Executive Summary: Poland Business Analysis
The beverage, dairy, and fruits & vegetables industries in Poland have been summarized below based on the detailed reports previously provided.
- In 2017, the non-alcoholic beverage sales volume in Poland was 9,462.2 million liters, with a 5-year CAGR of 1.9%. The sales volume was $5,491 million.
- The size of Poland's beer market by volume is 37 million HL. The market grew by 3% in 2017, while the non-alcoholic beer market grew by 75%. The sales volume was $9,666 million.
- Kompania Piwowarska (SAB Miller), Grupa Żywiec (Heineken), and Carlsberg are the top three players in Poland's beer market, while Coca-Cola HBC Polska and Pepsi Co. Polska are leading players in the non-alcoholic beverage market.
- There was no publicly available data on purchasing in Poland that was specific to the beverage industry.
- Globally, procurement departments in the beverage industry are moving to automatic creation of purchase orders, based on data analysis and user-defined criteria.
- A survey of B2B companies in Poland found that 83% of companies said good terms of cooperation were important when choosing a business partner, while only 57% said price was important.
- Important processes in the supply chain for the beverage industry include forecasting, supplier relations, evaluation, and analysis. It is also important to regularly manage suppliers to ensure that the terms and prices are competitive and are meeting the needs of the company.
- One report found that Poland has great potential for cold chain logistics. The country already has 10.3 million square meters in chilled warehouse, is building 640,000 square meters, and is investing around $2 billion per year.
- According to McKinsey, at least two companies, Kompania Piwowarska and SABMiller, have built state-of-the-art clean rooms in their processing plants, which allows for the highest quality packaging. This sort of innovation is unique and has not been done in Europe before.
- Subsidy issues can cause supply chain problems. When raw product producers have financial problems, it can affect investment further up the production line.
- Logistics and transport is a major factor in the beverage supply chain in Poland. Its biggest pressures at the moment are finding skilled workers and increasing wages.
- Brexit is expected to reduce the amount of beverage exports from Poland to the UK. The change may lead to tariffs being imposed, which will affect the 1.4 million in agricultural & processed food that the UK imports from different countries, including Poland.
- Waste management directives coming from the EU means that beverage companies need to find alternatives to traditional bottle caps, as well as find materials other than plastic to use in packaging. The final directives are expected to be implemented in 2024.
- Competition for employees is high in Poland due to an overall shortage of workers. The shortage is due to factors such as Poles emigrating to other countries once Poland joined the EU, and Poland not being a top country chosen by foreign workers.
- Climate change has been blamed for bad weather which affects the availability of ingredients needed for beverage production. For example, if there is a shortage of barley, animals are prioritized and it is difficult for beverage manufacturers to get what they need.
- Government regulations have had a negative effect on the beverage industry, in particular, alcohol manufacturers. The government limits the number of licenses given out and also the time periods that alcohol can be sold.
- Poland is the sixth largest dairy producer in the EU and the market size for the industry was $4.618 billion in 2019. There were 3,100 million kilograms of dairy products produced in 2019.
- Vertical integration in the dairy industry in Poland is moderate with most dairy companies in the country only controlling two of the four supply chain stages.
- Three of the biggest players in the Polish dairy industry are Mlekovita (over €1 billion), Mlekpol (€0.76 billion) and Polmlek (€211 million).
- The Polish dairy industry is organized in cooperatives by geography. This structure appears to have evolved organically over the last century.
- The purchasing standards varied based on the cooperative and details were found for the Bieluch Dairy Cooperative in CHEŁM, Mlekovita Dairy, and the District Dairy Cooperative in Radomsko.
- Requirements include milk being produced in specific regions, support the direct collection of raw materials, protocols for obtaining raw materials, and food safety systems.
- The cooperatives and large producers typically have traditional management structures with a department dedicated to purchasing. Some cooperatives, such as District Dairy, have a single leader for purchase and transport, while Mlekovita Group has one person in charge of both.
- Dairy producers can benefit from international expertise as they try to break into international markets in the EU, and as they navigate the implications of a future Brexit.
- Specific needs for the dairy industry in terms of logistics include climate control, product storage, and transportation across country lines.
- Packaging in the industry is also being impacted by a push toward personalized packaging, bans on plastic, and consumer interest in sustainability.
- Seventy percent of milk production in Poland is done through cooperatives, while private industry accounts for the remaining 30%. The processors purchase milk directly from farmers with a large majority being collected by dairy trucks.
- In 2015, there were over 130,000 dairy farmers in Poland and only 165 dairy processing plants. Twenty five percent of milk produced in Poland is processed in a foreign country.
- Currently, about 60% of dairy production is handled by 10 large processors, and it is expected that this consolidation will continue.
- In 2019, TetraPak opened a facility providing the only end-to-end integrated solution for cheese production in Poland.
- Farmers rarely change their feed supplier, with the average number of changes of feed suppliers in the last ten years standing at 1.1. Feed is either purchased directly from the suppliers or through an intermediary.
- By employing new environmentally sustainable solutions, the country hopes to attract a growing climate-conscious demographic globally.
- Some reasons for inefficiencies in the supply chain include a lack of proximity to large producers, packaging and storage losses, expensive disposal.
- Severe climate conditions, including droughts, have a major impact on the entire agricultural industry in Poland. These impacts are expected to continue in 2020 and beyond. Additionally, the government recently proposed water fees and rain taxes which would have a large impact on the agricultural industry due to irrigation requirements.
- A no-deal Brexit could have a significant impact on the dairy industry in Poland as demand could decrease and tariffs could increase.
- Competition in the sector is expected to be fierce due to the consolidation of players, as well as the growth on the non-dairy alternatives industry.
- The demand for butter, especially by international markets, has decreased, which has resulted in increased supply and reduced prices.
- Changing consumer behavior is having an impact on the dairy industry in Poland as many consumers want non-GMO and organic dairy products. Consumers are also more aware of the benefits of fresh milk and this could affect the shelf stable milk industry.
- The Russian embargo on the EU has resulted in a significant reduction in demand for dairy products in Poland.
Fruits and Vegetables
- In 2018, the total average volume for vegetables in Poland amounted to 4.1 million tonnes, but it was about 10% lower compared to 2017's production figure of 4.58 million tonnes.
- Retail sales of fruits and vegetables in Poland are decreasing in value and expected to continue to diminish in the next five years. The latest data from 2016 shows that the retail sales of fruits and vegetable in Poland is $599.89 million and is expected to reach $541.78 million in 2020.
- As for fruits, production in 2017 was considerably lower, amounting to 2.7 million tonnes. The following year, production increased by 70% to reach 4.59 million tonnes.
- Vertical integration is common in the produce sector in Poland.
- The top distribution channel for fruits and vegetables in Poland are discounters.
- Bonduelle is one of the key players in the industry in Poland. Euromonitor also noted that private labels are the current market leaders as the Polish are known for being smart purchasers.
- Purchasers follow an organized system for purchasing fruits and vegetables, and it is typical to purchase directly from the growers. Databases are created of proven suppliers so the purchasers have the information they need.
- Quality is prioritized over price when purchasing fruits and vegetables, and many Polish consumers prefer domestically grown produce, which would impact the produce purchased by businesses.
- Young Poles prefer food that is high in nutritional value over food that tastes good. For this reason, among others, organic food producers tend to use fresh fruits and vegetables as ingredients in their products.
- Sixty four percent of Polish purchasers of fresh fruits and vegetables always consider the country of origin of the crops they buy; 60% of purchasers prefer to buy fruit and vegetables from Polish producers; and 68% believe that produce from Poland is tastier and healthier than that produced in other countries.
- A survey found that 51% of Polish consumers consider sustainability when making purchase decisions. Fruits and vegetables are recommended to be eaten for sustainable consumption. Only 58% of the Polish population consumes fruit daily, while 61% consume vegetables daily.
- Some considerations for purchasing departments include the cost of delivering fruits to packaging centers, logistics cost of returning crates, proper refrigeration and storage, transportation, security, packing materials, and hiring experts.
- Typical responsibilities of a purchasing manager may include budgeting, analyzing the market, tracking and reporting on purchases, finalizing contracts, training vendors, and packaging.
- A labor shortage in Poland is causing issues with the supply chain. Much of the produce is left to rot, including 30-40% of the strawberry crops, due to a lack of labor available to pick the produce. Statistics show that the impact is greater on the fruit industry than on vegetables.
- Many of the potential foreign workers are going to countries that can pay more.
- The supply chain was also impacted by a reduction in production of onions, carrots, beets and cabbages, which could be mostly attributable to drought. For fruits, cherries, black currants, and raspberries were most impacted by drought.
- "Purposeful packaging" was introduced in Poland as a way to extend the shelf life of fresh produce. In one example, blueberries packaged with the new technology had 40% less spoilage than traditionally packed blueberries.
- SmartTraxx™ GO technology is being introduced in Poland which will allow Polish companies to track their produce supply in real time. For produce that continues to ripen after harvest, the Smart Traxx technology could allow farmers to harvest earlier in the season, which could mitigate some negative implications from climate change.
- Climate concerns are having a big impact on the agricultural industry in Poland, with 2019 fruit harvests expected to be about 30% lower than the 2018 amounts. Crops were negatively affected by drought, heavy rains and frost.
- Slovakia and the Czech Republic both have more favorable working conditions than Poland, and that has contributed to the labor shortage in the agricultural industry in the country. Ukrainian workers who used to favor Poland as a work location are now looking elsewhere.
- Increased electric expenses are impacting businesses in many locations, but Polish fruit farmers have seen an increase in electricity costs from the previous year. Additionally, rising water, gas, and logistics costs are also a challenge for the industry.
- As with the other sectors examined, the looming Brexit is causing uncertainty for farmers in Poland. Demand from the UK is expected to decrease if there is a hard Brexit, and there will be additional custom requirements for produce that is exported there.
- There has been increased competition in the fruit industry from countries including Turkey, China, Ukraine, Iran, and Serbia. Lower production costs in those countries mean they can compete with Poland on price, and they are also competing on quality.
- Increased energy and production costs means that farmers have not been able to develop greenhouse operations that would allow them to meet off-season demand.
White Exchange Pallets
- Polska Woda, Refresco, and Goliard all reported issues with the white wood pallet system, including inconsistent quality, lost and damaged pallets, and high costs associated with maintenance and storage. These issues contributed to significant additional expenses for the companies.
- Poor quality white pallets often lead to equipment failures and incurring extra expenses to replace the damaged pallets. It also reduces delivery precision and time management, which could impact customer satisfaction rates.
- Lost pallets can also lead to strained relationships between FMCG companies and their distributors, which has a negative impact on the supply chain.