Purchasing Process

• When procuring logistics services to transport fruits and vegetables, the cost of delivering fruits to packaging centers should be taken into account.
• The logistics cost of returning these crates should also be factored in.
• Companies should also make sure that they procure logistics services that are associated with ensuring that products are refrigerated and stored properly.
• Other logistics services and costs that need to be procured by fruit and vegetable businesses include transportation, chests to contain the fruits, warehouse logistics, storage security, and other transport and storage expenses.
• Companies will also need to acquire the services of a refrigerated transport provider to ensure the freshness of fruits and vegetables.
• Additionally, they should ensure that they obtain packaging materials that can shield fresh produce from mechanical damages.
• Companies involved in the fruits and vegetables industry must employ experts that are knowledgeable in logistics.
• They should engage providers that can offer swift transport of these goods.
• Companies should also engage the services of their providers to guarantee the "storage, preparation for packaging, and delivery to the recipient."

General Purchases at Production Centers

• Purchasing departments for production companies should make certain they have a sufficient supply of packaging materials to meet the business goals of the company.
• Purchasing departments typically do not have leeway to seek new suppliers as this will typically result in additional efforts to test the services and products of those vendors.
• Furthermore, introducing a new supplier will usually entail some downtime to ensure that the new vendor's product or service will not cause concerns in the production environment.
• However, this concern can be mitigated by employing an expert that can optimize the packaging process in production.
• The specialist can collaborate with purchasing departments to effectively incorporate superior and more cost-efficient packaging products into the operation.
• During a Senate conference on fruits and vegetables operations in Poland, the speakers mentioned that the absence of purchasing groups in the country are causing some logistics and trade issues when exporting fruits.

Purchasing Manager Role at Materne (Polish Company)

• Based on the profile of a purchasing manager at Materne Poland, a fruit purchasing company, the following are the typical responsibilities:
• The purchasing manager is responsible for deploying budgets that are intended for purchasing fresh fruits and vegetables.
• They also analyze the fruit and vegetable market for several years.
• They are responsible for drafting a report on fresh fruit purchases.
• Furthermore, they are in charge of finalizing contracts with fresh fruit vendors.
• Also, they train vendors on the process.
• Finally, they collaborate in the "field of economy and marketing of packaging in the season."

Company Purchasing Case Studies

Materne

• When arranging the necessary logistics to deliver its fruits, the company assures optimal time of transport and the availability of cold room services to preserve the freshness of the produce.
• The company's employees also make certain that the loading and delivery process is sufficient to ensure product quality.

Greenyard Fresh

• Greenyard Fresh taps its global network of logistics providers to deliver fresh produce to its customers.
• The company uses the logistics to source products for areas that are the closest to its consumers.
• The company also values its supplier relationships with these providers and considers them to be key partners in delivering its fresh products.

Global Fruit

• Global Fruit aims to deliver fresh fruits and vegetables by using quality packaging materials.
• The company also collaborates with multiple logistics providers and cold storage vendors to ensure the timely shipment of fresh produce.
• Moreover, it assures buyers that it has packaging materials that can meet the requirements of their customers.

The Fruit Group

• The Fruit Group has procured two machines to pack their apples.
• They also secured storage facilities to store fresh fruits.

Research Strategy:

Decision Makers

• The dairy industry in Poland comprises primarily of cooperatives, with private industry only making up 25% of production, according to research from the Government of Scotland.
• Large cooperatives and producers typically have standard business leadership structures, with various sub-departments created specifically to handle logistics (i.e, Departments of Purchasing, Transport, Production, etc.) and executive leaders of those departments.
• Examples of these include the District Dairy Cooperative in Radomsko, which has separate departments of Purchasing and Transport, which are overseen by a Vice President of Purchase, Transport, Service, and Promotion, and Mlekovita Group, which also has departments of Purchasing and Transport, although Mlekovita Group heads each of these departments with their own leaders.
• More socially-minded cooperatives in Poland elect supervisory boards that control and supervise the cooperative on behalf of all members such as BIELUCH Dairy Cooperative in Chełm and SM MLEKPOL, two of the largest dairy producers in the country.

Logistics Services

• According to Scottish agricultural research, the Polish dairy industry is the 6th largest producer of dairy products in the European Union and the 7th largest cheese producer in the world. Poland is a net exporter of dairy products, with its export of dairy products comprising over 30% of European Union milk deliveries when converted to their equivalent volume in fluid milk (also known as milk equivalent).
• As an exporter of dairy products, the Polish dairy industry usually seeks specific needs when it comes to the logistics of dairy production, with commonly cited needs such as climate control, product storage, and transportation across country lines within the European Union and worldwide. Extreme heat is often cited as a major obstacle in Polish dairy processing.
• The need for international knowledge and expertise is evident with the current uncertainty regarding Polish dairy exports to Britain. As the 4th largest importer of Polish dairy products, the unease around the United Kingdom and Brexit could hurt both the Polish and British dairy sectors.
• The Polish Minister of Agriculture and Rural Development attributes this hypothetical dip to the possibility of "import tariffs on selected dairy products, border controls, and custom procedures" as a result of Brexit. As the geopolitical situation develops, Polish dairy leaders will increasingly need to consider the international reach and experience of logistics firms that they choose to contract with.
• Further need for international expertise and reach is evident in the struggles Polish dairy producers are having entering supermarkets in Germany or France, despite European Union laws on free trade.

Packaging

• The packaging industry in Poland is seeking to target the dairy industry better through the use of packaging personalized for the consumer. Industry research reveals that consumers of products such as yogurt and other dairy desserts tend to be drawn to "personalization and seasonality" of the packaged goods when shopping.
• Demographic shifts towards urban areas and smaller households is one of the most influential trends in fast-moving consumer goods, influencing not only the dairy industry but the Polish packing industry as well.
•  Recent innovations in packaging include resealable packages or pre-portioned dairy packages. Throughout 2018/2019, a new trend emerged in the dairy industry with spreadable, processed cheese available in on-the-go packaging from companies such as Hochland Polska.
• Consumers were previously unconcerned with the environmental impact of packaging, and this was not considered a factor in the purchasing process for the Polish dairy industry. However, in recent years, this has changed, with many consumers citing an interest in fully recyclable packaging.
• Poland is currently not on track to meet EU 2020 recycling goals due to regional differences between dairy-producing regions in the nation. As a result of both consumer demand and international goalposts, the eco-friendliness of packaging is now considered a major decision-making factor in the purchasing process.
• Additionally, with an EU-wide single-use plastics ban confirmed for enactment in 2021, the Polish dairy industry seeks to move towards reusable packaging products or other packaging products with reduced environmental impact.

Research Strategy

Severe Climatic Conditions (Negative)

• Ranking last place among EU nations in terms of water availability, and with poor water storage infrastructure, Poland offers a very difficult environment for companies operating in the dairy industry.

• For one, low rainfall (which provides 97% of Polish water) increases the chances of harvest loss, which ultimately increases production costs for milk production (as crops used for feeding are lost), and decreases company crop productivity.
• Second, due to high seasonal temperatures (sometimes exceeding 30 degrees), cooling systems become essential for the storage of food products. With limited energy and water resources, companies are forced to limit their volume of production.
• Third, in 2015, Polish power plants introduced limitations on big customers who use more than 300kW of energy. As a result, food processing companies had to limit their production some more, with brands such as Nestle laying down production daily at five factories.
• Fourth, the government has recently proposed water fees, rain taxes and new plans to tackle water retention in the nation. For companies in the dairy industry, this will include fees for irrigation and general agricultural production (critical for providing feed). Already, 8% of farms are covered by such water fees, and the rain tax was pursued in 2018, further increasing production costs and decreasing profit margins for companies in the dairy industry.

Geo-Politics: Brexit, Quotas, and Tariffs (Mixed)

• The current geopolitical environment for companies operating in the dairy industry in Poland is somewhat conflicted- with significant strengths, weaknesses, opportunities, and threats. For example, while global consumption of fresh and processed dairy products is growing (forecast to increase 2.1% and 1.7% annually over the next decade respectively), dairy companies operating in Poland face a significant threat from the UK market (which is the 4th largest importer of Polish dairy products).
• Should a no-deal Brexit occur, both producers of Polish dairy products and UK consumers of such products will have to deal with tariffs of 14.2% according to mintec, and upwards of 15% according to the NY Times. As a result, selling costs increase for Polish dairy companies, while demand simultaneously decreases from their UK customers/consumers, thereby affecting revenues, profit margins and, volumes of product sold.
• Moreover, the Russian market was an important consumer of Polish dairy. After the Russian embargo on the EU, global demand for Polish dairy products decreased significantly. With Poland among the most affected by the ban, there was pressure on Polish dairy companies to push product prices down as supply suddenly outweighed demand.
• At the same time, Credit Agricole notes that Poland has been one of the leading beneficiaries of the European quota abolition in 2015. Of the NM-10 to the European Union, Poland has enjoyed the largest growth in milk production, and companies operating in the country have been able to successfully increase dairy production volumes since the quota abolition.

Changing Consumer Behavior (Depends on Product Mix)

• With growing Polish awareness and skittishness of GMOs, the Polish Chamber of Milk has established a certificate for companies that produce milk without GMO ingredients. As a result, companies that satisfy this growing demand for non-GMO dairy products are better positioned to succeed in the domestic Polish dairy market.
• Moreover, Polish consumers are also increasingly aware of the benefits of fresh milk. As a result, Euromonitor reports that fresh milk has recorded stronger retail volume growth relative to shelf-stable milk into 2019. Thus, producers that can ride this fresh milk trend are also more likely to experience higher volumes, growing revenues, stronger profit margins, and increasing bottom-line growth.
• Finally, forecasts show that Soy drinks and other milk alternatives are predicted to perform well, with sales growth boosted by a more health-oriented consumer base. Leading milk alternative companies such as Alpro are likely to experience strong tailwinds from this growing demographic trend in their consumer base.

Competition and Industry Analysis (Mixed)

• Two local milk companies, SM Mlekpol and SM Mlekovita, dominated milk product sales in Poland in 2019. As a duopoly, both Mlekpol and Mlekovita can benefit from economies of scale, ramp up production and squeeze smaller companies out of business.
• Moreover, Polish dairy producers are in strong competition with producers in Western Europe. This coupled with aggressive domestic competition has pushed many Polish producers to convert their milk herd into suckler herds, with data showing that Polish meat production surged 66% between 2004 and 2016.
• A Scottish Government report on the impact of dairy contracts in European nations also shows that retailers in the industry have high negotiation power with dairy processors in Poland. This likely puts further pressure on dairy producers and decreases their ability to sell products at a considerable markup from their cost price, decreasing overall profit margins.

Innovation (Positive)

• Companies such as Tetra Pak have found innovative solutions to address the growing problems of the dairy industry in Poland. For example, the company has recently announced a new €25 million site in Poland that will be able to offset some disadvantages of the climatic conditions of the country. This includes a system that helps manage ventilation, as well as a rainwater collection system.
• Moreover, using new production methods, the company hopes to double its cheese-making capacity in Poland, thereby increasing product volumes and sales.
• Finally, by employing new environmentally sustainable solutions, the country hopes to attract a growing climate-conscious demographic globally.

Positive Implications

• Both the use of purposeful packaging and the Smart Traxx technology can provide positive implications for the Fruit and vegetable growers in Poland.
• The purposeful packaging (Row 7) could result in less waste and a customer perception of higher quality from that supplier.
• For produce that continues to ripen after harvest, the Smart Traxx technology (Row 9) could allow farmers to harvest earlier in the season, which could mitigate some negative implications from climate change discussed below.

Negative implications

• Three insights in supply chain and pain point reports will lead to diminished yield, lower revenue, and higher per-unit cost. These three are delays in fruit production (row 5), decrease in harvest due to drought (Row 6) and adverse weather conditions (Row 10). All of these have been defined as events that have been deemed outside the normal range and are due to climate change. 
• The delay in fruit production (Row 5) and the resulting shift in harvesting season is also linked to the employee deficit (Row 11) issue. When combined, these conditions have led to produce left rotting in the field, which also has the results of diminished yield, lower revenue, and higher per-unit costs.
• Rising energy (row 8) and production (Row 12) costs have left the polish farmer with the inability to create cost-effective greenhouse operations to meet out-of-season demand. This decreases their competitive edge in the international market, where some producers can meet distributor demands around the year.
• Even without the challenge of energy costs, Polish farmers are facing increased competition from foreign growers (Row 14). Because these growers have lower costs, Polish farmers are required to lower their prices, resulting in decreased revenue.
• Finally, the Brexit (Row 13) negotiations have the likely result of decreasing the market size for Polish farmers significantly.

Research Strategy