Race to the source
Although the company's chances of elbowing out its tough competition could be limited, since Coca-Cola is now chasing the same game.
The domestic mineral water market is potentially a very lucrative sector. Local consumption is increasing at a rate of eight percent a year, according to market researchers Canadean, and is expected to continue to do so, bringing Polish water consumption - currently 45 liters per head a year - ever nearer to EU levels of 84 liters per person annually. The structure of the market also represents significant opportunities. While 48 percent of the mineral water market is currently controlled by a handful of players, the remaining is in the hands of various small companies.
Local success story Hoop, with steep income growth has followed up its acquisition of local mineral water producer, 'Woda Grodziska' last year, by increasing its stake in distributor Pomorskie Centrum Dystribucji Hoop to 75 percent mid-November.
"This is part of the company's strategy of picking up small, local producers and distributors, with the aim of strengthening its position on the market," says Robert Niczewski, advisor to Hoop, adding that the strategy is intended to beat similar moves expected by competitors, which include massive the multinationals Nestle, Danone and PepsiCo.
Buying up controlling shares in distributors is a key factor in the strategy, since by controlling distributors the company hopes to offer a wider range of brands and gain a stronger negotiating position with powerful retailers like Auchan, Geant Polska and Cash and Carry.
Though unable to reveal any details, Robert Niczewski adds that there are more acquisitions of both water producers and distributors in the pipeline. Coca-Cola beverages Polska has also identified bottled water as a target market, and together with the multinational's second biggest bottling company, Coca-Cola Hellenic Bottling Company, (Coca-Cola HBC ) recently bought a 50 percent share each in regional mineral water producer 'Multivita.'
Coca-Cola are spending $500 million (zł.1.9 billion) on developing Multivita's production and distribution systems. Planning to reposition the regional brand as a nationwide product and dramatically increase sales, the world leader is skeptical of Hoop's chances of building itself up as a significant competitor.
"Not only do we have vast expertise because of our experience worldwide," says Iwona Jasaszek, public relations officer for Cola-Cola HBC Polska, "but we are also in a unique position in the market, because only we have a direct distribution system, our own warehouses and our own transport."
Though she also predicts that it will be difficult for Hoop, whose combined brands brand Arctic and Woda Grodziska currently hold something just over seven percent of the market, to compete against other powerful players in the market. Danone's brand, Żywiec Zdrój currently has a 19 percent share, while Nestle controls 13.1 percent, with its brand Nalęczowianka.
Despite Hoop's meteoric rise since its creation in 1993, which saw its revenues go from zł.29 million (€6.2 million) in 1993 to zł.350 million (€75 million) in 2002, 2003 has seen it falling. Over the last three quarters, the company made just zł.9.8 million (€2.1 million) net, compared to zł.17.1 million (€3.7 million) over the same period of the previous year. The share price has also gone down from zł..28 (€6) in August to zł.19 (€4.1) for most of November.
Robert Niczewski insists that the drop in income is a result of the company's failure to spot trends in soft drink packaging, yet some analysts have also attributed the drop in share price to doubts and rumours about the company's acquisition of a 50 percent share in Russian soft drinks and alkopop drinks producer Megapek and its distributor, DH Megapek. Independent analyst Jarosław Supłacz, whose report in the summer almost sabotaged the company's IPO - which was intended to fund the investment - claims that the deal on which Hoop is spending zł.15 million (€3.2 million), is a risky and potentially detrimental step, "So little is known about Megapak, that it's a risky transaction from the point of view of the investor," he says.
Yet the latest releases to the Russian press by the Russian shareholder in Megapak, Jarosław Drozda, on the deal, which is to be finalized in mid-December, strike a more positive note. They suggest that the deal, once signed, may help things pick up again for Hoop. Megapak, which has been co-operating with Hoop for the last two years, has seen its sales rise from $30 million (zł.140 million) in 2001 to $100 million (zł.389.7 million) in 2003. There are also plans to merge the two companies into one entity registered on the Warsaw Stock Exchange.
Apart from what may be proving to be a lucrative investment in Megapak, the company has also recently spent zł.50 million (€10.7 million) on its production facilities and aggressive advertising campaigns. The company hopes that this investment will increase incomes by 20 percent in 2004.
The domestic mineral water market is potentially a very lucrative sector. Local consumption is increasing at a rate of eight percent a year, according to market researchers Canadean, and is expected to continue to do so, bringing Polish water consumption - currently 45 liters per head a year - ever nearer to EU levels of 84 liters per person annually. The structure of the market also represents significant opportunities. While 48 percent of the mineral water market is currently controlled by a handful of players, the remaining is in the hands of various small companies.
Local success story Hoop, with steep income growth has followed up its acquisition of local mineral water producer, 'Woda Grodziska' last year, by increasing its stake in distributor Pomorskie Centrum Dystribucji Hoop to 75 percent mid-November.
"This is part of the company's strategy of picking up small, local producers and distributors, with the aim of strengthening its position on the market," says Robert Niczewski, advisor to Hoop, adding that the strategy is intended to beat similar moves expected by competitors, which include massive the multinationals Nestle, Danone and PepsiCo.
Buying up controlling shares in distributors is a key factor in the strategy, since by controlling distributors the company hopes to offer a wider range of brands and gain a stronger negotiating position with powerful retailers like Auchan, Geant Polska and Cash and Carry.
Though unable to reveal any details, Robert Niczewski adds that there are more acquisitions of both water producers and distributors in the pipeline. Coca-Cola beverages Polska has also identified bottled water as a target market, and together with the multinational's second biggest bottling company, Coca-Cola Hellenic Bottling Company, (Coca-Cola HBC ) recently bought a 50 percent share each in regional mineral water producer 'Multivita.'
Coca-Cola are spending $500 million (zł.1.9 billion) on developing Multivita's production and distribution systems. Planning to reposition the regional brand as a nationwide product and dramatically increase sales, the world leader is skeptical of Hoop's chances of building itself up as a significant competitor.
"Not only do we have vast expertise because of our experience worldwide," says Iwona Jasaszek, public relations officer for Cola-Cola HBC Polska, "but we are also in a unique position in the market, because only we have a direct distribution system, our own warehouses and our own transport."
Though she also predicts that it will be difficult for Hoop, whose combined brands brand Arctic and Woda Grodziska currently hold something just over seven percent of the market, to compete against other powerful players in the market. Danone's brand, Żywiec Zdrój currently has a 19 percent share, while Nestle controls 13.1 percent, with its brand Nalęczowianka.
Despite Hoop's meteoric rise since its creation in 1993, which saw its revenues go from zł.29 million (€6.2 million) in 1993 to zł.350 million (€75 million) in 2002, 2003 has seen it falling. Over the last three quarters, the company made just zł.9.8 million (€2.1 million) net, compared to zł.17.1 million (€3.7 million) over the same period of the previous year. The share price has also gone down from zł..28 (€6) in August to zł.19 (€4.1) for most of November.
Robert Niczewski insists that the drop in income is a result of the company's failure to spot trends in soft drink packaging, yet some analysts have also attributed the drop in share price to doubts and rumours about the company's acquisition of a 50 percent share in Russian soft drinks and alkopop drinks producer Megapek and its distributor, DH Megapek. Independent analyst Jarosław Supłacz, whose report in the summer almost sabotaged the company's IPO - which was intended to fund the investment - claims that the deal on which Hoop is spending zł.15 million (€3.2 million), is a risky and potentially detrimental step, "So little is known about Megapak, that it's a risky transaction from the point of view of the investor," he says.
Yet the latest releases to the Russian press by the Russian shareholder in Megapak, Jarosław Drozda, on the deal, which is to be finalized in mid-December, strike a more positive note. They suggest that the deal, once signed, may help things pick up again for Hoop. Megapak, which has been co-operating with Hoop for the last two years, has seen its sales rise from $30 million (zł.140 million) in 2001 to $100 million (zł.389.7 million) in 2003. There are also plans to merge the two companies into one entity registered on the Warsaw Stock Exchange.
Apart from what may be proving to be a lucrative investment in Megapak, the company has also recently spent zł.50 million (€10.7 million) on its production facilities and aggressive advertising campaigns. The company hopes that this investment will increase incomes by 20 percent in 2004.
