Recession proof
Central European Distribution Corp. (CEDC), which distributes alcoholic beverages, might be considered one of the most successful companies in the country.
The company's stock price has doubled since December; it has completed seven acquisitions since its initial public offering in 1998; it recently raised its 2002 earnings forecast from €271 million; and the government's recent 30% alcohol excise tax cut has opened up a larger part of the alcohol market for it to attack.
And, to top it all off, the company still has big future plans, which include millions of euros more spent on acquiring local distributors as a way of expanding its roughly 35% market share, as well as the introduction of its own alcohol brand, said William Carey, the chief executive.
Carey takes comfort in the fact that his business is virtually recession-proof, evidenced by the negative correlation between the steady growth of its stock price and market share over the past two years and the decline in the national and global economy.
"People don't consume less in a recession," he said. "Over the past 24 months, ours has been one of the top-performing stocks."
The company distributes well-known brands, such as Johnnie Walker, Stock Brandy, Sutter Home, Torres, Mondavi, Concha y Toro, Corona, Beck's, Foster's and Guinness. In total it manages some 820 alcohol brands. With three-quarters of its sales generated by vodka, it controls about a quarter of the local vodka market.
Local investors, though maybe familiar with its business, would be hard-pressed to grab any CEDC stock for their portfolios since shares are traded only on Nasdaq. And while its business is entirely in Poland, the company is based in Sarasota, Florida, where it has a handful of employees charged with Security and Exchange Commission compliance issues.
Carey said that the company's acquisitiveness has thrilled investors.
"We have just continued our business model, which is taking market share from competitors," Carey said. He added that CEDC has benefited from the simplicity of its business model, a feature that is a valuable currency, especially in the US where investors still feel they have been fleeced by so-called New Economy companies, whose plummeting share prices and bankruptcies have devoured portfolios.
In January, CEDC signed a letter of intent to acquire the Dako Galant Company, a beer, wine and spirits distributor located in the northwest of the country, for around €2.2 million. Its net sales were roughly €53 million last year, and the acquisition, once completed, will bring in an additional 1,000 clients.
Carey said company executives would scout for similar deals later this year and next, though the number of distributors in this highly fragmented market is dwindling.
A dozen years ago when CEDC entered the market, there were about 1,000 distributors. Today the figure is closer to 300.
Carey declined to say when and where other acquisitions would be made and stressed that even if its buying pace slows, the company would still grow more than 10% organically. CEDC is still gaining on its competitors, he said, as consumers are beginning to purchase more of its high-end products such as wine instead of local vodka. The cut in excise tax is another plus factor.
Carey noted that the 30% excise tax cut introduced on October 1 has shrunk the black market, which had begun to chip away at CEDC's spirits business. And he said there is a chance the government would further trim the excise tax in order to drown the contraband industry.
"It could almost eliminate the black market," he said, adding that such a move could even add to CEDC's already positive growth forecasts.
Furthermore, Carey said he would like to capitalise on one key difference between the booze business in Poland and the US. In the states, one company is not allowed to own a brand, a distribution company and a retailer at the same time. In Poland, that's not the case.
CEDC has initial plans to either buy or create a brand that would allow it to have greater control of the supply chain, Carey said. He declined to provide details about the company's developments.
The company's stock price has doubled since December; it has completed seven acquisitions since its initial public offering in 1998; it recently raised its 2002 earnings forecast from €271 million; and the government's recent 30% alcohol excise tax cut has opened up a larger part of the alcohol market for it to attack.
And, to top it all off, the company still has big future plans, which include millions of euros more spent on acquiring local distributors as a way of expanding its roughly 35% market share, as well as the introduction of its own alcohol brand, said William Carey, the chief executive.
Carey takes comfort in the fact that his business is virtually recession-proof, evidenced by the negative correlation between the steady growth of its stock price and market share over the past two years and the decline in the national and global economy.
"People don't consume less in a recession," he said. "Over the past 24 months, ours has been one of the top-performing stocks."
The company distributes well-known brands, such as Johnnie Walker, Stock Brandy, Sutter Home, Torres, Mondavi, Concha y Toro, Corona, Beck's, Foster's and Guinness. In total it manages some 820 alcohol brands. With three-quarters of its sales generated by vodka, it controls about a quarter of the local vodka market.
Local investors, though maybe familiar with its business, would be hard-pressed to grab any CEDC stock for their portfolios since shares are traded only on Nasdaq. And while its business is entirely in Poland, the company is based in Sarasota, Florida, where it has a handful of employees charged with Security and Exchange Commission compliance issues.
Carey said that the company's acquisitiveness has thrilled investors.
"We have just continued our business model, which is taking market share from competitors," Carey said. He added that CEDC has benefited from the simplicity of its business model, a feature that is a valuable currency, especially in the US where investors still feel they have been fleeced by so-called New Economy companies, whose plummeting share prices and bankruptcies have devoured portfolios.
In January, CEDC signed a letter of intent to acquire the Dako Galant Company, a beer, wine and spirits distributor located in the northwest of the country, for around €2.2 million. Its net sales were roughly €53 million last year, and the acquisition, once completed, will bring in an additional 1,000 clients.
Carey said company executives would scout for similar deals later this year and next, though the number of distributors in this highly fragmented market is dwindling.
A dozen years ago when CEDC entered the market, there were about 1,000 distributors. Today the figure is closer to 300.
Carey declined to say when and where other acquisitions would be made and stressed that even if its buying pace slows, the company would still grow more than 10% organically. CEDC is still gaining on its competitors, he said, as consumers are beginning to purchase more of its high-end products such as wine instead of local vodka. The cut in excise tax is another plus factor.
Carey noted that the 30% excise tax cut introduced on October 1 has shrunk the black market, which had begun to chip away at CEDC's spirits business. And he said there is a chance the government would further trim the excise tax in order to drown the contraband industry.
"It could almost eliminate the black market," he said, adding that such a move could even add to CEDC's already positive growth forecasts.
Furthermore, Carey said he would like to capitalise on one key difference between the booze business in Poland and the US. In the states, one company is not allowed to own a brand, a distribution company and a retailer at the same time. In Poland, that's not the case.
CEDC has initial plans to either buy or create a brand that would allow it to have greater control of the supply chain, Carey said. He declined to provide details about the company's developments.
