fresh produce has certainly got a reputation for high quality - and a lot of organic baby food produced by German companies is now based on mostly Polish ingredients - when it comes to branded product, there is consumer conservatism to take into account.
"If you can't even pronounce the name because it's got three 'Zs,' for example, that is something of a turn-off for the consumer," he explains, before going on to add, though, that in neighboring countries, such as Germany, there may well be more of a base of cultural familiarity to work from.
And while, in Wojtkowksi's view, substantial profits and - significant know-how - could be gained by producing for private label on Western markets, Jason Holway is less sure, commenting, "In countries like Germany, private label retailers and producers already have very cost-effective systems and pricing strategies worked out in relation to their neighbors, so I'm not sure how much of an inroad there would really be."
Recent reports in the press that European-based fruit juice magnate Eckes-Granini might be buying up one of the market leaders, such as number three player, Hortex, were quickly refuted by Hortex CEO Tomasz Kurpisz. "We are not going to be bought by anyone," he said, "in the near future. Our shareholders are not planning an exit for another couple of years."
The news was confirmed by Ryszard Wojtkowski, partner at Enterprise Investors, a private equity fund that controls Hortex's nearest competitor, number two player Agros-Nova, who said, "I wouldn't be surprised if Eckes-Granini had approached the Bank of America (which controls 93 percent of Hortex stock) because almost everybody has. But the Bank of America isn't selling now, even though selling now would probably be in the interest of the other shareholders."
Others suspected of having shown an acquisitive interest in Hortex include Agros Nova itself, market leader Maspex and Coco Cola Helenic Bottling.
Enterpise Investors isn't planning 'out' for another couple of years either, having only just completed the merger of the two companies, Agros Fortuna and Sonda, that created Agros Nova last year. But that hasn't stopped the flow of interest in the company's three processing businesses, namely those for jams, preserves and juice, according to Wojtkowski.
"We're constantly approached by huge concerns wanting one of the pieces of Agros Nova," he says, adding, "CCHBC, for example, wanted the fruit juice business."
Market leader Maspex is owned by a group of six partners, none of which plan to dispose of their shares in the firm, while number four, Sokpol, also a locally owned private company - which has cut its slice of the market largely through private label (in which 60 percent of its sales are contained) - could prove an interesting option for investment. However, according to some sources, Sokpol's ongoing attempt to develop its own brands is not enjoying much success. And, furthermore, its shareholders are apparently not interested in sell up, either.
Meanwhile, the 18 percent of the market that remains fragmented does not present any real attractions. "[The firms] are all to small, while setting out to bundle a few of them together would not be a sensible strategy," Wojtkowski explains. "There are too many brands, none of which are that strong. It would just be unmanageable," he continues.
Unless the Bank of America changes its mind in the near future, it looks as if European players might just have to be patient. Meanwhile, those on the ground warn that foreigners shouldn't expect easy profits anyway, judging by the past record of attempts to take the market by strategic investors.
"I'm surprised at how unsuccessful Eckes-Granini has been," says Wojtkowski, referring to the company's acquisition of tiny local juice producer Aronia, which has just three percent of the market. "They didn't feed Aronia with know-how and capital," he adds.
Coca-Cola, which spent zł.350 million on seven plants when it first came to Poland, has still only two percent of the market for fruit juice, and its share of the fizzy drinks market has also lost out to price competitive local producers.
The reason for the notable failure of internationals on the local fruit juice market so far, say market watchers, is that they have come with their own international brands and international prices, instead of building up cheaper - but good-quality - local brands.
"Fruit juice is a commodity," Wojtkowski explains, "and consumers will only pay up to 30 percent more for quality."
In stark contrast, for example, is the success of the three international beer companies that, by developing local brands, have now taken over 80 percent of the market between them, and are enjoying growth rates of an average of eight percent.
Meanwhile, the biggest change that EU entry will bring to the locally owned companies concerns export opportunities. Wojtkowski, for one, expresses surprise at how slow Western retailers in the food and drink business have been to see the coming opportunity of importing cheaper but good quality Polish produce. "It seems strange to me, for example, that it's still easier to buy Polish gas in Germany than it is to buy Polish jam," he comments.
Jason Holway, a consultant at UK-based food and drink consultancy Zenith International, however, points out that although Polish fresh produce has certainly got a reputation for high quality - and a lot of organic baby food produced by German companies is now based on mostly Polish ingredients - when it comes to branded product, there is consumer conservatism to take into account.
"If you can't even pronounce the name because it's got three 'Zs,' for example, that is something of a turn-off for the consumer," he explains, before going on to add, though, that in neighboring countries, such as Germany, there may well be more of a base of cultural familiarity to work from.
And while, in Wojtkowksi's view, substantial profits and - significant know-how - could be gained by producing for private label on Western markets, Jason Holway is less sure, commenting, "In countries like Germany, private label retailers and producers already have very cost-effective systems and pricing strategies worked out in relation to their neighbors, so I'm not sure how much of an inroad there would really be."
