Poland Business Analysis

Part
01
of four
Part
01

Fruits and Vegetables Purchasing: Logistics + Packaging

Detailed insights surrounding purchasing departments at companies in the fresh fruits and vegetables industry revolve around the purchase of packaging materials to ensure freshness of produce, the engagement with logistics providers to provide a timely delivery, and the task of a purchasing manager to oversee the budgets and the fresh produce procurement process.

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

The Fruit Group

Research Strategy:

To find detailed insights surrounding purchasing departments at companies in the fresh fruits and vegetables industry, specifically regarding the purchasing of logistics services and packaging in Poland, we looked through different industry-related publications and business reports in the country. However, this approach only revealed general supply chain processes of the companies that are applicable for all industries and not specific to fresh fruits and vegetables.

Next, we scanned through the websites and official reports of various fruit and vegetable producers/companies in Poland such as Materne, Rajpol Sp, Skowronki Group, Global Fruit, Fruit Group Sp, Greenyard, and others. We hoped to find some insights on their purchasing operations. Based on this search, we found some details on how some of their purchasing departments operate. However, the details were very high-level and not comprehensive. There also limited details on the decision-making process at these companies.

Additionally, we tried searching for purchasing-related job titles on career sites such as Glassdoor, LinkedIn, Indeed, etc. to see if the job descriptions offered some details on the decision makers of purchasing organizations at beverage companies. However, the job titles we found were highly fragmented and did not provide comprehensive data to derive the operations and decision-making process of purchasing organizations in Poland. We also expanded our search to encompass all industries in Poland to determine how their purchasing operations work and how decisions are conducted. Though we found some fragmented details on purchasing operations in Poland in general, we could not find any comprehensive processes on purchasing operations and the decision-making process, possibly due to the internal nature of this information.
We decided to extract some snippets of helpful details from all our search efforts to offer a partial picture of purchasing department operations and the decision-making process in Poland's fruits and vegetables sector and industries in general.
Part
02
of four
Part
02

Dairy Purchasing: Logistics + Packaging

The dairy industry in Poland consists primarily of cooperatives, with a large percentage of the dairy being exported across the world. The cooperatives usually contain sub-departments dedicated to purchasing and logistics services, with either executives or elected boards heading them and leading the decision-making processes. As a net exporter of dairy, the Polish dairy industry requires specific logistics services that prevent the dairy products from spoiling and allow them to be quickly and reliably transported not only across the European Union but worldwide in compliance with both international standards and local import laws. Additionally, the Polish dairy industry has seen an increase in demand for sustainable packaging, as concern for the environment rises among consumers and Poland approaches a 2020 European Union deadline for recycling goals.

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

We began our research by reviewing the previous request for purchasing in the Polish dairy industry, as our focus follows up on that research. We reviewed the major dairy producers and cross-referenced with a list of prominent dairy producers in Poland, retrieving the names and URLs of several notable producers from Forum Mleczarskie, a Polish source on the dairy trade within the country, to analyze their corporate structures. As a significant provider of business-to-business discussion for the Polish dairy industry, attracting over 15,000 visitors per month, the research team considered this a relatively accurate source for the industry. We then checked the sites for information regarding their corporate structure and company boards through either an "About" or "Contact" page listed on each site, searching specifically for any information regarding logistics (transportation, production, packaging, etc.).

Multiple research and industry pieces published within the last 2-3 years regarding the Polish dairy industry were also analyzed. While no direct information on purchasing habits was available, we came across data on decision-making factors for packaging and logistics.

We combined this information with other, pertinent data, such as the effect of environmental legislation, recycling goals in the EU, or the fears of Brexit in the Polish dairy sector, to triangulate various avenues that Polish dairy manufacturers and processors may be looking into to keep pace with changing market demands, legislation, and international relations.
Part
03
of four
Part
03

Dairy: Implications

The implications of industry pain points and supply chain disruptions on the dairy industry in Poland are quite varied. Opportunities such as innovation can provide competitive advantages for select Polish dairy producers, whereas climatic conditions in the country hurt company productivity, product sales, and profit margins. Other factors such as changing consumer behavior, geopolitics and industry competition have mixed effects on different industry participants.

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)

Part
04
of four
Part
04

Fruits & Vegetables: Implications

There are both positive and negative impacts resulting from the supply chain disruption and pain points identified earlier. The positive impacts include an opportunity for less waste and enhanced perception of quality among consumers, as well as an opportunity to mitigate the challenges of climate change. The negative implications include diminished yield, lower revenue and higher per-unit costs. Each of the implications is linked to an original supply chain or pain point statement in the attached spreadsheet.

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

Research Strategy

An analysis of each item generated one of more implications, which were then entered into the spreadsheet. Each row of implications was then categorized as a negative or positive for the industry. The final report was written by category and each insight was linked to both the row in the spreadsheet, and the original research from the previous report.


Sources
Sources

From Part 02
Quotes
  • "The growing urban population and decreasing number of persons per household are among the most influential demographic shifts shaping FMCG as a whole, including packaging."
  • "another trend influencing packaging is the personalisation of products"
  • "Poland at risk of not reaching EU’s 2020 recycling goal of 50% due to regional differences"
Quotes
  • "Poland milk production in 2017 was 13.6 billion tonnes, i.e., represents 7.5% of EU milk deliveries, with its exports of dairy products, converted into milk equivalent (ME) being 33.7% of the milk deliveries."
  • "Poland dairy sector relays significantly on the external market since 25% of its national production (by volume) is sold outside the country, being 77% sold in the European Union and 10% in the Central European Initiative. "
  • "The increase in value has been due to the evolution of international prices, the favourable exchange rate, and an increase in exports of products with higher added value, such as cheeses."
Quotes
  • "Modern dairy processing companies try to focus on one of the main trends, which is providing their customers with a well-balanced diet. The dairy processing companies try to accomplish this through producing healthy food in an environmentally-friendly way. Dairy companies can accomplish this through implementing innovative eco-friendly solutions for processing, energy management and marketing."
  • "The Polish consumers’ awareness on GMO’s (genetically modified organisms) is constantly growing. There is a growing social pressure to clearly indicate which dairy products do not contain GMO’s. "
  • "According to the Polish Minister of Agriculture and Rural Development, the Brexit could have a negative impact on both the Polish and British dairy sector, because there is a lot of uncertainty."
Quotes
  • "Extreme heat causes problems to regular citizens and food processing industry."
Quotes
  • "Poland is a net exporter of dairy products.In 2017, the value of exports of dairy products amounted to $2.23 billion, while imports were about $1.0 billion."
  • "In 2017, the value of exports of dairy products amounted to $2.23 billion, while imports were about $1.0 billion.Germany, the Netherlands, the Czech Republic, and the UK are the main export markets for Polish dairy products.In the first seven months of 2018, the value of exports of dairy products amounted to $ 1.45 billion, a 10-percent increase over the same period of 2017.This increase resulted from the growing shipmentsto Germany and the Czech Republic."
Quotes
  • "Dairy products have a limited shelf-life and keep or lose value based on their freshness. Therefore, dairy products require special conditions for transportation and storage. With climate control systems, a logistics service provider can assure you that its warehouses and transport modes have the appropriate temperature for your milk and other dairy products. Next to being able to create a special conditioned journey for your products, a logistics service provider should efficiently ship your products to your customers, which requires the necessary timing and thus reliability."
  • "Broekman Logistics Poland is specialised in the cold chain for dairy. With in-depth knowledge about Polish main products, i.e. food, dehydrated, freeze-dried and deep frozen, we provide comprehensive, professional and reliable complex services. These include dairy logistics (storage, handling and transport), custom formalities, insurance and our priority: on-time deliveries."
Quotes
  • "The overall activity of the Cooperative on behalf of all members is controlled and supervised by the Supervisory Board"
Quotes
  • "The Management Board of Spółdzielnia Mleczarska Mlekpol is elected by the Supervisory Board for an indefinite period of time in a secret vote by a simple majority."
Quotes
  • "“Currently, we are shipping products to 100 countries outside the EU. We have the capacity to conquer new markets, for example Latin America,” says Agnieszka Maliszewska, director of the Polish Chamber of Milk. Edward Bajko, president of the dairy cooperative Spomlek confirms: “We have customers across the world. Our products are even sent to Cuba and Asia.” "
  • "The main export products include easily stored powder products, such as milk powder, whey powder, as well as aged cheese and butter. Cheeses, in particular aged, fresh and cottage cheese, are of particular importance."
  • "“They won’t let us enter the European market on purpose and they don’t mind that what they’re doing is against the European Union law,” says Lech Karendys, sales director at the dairy cooperative Mlekpol. "
  • " “One of the supermarket chains told us recently that private label products intended for the French market can only be made with French milk. This doesn’t make any sense, our milk is no different than the French milk. The large retail chains just decide on their own which products their domestic consumers can buy. The local lobby prevents us from accessing these markets.” "
Quotes
  • "After recent packaging innovations focusing on resealable packs or portioning, a new trend was observed in 2018/2019, with spreadable processed cheese becoming available in packaging suitable for on-the-go consumption. In 2018 Hochland Polska introduced a pack type addressing on-the-go trend with four connected containers of 30g each."
  • "Other processed cheese in Poland was traditionally characterised by processed cheese in slices designed for grilling or toasting. However, cheese sticks are becoming increasingly popular in Poland, as discounters introduce the format under their private label ranges."