Spreading their wings
With capital from foreign investors, regional brewers are stepping up promotional pushes to both increase sales and protect themselves as the market consolidates around major brands with national distribution networks.
The result has been the creation of a second tier of brewers that aren't facing competitive extinction, but rather are carving out a new niche for themselves.
"The tigers have appeared," said Przemyslaw Kurszewski, press spokesman at Dojlidy. "And the tigers on the market are companies like ours."
After German firms such as Binding Group and Holsten bought stakes in Dojlidy and Brok respectively, these smaller brewers have focused on solidifying their regional bases and then gradually branching out to other big cities.
Even smaller brewers without foreign investment, such as Wroclaw-based Piast, are packing their promotional punch. In addition to increasing point of sales materials and making sure to dominate advertising in the old town in Wroclaw, Piast is also sponsoring the football team Widzew lodz and has the rights for its name to appear on the team's shirts.
As a result, these beer companies are becoming "super-regional" breweries, said Michal Szymanski, investment manager at ING BSK Asset Management. At the same time, this new class of brewers has seen sales rise significantly over the past two years, he added.
Previously, smaller brewers had been too weak to inject the requisite spending into commercials and modernizing their distribution networks. Large brewers such as EB and Zywiec took advantage of such weaknesses to further entrench their dominant market position.
But this is no longer the state of play, Szymanski said.
The performance of Brok, based in Koszalin, is an example. Sales in the first half of this year, rose 25% to zl. 52.6 million ($13.49 million) compared to the same period in 1998, said Pawel Zach, an analyst at Citibank (Poland). Dojlidy, from Bialystok, saw sales grow nearly 240% from 1994 to 1998. It expects 1999 sales to grow an additional 25% to zl. 200 million ($51.28 million). Although the brewer hasn't shown a profit since 1997 - it lost zl.1 million-zl. 2 million ($285,714-$571,428) last year - it has embarked on a massive investment program, spending zl. 180 million ($46.15 million) since 1997 on promotion, modernizing its production facilities and expanding its distribution network.
"That's a lot of money when we look at our revenue," Kurszewski said. "We have one of the highest rates of investment intensity in Polish breweries."
Like most brewers, the firm is concerned with capacity and distribution. While it builds a new plant in Bialystok that will take a few years to complete, and has increased its distribution network to 50 independent entities, most of which sell Dojlidy beer exclusively, Kurszewski said.
After the Binding Group bought its majority stake in Dojlidy in July 1997, the company branched out through a sales drive outside its traditional northeastern territory, advertising in both the press and on television.
Brok also hit hard with a strong increase in distribution outside Koszalin last year. While Kurszewski would not disclose the exact figure spent on Dojlidy's ad campaign, he said that before the Binding Group came in, the company had been spending zl. 12 million ($3.7 million) annually. In 1997, ad spending grew three times.
"Before, our possibilities were limited," he said. "It is enough to look at Polish brewers without foreign investors. Companies with (them) appear on TV and billboards, (those) without (them) don't."
In addition, smaller brewers with limited ad budgets have also been hamstrung by restrictions on advertising beer. Larger companies are able to get around this by either advertising non-alcoholic brands or sponsoring events and programs.
But the larger ad budgets that came with the new investment have allowed the now super-regional breweries to get into this game as well.
For example, Dojlidy has sponsored the TVP1 program "Jaka to Melodia" (Name That Tune), the "Machinery" pop-culture show and "Wiktory" television presenter awards, as well as a country music festival. It has also sponsored the Przeglad Sportowy ball for sportspeople and an international motorcross championship.
Brok has also been active in promoting its national presence by sponsoring the transmission of the boxer Dariusz Michalczewski's fights, said brand manager Katarzyna Kopec. Currently the company is concentrating its advertising budget on television after having had a strong billboard presence in the past, she said. She would not disclose how much the company has spent on advertising.
Beer companies have used sports and music as the two most effective vehicles to increase their brand awareness, said Chris Dorsey, client services director at advertising agency McCann Erickson Polska, citing EB's concert promotion of local artists and Lech's current campaign with ex-soccer player Zbigniew Boniek. "People recognize the link between Lech and sport," he said. "TV is the most effective way of reaching the consumer. You can spend $250 for a billboard, but TV is much more efficient."
With investors, smaller companies have a lot more expertise in marketing themselves than in the past, said Sebastian Troen, account manager with advertising agency Young & Rubicam Poland, which has the account for Wroclaw based brewer Piast.
As well as the enthusiasm for the media brewers now have, there is a lot more promotion on the ground. He said that Piast is typical of many brewers in the way it is increasing point-of-sale material, with wider circulation of beermats, advertisements on pub tables and bartenders wearing t-shirts with brand logos printed on them.
Furthermore, there is a marked increase in brewers installing their own-brand serving points in pubs, Troen said. Dojlidy is now represented this way in 4,000 pubs across Poland, and the company has seen a real growth since 1997 in the extension of its umbrellas to strategic places, such as the old town squares in Warsaw, Gdansk and Poznan, Kurszewski said.
But brewers also attribute their rising sales to a lower-key marketing move - smarter packaging. In July 1997, Dojlidy changed the shape of its bottles to a more European Union-friendly, slimmer shape. It also changed the stickers on its bottles. "It grabbed the attention of the consumers," Kurszewski said.
Brok's labels, logo and designs also saw an overhaul last year, becoming "clearer, innovative and exclusive," Kopec said.
In addition, Dojlidy has upped its sales representatives from zero to 40-50, Kurszewski said. This move dovetailed with its ad campaigns and helped find more contacts for the company's distributors.
It has also increased its export operations: Previously it sold to ex-USSR states, but from 1995 it started selling to Sweden, where it expects to export 10 million bottles this year, he said. In December 1998, Dojlidy began exporting to the United States, where it will sell 2.5 million bottles this year and where it aims to become the leading Polish beer exporter, Kurszewski said. At the beginning of 1999, it began operations in Canada.
But while local brewers are riding this current wave of success, others are skeptical as to how long it can last. "The times, they are a changing, they're looking to slowly expand," said Wojtek Jablonski, client services director with Young & Rubicam. "But can they sustain this over a long period of time on a national basis? My feeling is that they can't."
Chief among Jablonski's concerns is a doubt that the regional brewers have enough niche brands to sustain growth in a small, although developing, market, while facing the same issues that the bigger brewers such as Zywiec, Lech and Okocim face.
"I don't believe that the smaller breweries, even with greater capacity, know and fully appreciate the problems of keeping up their quality and distribution over a long period of time," he said.
Added to this is the fact that, unlike in other European beer-drinking countries such as Britain, Germany and Denmark, Poles tend to go out less for a pint between Mondays and Thursdays or on Sundays. With a comparatively reduced target audience of the 18-35 age group and increasing competition, companies are left with weekends to push their beer.
"How can you grow your business with such a small target group?" Jablonski said
The result has been the creation of a second tier of brewers that aren't facing competitive extinction, but rather are carving out a new niche for themselves.
"The tigers have appeared," said Przemyslaw Kurszewski, press spokesman at Dojlidy. "And the tigers on the market are companies like ours."
After German firms such as Binding Group and Holsten bought stakes in Dojlidy and Brok respectively, these smaller brewers have focused on solidifying their regional bases and then gradually branching out to other big cities.
Even smaller brewers without foreign investment, such as Wroclaw-based Piast, are packing their promotional punch. In addition to increasing point of sales materials and making sure to dominate advertising in the old town in Wroclaw, Piast is also sponsoring the football team Widzew lodz and has the rights for its name to appear on the team's shirts.
As a result, these beer companies are becoming "super-regional" breweries, said Michal Szymanski, investment manager at ING BSK Asset Management. At the same time, this new class of brewers has seen sales rise significantly over the past two years, he added.
Previously, smaller brewers had been too weak to inject the requisite spending into commercials and modernizing their distribution networks. Large brewers such as EB and Zywiec took advantage of such weaknesses to further entrench their dominant market position.
But this is no longer the state of play, Szymanski said.
The performance of Brok, based in Koszalin, is an example. Sales in the first half of this year, rose 25% to zl. 52.6 million ($13.49 million) compared to the same period in 1998, said Pawel Zach, an analyst at Citibank (Poland). Dojlidy, from Bialystok, saw sales grow nearly 240% from 1994 to 1998. It expects 1999 sales to grow an additional 25% to zl. 200 million ($51.28 million). Although the brewer hasn't shown a profit since 1997 - it lost zl.1 million-zl. 2 million ($285,714-$571,428) last year - it has embarked on a massive investment program, spending zl. 180 million ($46.15 million) since 1997 on promotion, modernizing its production facilities and expanding its distribution network.
"That's a lot of money when we look at our revenue," Kurszewski said. "We have one of the highest rates of investment intensity in Polish breweries."
Like most brewers, the firm is concerned with capacity and distribution. While it builds a new plant in Bialystok that will take a few years to complete, and has increased its distribution network to 50 independent entities, most of which sell Dojlidy beer exclusively, Kurszewski said.
After the Binding Group bought its majority stake in Dojlidy in July 1997, the company branched out through a sales drive outside its traditional northeastern territory, advertising in both the press and on television.
Brok also hit hard with a strong increase in distribution outside Koszalin last year. While Kurszewski would not disclose the exact figure spent on Dojlidy's ad campaign, he said that before the Binding Group came in, the company had been spending zl. 12 million ($3.7 million) annually. In 1997, ad spending grew three times.
"Before, our possibilities were limited," he said. "It is enough to look at Polish brewers without foreign investors. Companies with (them) appear on TV and billboards, (those) without (them) don't."
In addition, smaller brewers with limited ad budgets have also been hamstrung by restrictions on advertising beer. Larger companies are able to get around this by either advertising non-alcoholic brands or sponsoring events and programs.
But the larger ad budgets that came with the new investment have allowed the now super-regional breweries to get into this game as well.
For example, Dojlidy has sponsored the TVP1 program "Jaka to Melodia" (Name That Tune), the "Machinery" pop-culture show and "Wiktory" television presenter awards, as well as a country music festival. It has also sponsored the Przeglad Sportowy ball for sportspeople and an international motorcross championship.
Brok has also been active in promoting its national presence by sponsoring the transmission of the boxer Dariusz Michalczewski's fights, said brand manager Katarzyna Kopec. Currently the company is concentrating its advertising budget on television after having had a strong billboard presence in the past, she said. She would not disclose how much the company has spent on advertising.
Beer companies have used sports and music as the two most effective vehicles to increase their brand awareness, said Chris Dorsey, client services director at advertising agency McCann Erickson Polska, citing EB's concert promotion of local artists and Lech's current campaign with ex-soccer player Zbigniew Boniek. "People recognize the link between Lech and sport," he said. "TV is the most effective way of reaching the consumer. You can spend $250 for a billboard, but TV is much more efficient."
With investors, smaller companies have a lot more expertise in marketing themselves than in the past, said Sebastian Troen, account manager with advertising agency Young & Rubicam Poland, which has the account for Wroclaw based brewer Piast.
As well as the enthusiasm for the media brewers now have, there is a lot more promotion on the ground. He said that Piast is typical of many brewers in the way it is increasing point-of-sale material, with wider circulation of beermats, advertisements on pub tables and bartenders wearing t-shirts with brand logos printed on them.
Furthermore, there is a marked increase in brewers installing their own-brand serving points in pubs, Troen said. Dojlidy is now represented this way in 4,000 pubs across Poland, and the company has seen a real growth since 1997 in the extension of its umbrellas to strategic places, such as the old town squares in Warsaw, Gdansk and Poznan, Kurszewski said.
But brewers also attribute their rising sales to a lower-key marketing move - smarter packaging. In July 1997, Dojlidy changed the shape of its bottles to a more European Union-friendly, slimmer shape. It also changed the stickers on its bottles. "It grabbed the attention of the consumers," Kurszewski said.
Brok's labels, logo and designs also saw an overhaul last year, becoming "clearer, innovative and exclusive," Kopec said.
In addition, Dojlidy has upped its sales representatives from zero to 40-50, Kurszewski said. This move dovetailed with its ad campaigns and helped find more contacts for the company's distributors.
It has also increased its export operations: Previously it sold to ex-USSR states, but from 1995 it started selling to Sweden, where it expects to export 10 million bottles this year, he said. In December 1998, Dojlidy began exporting to the United States, where it will sell 2.5 million bottles this year and where it aims to become the leading Polish beer exporter, Kurszewski said. At the beginning of 1999, it began operations in Canada.
But while local brewers are riding this current wave of success, others are skeptical as to how long it can last. "The times, they are a changing, they're looking to slowly expand," said Wojtek Jablonski, client services director with Young & Rubicam. "But can they sustain this over a long period of time on a national basis? My feeling is that they can't."
Chief among Jablonski's concerns is a doubt that the regional brewers have enough niche brands to sustain growth in a small, although developing, market, while facing the same issues that the bigger brewers such as Zywiec, Lech and Okocim face.
"I don't believe that the smaller breweries, even with greater capacity, know and fully appreciate the problems of keeping up their quality and distribution over a long period of time," he said.
Added to this is the fact that, unlike in other European beer-drinking countries such as Britain, Germany and Denmark, Poles tend to go out less for a pint between Mondays and Thursdays or on Sundays. With a comparatively reduced target audience of the 18-35 age group and increasing competition, companies are left with weekends to push their beer.
"How can you grow your business with such a small target group?" Jablonski said
