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Poland
Poland
ECONOMIC OVERVIEW ______________________________________________________
GDP and CPI
GDP and CPI
2001
2002
2003
2004
GDP growth (%)
1.0
1.4
3.8
5.4
CPI (%)
5.5
1.9
0.7
3.5
Source: EIU, August 2005
The economy showed strong growth in 2004, supported
by robust export growth. Real GDP growth was 5.4%
year-on-year (YoY) in 2004 following the acceleration to
3.8% growth in 2003. The economic expansion appears to
have slowed slightly in 2005. The strong financial position
of Polish companies finally led to a significant acceleration
in capital spending at the end of 2004, and the recovery in
fixed investment is expected to strengthen in 2005-06.
The strengthening of the Polish currency and slower
growth in Poland’s main markets will have a diminishing
effect on exports, but strong productivity growth
should still allow exports to expand, mainly due to high
competitiveness of Polish products in the European Union
(EU).
The latest revision of the consumer-spending basket
has led to a fall in the inflation rate, with YoY growth of
consumer prices in January 2005 at 3.7%, lower than the
initial estimate of 4%. Domestic cost pressures from the
labour market continue to be weak – nominal wages in
enterprises rose by just 2% year on year in the first two
months of 2005 – and, although unemployment is falling
slowly, it is expected that the remaining high level of
unemployment will prevent a sharp acceleration in wage
inflation. The price shocks linked to EU entry in 2004 will
not be repeated in 2005, and the strong zloty will reduce
external inflationary pressures.
Area (‘000 sq km)¹: 312.7
(US 9,600 – EU25 3,981 – World 133,700)
Capital²: Warsaw
(Number of inhabitants: 2.4 million)
Population (million)³: 38.2
(US 293 – EU25 456 – World 6,376)
GDP (USD billion)³: 242.2
(US 11,735 – EU25 12,723 – World 39,503.5)
GNI per capita (USD)¹: 5,280
(US 37,870 – EU25 22,810 – World 5,110)
Currency: Zloty (PLN)
Languages: Polish
Main religions: Roman Catholic (90%)
Government type: Republic
Sources: CIA Factbook; (1) World Bank 2005; (2) City Population;
(3) Economist Intelligence Unit 2004 data
2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats* 139
Poland
Unemployment
Poland’s unemployment rate, currently hovering around
19% – the highest in Europe – is now falling and the trend
is gaining speed. In first quarter 2005 the unemployment
rate decreased to 19.3%, representing just over 3 million
people without a job (compared to just over 3.2 million in
first quarter 2004).
However, people born during the baby boom of the 1980s
are still entering the market and Poland needs hundreds
of thousands of new jobs every year. The most numerous
group among the unemployed (51.6%) are people aged
between 18 and 34 years.
The key reasons for the high unemployment figure are
ongoing structural reforms and high non-wage labour
costs. Improvement in the employment rate is dependent
on the growth of the Polish economy and an increase of
foreign direct investment (FDI). Both of these factors create
new jobs and are expected to bring the unemployment
rate down to 18.6% by the end of 2005.
Unemployment
Unemployment rate (%)
2001
2002
2003
2004
18.0
19.7
19.9
19.6
Source: EIU, August 2005
restrained mainly by an inefficient agricultural sector and
loss making, state-owned enterprises lagging the rapidly
developing private sector. Western Europe’s stagnation
also affects Polish growth, as well as high domestic
interest rates and a strong currency. In 2006 GDP growth
is expected to reach 4.3%. The structure of GDP will
also change and domestic demand will partially replace
exports.
Exports and imports will keep on growing, pushing the
current account deficit to increase from 1.5% of GDP in
2004 to 2.4% in 2005 and 3.0% next year. Inflation will
fall back in mid-2005 and is forecast to average 2.1% in
2005 and 1.8% in 2006, as high unemployment continues
to limit inflationary pressures. Employment prospects are
not very bright and it is envisaged that unemployment
may drop to only 17.2% by 2007. The main driver of the
economy is increasing investments by roughly 10% in
2005 and also in 2006. Polish society as a whole remains
committed to improving Poland’s macroeconomic
fundamentals and further reducing the role that the state
plays in the economy. Poland continues to liberalise
its trade, foreign exchange and investment policies in
accordance with its obligations to the EU, The World
Trade Organization, and the Organization for Economic
Cooperation and Development.
Key economic forecasts
2005
2006
2007
Economic forecasts
GDP (%)
3.8
4.3
4.2
Poland overcame economic stagnation in the late nineties
and is now one of the fastest growing countries in the
EU. In 2005, Poland’s economy is expected to grow
by 3.8% in comparison to 5.4% in 2004. The growth is
CPI (%)
2.1
1.8
2.2
Unemployment rate (%)
18.2
17.5
17.2
Source: EIU, August 2005
REGULATORY ENVIRONMENT ________________________________________________
Foreign direct investment
Increased inflow of foreign direct investment is one of
the much-awaited effects of Poland’s EU entry. Recent
headlines brought clear confirmation that Poland
witnessed a strong rise in FDI in 2004, regardless of the
methods of calculation.
The increase of investment positively influenced the
unemployment rate in Poland – one of the most significant
economic problems at the moment.
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According to the Polish Information and Foreign
Investment Agency, analysis of the FDI structure in 2004
confirms that foreign firms are increasingly interested in
green-field investments. In 2002, they constituted 37% of
the annual FDI influx. A year later, their share was 51%.
According to the newest data, this type of investment now
forms a 58% share in the total invested capital.
Poland
Poland offers a wide range of investment incentives.
According to the Law on Financial Support for Investment
of 20 March 2002, foreign investors in Poland may
obtain investment grants covering up to 25% of
outlays, employment grants for each new job created,
training grants for each trained employee and grants for
infrastructure development. There is also some tax relief
available, however, the total value of aid offered to the
investor cannot exceed 50% of the investment outlays.
In the social sphere, goods and services accessibility
improved significantly. Consumer protection in Poland
strengthened and widened, both in legal regulations
and in individual awareness. According to the latest
attitude research, 63% of Poles were pleased with the EU
membership at the end of April 2005, compared to 50% in
April 2004.
Property/Real estate regulations
FDI
2001
2002
2003
2004
FDI
(PLN bn)
17.12
12.38
12.35
18.47
FDI
(USD bn)
5.71
4.13
4.12
6.16
Source: EIU, August 2005 (Exchange rate: December 31, 2004)
Expected impacts following EU entry
Poland celebrated its first year anniversary as a member
of the EU on 1 May 2005. The accession was considered
to be a breakthrough, both in terms of Polish history and
for the economy. However, one year is a short perspective;
long-term results are not yet apparent. There is also
difficulty in determining which trends in 2005-06 are a
direct effect of the accession and which are the results of
Poland’s continuous development since the introduction
of the free market economy. There is a certain synergy
between these two processes and there is no doubt both
factors are positive. There was some anxiety among Polish
society prior to the accession, but it is obvious now the
advantages surpassed the problems.
GDP growth in 2004 was the highest it has been
since 1997; the unemployment rate decreased and
there continues to be an expectation of continuous
improvement. The Polish currency also strengthened
significantly.
The most significant disadvantages were price increases.
Food and non-alcoholic drinks prices went up by 7.8% in
2004 compared to the previous year. The most significant
increases were sugar and confectionery (17.0%), oils and
fats (10.8%), and meat (9.6%). The prices of industrial
goods and services showed less definite tendency.
Building materials noted the highest increase of 14.7%
(VAT change from 7% to 22%). Prices increased for cars
(3.0%) as well household appliances (2.6%). At the same
time, prices of clothing/footwear went down by 3.6% and
electronics saw a drop of 4.3%.
Foreigners from countries other than those from the EU
are required to obtain a permit from the Minister of Internal
Affairs and Administration prior to acquisition of real
estate. Citizens or companies of the EU do not generally
require any permit for the acquisition of real estate or
shares in companies that own real estate. However,
some exemptions to this general rule exist, such as the
acquisition of agricultural and forest real estate (12-year
transition period), and the acquisition of second houses
(5-year transition period).
After a period of adjusting Polish real estate regulations
to EU standards (e.g., facilitating of real estate trading
for EU investments), there is a marked slow down in raw
real estate legislation. Currently, parliament has under
consideration bills strongly affecting the real estate market,
in particular concerning mortgage loans, new zoning
and development planning systems, and a possibility to
transform perpetual usufruct into the ownership right. Due
to the planned parliamentary elections the new legislation
may be deferred to the beginning of 2006.
The Polish construction process is long and complicated.
Gaining building permits can take up to one year. The
main problem is a lack of development plans issued by
the authorities specifying the types of buildings permitted
to be developed in certain areas. According to The Act
of Spatial Planning (passed in March 2003), development
plans enacted before 1995 expired on 1 January 2004.
Currently, it is estimated that about 88% of Poland’s
land area does not have valid development plans. For an
investor, no development plan means longer construction
timelines. Before applying for a building permit, an
investor has to apply for approval for site development.
Consequently, the construction process is composed of
two procedures instead of one.
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Poland
Due to this two-fold process, Poland has not enacted
any re-privatisation statutes to govern former owners of
real estate nationalised after the Second World War. The
utmost care must be taken before purchasing real estate
from the state or a local government authority that no
claims have been asserted against the property by the
former owners.
Other regulations
The trend of strengthening the regulatory environment
continued in Poland throughout 2004. Polish retail and
consumer sectors represent both high potential and
significant challenges for investors.
Competition law
intra-community supply and acquisition of goods), rules
determining the place of supply with respect to a number
of services, registration as an EU-VAT taxpayer, as well
as additional documentation requirements. Because the
Polish VAT law is still not fully harmonised with the EU
regulations, some amendments to the VAT law are still to
be made.
The EU accession also resulted in VAT rate increases
(due to obligatory standardisation) in regard to building
materials, children’s wear and leisure services among,
others. These changes were a factor behind price growth
factors affecting the consumer market, especially in the
DIY sector.
New store openings
An Act on counteracting unfair competition was introduced
in 1993, with its amendments in 2002 restricting
promotions and sales without a trade margin in retail
outlets with areas greater than 400sq m, restricting the
sale of private label goods in discount store chains to 20%
of their turnover, and restricting bonus sales and trade
using gift coupons.
According to Polish law, all shopping utilities with floor
areas over 2,000sq m can be located exclusively in the
areas that are assigned a valid development plan for retail
development. Moreover, construction of shopping centres
and large-area hypermarkets over 10,000sq m requires
detailed environmental consideration in both phases of
the construction process, which further prolongs the
construction process.
Income tax
Imports
Some favourable changes were introduced to corporate
income tax starting from January 2004. The government
decided to cut corporate income tax from 27% to 19%,
and introduced a flat, 19% personal income tax rate for
small business owners, instead of the previous progressive
scale of 19%, 30% and 40%.
However, the government also decided not to prolong the
exemption from capital gains tax. The exemption expired
on 31 December 2003. Parliament decided to impose a
19% capital gains tax, which came into force in January
2004. Simultaneously the government increased the
dividend tax from 15% in 2003 to 19% in 2004.
VAT
After the introduction of the new VAT legislation in May
2004, the rules governing VAT taxation in respect to many
business transactions have been significantly modified
to reflect the guidelines provided by the EU regulations,
in particular the VI Directive of 17 May 1977 on the
harmonisation of the laws of the Member States relating
to turnover taxes. The main changes in the VAT legislation
relate to the new definition of activities subject to VAT
(particularly regarding marketing and advertising activities,
142 2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats*
Since Polish accession in May 2004, imports are limited
to countries from outside the EU. The trade transactions
between Poland and other EU countries are treated as
intra-community transactions and regulated by EU law. A
specific Polish issue is the excise tax domain. In Poland, a
variety of products that are excluded from this obligation
in the EU, are still excisable. This includes cosmetics
and perfumes, leather furs and passenger cars. This
imposes an additional price increase on certain goods
and decreases Polish customers’ accessibility to these
products.
Waste
Producers, importers and large scale retailers (sales
area of more than 500sq m) of goods in non-reusable
packaging, or of goods made of plastic, aluminium,
paper, glass or wood, are obliged to attain the required
recovery or recycling rate (transition period till 2007). Noncompliance with the regulation results in charges.
Sunday trade
In a few Polish cities there were plans among local
politicians to pass laws prohibiting trade on Sundays and
holidays, despite 51% of Poles stating that hypermarkets
should be opened on Sundays and holidays. As at the date
of this report, none of these plans have been passed.
Poland
Consumer protection
Since accession to the EU, Poland introduced several new
structures and regulations aiming to strengthen consumer
protection. The Polish centre of the European ExtraJuridical Network started operations in January 2005,
informing consumers of their rights and supporting them
in litigation. Simultaneously, Poland entered the dangerous
products notification system RAPEX. Since May 2004,
20 products available in Poland were announced as
hazardous. The producers of such goods were obligated
to withdraw them from the market and modify them to
ensure safety for consumers.
DEMOGRAPHICS AND CONSUMER BEHAVIOUR ______________________________
Population
Urbanisation of the population
Population evolution
Urban/Rural split
During 2001-04, Poland’s population went down by
100,000 people. The fall has resulted mainly from the low
population growth rate. A downward trend in birth rates
noted since the 1990s has deepened. Women accounted
for 51% of Poland’s population.
According to recent demographic forecasts, Poland’s
population could shrink by one million people by 2020, and
by a further 1.5 million in the following decade. This would
mean that by 2030, the country’s population would be
down to some 35.7 million from the present 38.2 million.
Population
Population (m)
% of total population
1998
2003
2008 (f)
Urban
61.9
61.7
61.3
Rural
38.1
38.3
38.7
Source: EIU, April 2004
Income/Buying power
The situation in the Polish labour market is still difficult,
keeping wage growth demands under control.
Consumer prices and nominal wages growth
2001
2002
2003
2004
38.3
38.2
38.2
38.2
Source: EIU, August 2005
Population by age group
At present trends, the post-production age population –
women over 60 and men over 65 – will grow to 6.4 million
from the present 5.8 million over the next five years. The
average age would be up to 45 years from the present 37.
After 2020, the process of society ageing will accelerate
sharply, with all the economic and social consequences
that go with this.
Age profile
% of total population
1998
2003
2008 (f)
0 – 14 years
20.3
17.5
15.1
15 – 64 years
67.8
69.6
71.4
Over 65 years
11.9
12.9
13.5
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
8.0
5.5
4.2
4.8
3.5
2.6
1.9
0.8
2001
2002
Consumer prices % growth
2003
2004
Nominal wages % growth
Source: GUS – Glowny Urzad Statystyczny
Disposable income per head is still much lower than
in Western Europe, although income levels are much
higher in urban areas, such as Warsaw, than in the lessdeveloped areas in the east of the country. About twothirds of the population lives in urban areas, and modern
patterns of consumption are most prevalent in Warsaw
and the other major cities.
Source: EIU, April 2004
2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats* 143
Poland
Average monthly gross wages and salaries
Gross in PLN
2001
2002
2003
2004
2001-2004 (%)
2,062
2,098
2,201
2,439
18.3
Source: GUS – Glowny Urzad Statystyczny
Monthly average income, expenditure and savings per capita
Monthly average
(PLN)
2001
2002
2003
2004
2003-2004 (%)
Income
644.48
664.21
680.5
735
8.01
Expenditure
609.72
624.99
643.84
695
7.95
Savings
34.76
39.22
36.66
40
9.11
Sources: Statistical Yearbook 2004/2003 and GUS Report
Consumer behaviour
Lifestyles/Shopping habits
Average household spending patterns
There is still a huge inequality in income and lifestyle
between big cities and the countryside that affects
shopping habits. Those from urban cities, as well as many
teenagers, follow Western European patterns. However,
those living in the countryside and in eastern Poland keep
many traditional Polish habits and customs.
The most apparent trend is continuous decrease of
spending on food and beverages in Poland. Expenditures
for rent, electricity and heating seem to be increasing
slightly since 2001.
Composition of household expenditure, 2000 to 2003
100%
90%
80%
70%
60%
50%
40%
7%
13%
14%
15%
14%
13%
13%
8%
4%
6%
6%
8%
5%
5%
5%
8%
5%
5%
5%
18%
20%
21%
34%
31%
30%
28%
2000
2001
2002
2003
13%
8%
4%
6%
6%
22%
30%
20%
10%
0%
Food and drinks
Rent, electricity & heating
Household operations*
Healthcare
Clothing & footwear
Education & leisure
Transport & communications
Other
Source: GfK Polonia, FMCG Strategic Report, 2005
(*) Household operations include furnishings, household equipment and
routine maintenance of house/flat.
144 2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats*
Polish consumers tend to shop in traditional retail
outlets. The research shows that Poles have more loyalty
to this channel than their Central and Eastern Europe
counterparts. Discount outlets are gaining in popularity,
chiefly due to their low prices. Crucial criteria for choosing
a place for shopping are: low prices, high quality of
products and proximity to the place of living.
Women are mostly responsible for shopping, however
Polish households with joint shopping (a husband and
wife) are becoming more common in wealthier families.
The average time spent shopping has noticeably
decreased from 5.4 hours in 1994 to 2.9 hours in 2004.
One-third of Poles have at least one debit card (an
increase of 6% in comparison to 2003). Consumers tend
to use debit cards more often for payments in shops, not
only for cash withdrawals. After research performed for the
period 1996-04, it was observed the usage of debit cards
stimulates consumption and strengthens GDP growth in
the long term.
Poland
Brand/Price sensitivity
Brand awareness
Consumer brand awareness in Poland is especially high
for coffee and tea; 37% of Poles say they actively seek a
brand in different stores or wait for the availability of their
most favourite coffee brand. In case of tea, 27% of Polish
consumers pledge a similar loyalty. However, in general,
brand awareness in Poland still has growth potential.
European Trusted Brands indicates leading Polish brands
are Wedel, Hortex, Zywiec, Prince Polo and Winiary, and
international brands as Lipton, Coca-Cola, Nivea, Adidas
and Mercedes.
In 2005, the first Polish edition of the world-renowned
Superbrands contest was organised, whereby 75 brands
of highest value were chosen by the Polish authorities of
business and media. Initiatives such as the Superbrands
contest confirm growing brand awareness and gaining
importance in the premium segment and price-oriented
consumers.
Private labels
Most of the foreign retail chains operating in Poland have
their own private brands: Tesco Polska (Korzystny Zakup),
Carrefour (No.1), Casino Group (Leader Price), Metro
Group (Aro), Ahold Polska (Euro Shopper, Albert Q-line)
and Auchan (Pierwsza Cena). The value contribution of
own or private labels to the Polish market remains low at
about 3%. Consumers are more willing to accept private
label detergents, non-alcoholic beverages, juices, spices
and sweets.
The acceptance level of own brands is higher for older
and less-educated customers with lower income, because
they are more price-oriented. In Poland, own labels tend
to be perceived as cheap and of low quality. However,
there are attempts to improve their image. Some chains
have recently launched new own labels with better quality
and at the same time with a higher price (but still lower
than branded goods). Tesco Polska and Metro Group
introduced respectively “Jakość Dla Ciebie” and “Makro
Quality”.
Health and fitness
In 2004, five out of seven global product categories
with the highest growth of sales (an increase of above
10%) had healing or sliming qualities. The most dynamic
categories were soy products (increase of 31%) and
yoghurt drinks (increase of 19%). Similar tendencies are
observed in the convenience products market.
The Polish consumer market is starting to follow this
international trend and has a vast potential. In 2004, 20%
of Poles declared their willingness to buy organic food.
However, only 0.1% of Polish farms representing 0.3%
of land do not use artificial fertilizers. In comparison to
Western Europe, where leading countries with organic
farms are Austria (9.2%), France (6.8%) and Holland
(5.9%), it is still an insignificant contribution. By 2009
the expected share of the organic farms would be 3%.
As regards retail, there are only 150 shops in Poland
specialising in health food. More than 20 of those are
located in Warsaw. Knowing the Western Europe pattern, it
represents an interesting market opportunity.
2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats* 145
Poland
RETAIL & CONSUMER SECTOR PERFORMANCE _______________________________
Major consumer goods players
It is worth mentioning that smaller domestic producers
acting as suppliers or sub-contractors to the global
players operating in Poland have benefited from the EU
enlargement in terms of export volumes.
The list of major consumer goods manufacturers in Poland
is almost fully dominated by global players. In sectors
such as tobacco, brewing and consumer electronics,
big multinational companies build strong competition for
Polish firms.
Key consumer goods companies
No. Company Name
1
Philip Morris Polska
2
Grupa Źywiec SA
3
Category of products
2004 sales (PLN m) 2004 sales (EUR m)
Tobacco
5,017
1,107
Breweries
3,629
800
Imperial Tobacco Polska S.A.
Tobacco
3,455
762
4
Thomson Multimedia Polska
Electronic
3,310
730
5
Kompania Piwowarska
Breweries
2,655
586
6
Unilever Polska
Food/chemicals/
cosmetics brand
management
2,453
541
7
Procter & Gamble Operations Polska
Food/chemicals/
cosmetics
2,417
533
8
Central European Distribution Corporation
Alcoholic beverages
2,123
468
9
British American Tobacco Polska
Tobacco
1,948
430
10
Philips Lighting Poland
Electronic
1,912
422
11
Nokia Poland
Electronic
1,911
421
12
Avon Operations Polska
Cosmetics
1,794
396
13
Sobieski Dystrybucja
Alcoholic beverages
1,692
373
14
Scandinavian Tobacco
Tobacco
1,585
350
15
Krajowa Spolka Cukrowa
Sugar
1,558
344
16
Philips CEI Poland
Electronic
1,557
343
17
Nestle Polska
Food and beverages
1,551
342
18
Daewoo Electronics Manufacturing Poland
sp. z o.o.
Electronic
1,259
277
19
LG Electronics
Electronic
1,254
277
20
Altadis Polska SA
Tobacco
1,240
273
Sources: Rzeczpospolita – Lista 500; Polityka – Lista 500
146 2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats*
Poland
Food and beverages
EU accession has had a very positive influence on the
domestic food industry. In 2004, Polish food exporters
boosted their foreign sales by more than 30%, reaching
EUR5.2 billion. The latter recorded a 9.2% increase in
sales over the previous year. The most popular food
products sold abroad include milk and dairy products,
meat, poultry and fruit juices. Much of the success lays in
diligent pre-accession preparations and maintaining high
investment expenditure, which helps to create a reputation
of high quality, naturally produced foodstuff.
Dairy production has been successful on the European
market as more Polish dairy products meet EU standards.
Approximately one third of the country’s agricultural
labour resources are employed in dairy products, which is
currently highly dispersed with further consolidation in the
industry inevitable.
The fruit juice sector is still expanding. According to
ACNielsen, total sales in 2004 increased by 5.2%, bringing
the market value to PLN2.4 billion (EUR0.5 billion).
Domestic companies not only compete locally, but also
expand to nearby countries. The Polish Maspex Group
has taken over non-alcoholic beverage entities in Czech
Republic and Hungary.
The Polish beer sector is dominated by three leading
producers, accounting for over 85% of the market share.
Market analyses show that the consumers prefer to buy
beer and other alcoholic beverages in small- and mediumsized groceries. Poles, although open for novelties and
new beer brands, focus mainly on price, which remains
one of the lowest in the EU.
Among the top-30 worldwide bestselling spirit brands,
six originate from Poland. The average consumption
of alcoholic beverages increased in the past 12 years
from 6.5 litres to 7.9 litres per capita (of pure spirit) and,
according to market analysis, will increase to 8.9 litres
in 2010. A characteristic of the market is the ongoing
consolidation among the key players and distributors.
Central European Distribution Corporation has been a
significant player in the consolidation.
Electronics
Technological pressure, lifestyle changes and increasing
purchasing power of Poles highly impacts the demand
for various electronic products. The domestic electronics
market is valued at some PLN8.7 billion (EUR1.9 billion).
The majority of this demand is still being satisfied by
imports, however, already 15 companies in this sector are
on the top-100 Polish exporters’ list.
The scale of foreign investments involvement in the
Polish electronics sector has been continuously growing.
As the investment climate in Poland has improved,
foreign companies intensified their efforts in penetrating
the domestic market. Competitive labour costs, high
qualification of personnel, Poland’s central location
in Europe and the recent EU accession attracted new
investments, like LG Electronics (plasma and LCD TV sets),
Bosch and Siemens Hausgerate (household electronics).
Electronics retailing has undergone significant changes.
Metro AG introduced a new speciality supermarket chain
Saturn, indirectly competing with related Media Markt and
with a growing number of domestic networks like RTV Euro
AGD, Mars or Avans. Avans has launched a hypermarket
scale formula with its Mega Avans outlets located in
Warsaw and Poznan. The competition may become even
fiercer after a British electronics chain operated by Dixons
Group enters the market and which is to open by end-2005.
Clothing
The clothing market in Poland is still in the development
phase and is valued at PLN16 billion a year (EUR3.5
billion). Next to the big international players (H&M, Zara,
C&A) there are a number of successful domestic clothing
companies, such as Redan (Top Secret and Troll labels),
Artman (House), KAN (Tatuum) and LPP (Reserved, Cropp).
Polish companies are extending their distribution channels,
both in Poland and in neighbouring territories, opening
new stores and therefore increasing their turnovers. Polish
retailers compete with the foreign clothing firms not only
on price level but also on quality, investing heavily in
building their own brands.
The biggest increase on the growing fashion market
in Poland is observed in the youth clothing segment.
Labels are important for the younger and more educated
consumer. Almost 40% of customers aged 15-20 buy
their clothes in stores with branded clothes, compared to
only 30% among 41-50. Therefore more companies with
well-known brands are constantly rejuvenating their image.
Brands such as Wólczanka, Vistula, Barbara B or Linear
(Galeria Centrum’s brands) are similarly growing. Children’s
wear is currently developing with Endo, Mother Care and
Smyk all expanding their footprint across Poland.
Market research shows that Poles are still price-oriented
when buying clothes. It is expected, however, that they
will follow the general Western trend increasing household
spending on fashion/clothes at the expense of food.
2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats* 147
Poland
Major retail players
Retail sales
The Polish market is one of the most diverse in Europe.
Over the past 13 years the number of stores in Poland
has risen almost threefold and is currently at 400,000,
according to GfK Polonia. In Poland, there were
approximately 118,000 food retail outlets in 2004, which
means a decrease of 1% compared to the previous year.
The decrease relates mainly to smaller food and specialty
stores. The greatest saturation of retail chains appears
in western and central Poland. The fact that 38% of the
Polish population is spread over 56,000 villages results in
a very dispersed market. There is a continuing rise in the
number of general grocery stores and a clear drop in the
number of specialty stores and pharmacies. At the same
time we are witnessing a dynamic development of some
kinds of retail units – particularly petrol stations, super
and hypermarkets. Over the past decade there has been a
clear rise in the number of large retail outlets created and
managed by foreign companies, mainly for food and daily
use non-food articles.
Total retail sales growth
Retail sales (PLN m)
2000
2001
2002
2003
2004
360,318
375,438
385,701
401,377
413,175
11.3
4.2
2.7
4.1
7.9
Retail sales growth (%)
Source: Glowny Urzad Statystyczny (GUS)
Breakdown by number of stores
Number of stores
Hypermarkets
Supermarkets
Discount stores
Convenience stores
(traditional channels)
2004
240
960
1,357
115,300
2003
202
924
1,274
115,800
Source: GfK Polonia, FMCG Strategic Report 2005, GfK Polonia, FMCG Strategic Report 2004
Market share by retail channels (share in selling food and cigarettes/alcohol)
%
Hypermarkets
Supermarkets
Discount stores
Convenience stores
(traditional channels)
2004
20
10
10
60
2003
18
10
8
64
Source: GfK Polonia, FMCG Strategic Report 2005, GfK Polonia, FMCG Strategic Report 2004
148 2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats*
Poland
The share of modern distribution channels, discount
stores, supermarkets, hypermarkets, in Polish retail
turnover has been increasing steadily and today amounts
to approximately 41-42%, including 20% share for
hypermarkets, 10% supermarkets and 9% discount stores.
Share of modern distribution channels* in retail sales
Modern distribution channels will continue their expansion,
but more likely in another dimension. Currently, more
than 80% of hypermarkets and more than 50% of
supermarkets operate in towns and cities with more than
50,000 inhabitants. In the future, the top retail chains plan
to direct their investments also to middle-sized towns
as the purchasing power of their inhabitants increases
steadily and they are becoming attractive even for hyperand supermarkets. Geant, for example, wants to open 12
new stores by 2008, mostly in middle-sized towns. As a
consequence, the average store selling area is expected to
decrease.
Recently, the American giant, world number one retailer
Wal-Mart announced its interest in entering Central
and Eastern Europe markets. Among others, Poland is
mentioned as a possible target.
1998
16%
1999
22%
2000
26%
2001
29%
2002
32%
2003
36-38%
2004
41-42%
Forecast
2006
45%
2008-2010
50%
Source: GfK Polonia: FMCG Strategic Report, 2005
(*) Hypermarkets, supermarkets and discount stores.
Key retail companies
No
Group name
Store brands
Retail formats
Number of
stores 2004
2004 net sales 2004 net sales
(PLN m)
(EUR m)
12,400
1
2
3
Metro Group
Jeronimo Martins
Tesco Polska
4
Schwarz Group
5
Ruch
6
Carrefour Polska
7
Auchan Polska
2,735
Makro C&C
Cash and carry
21
1,527
Real
Hypermarkets
27
647
Praktiker
DIY
16
125
Saturn, Media Markt
Household
appliances
24
2
435
Biedronka
Discount stores
725
Tesco
Hypermarkets
44
Tesco
Supermarkets
3
Savia
Supermarkets
31
Kaufland
Hypermarkets
Lidl
Discount stores
Ruch
Kiosks
Carrefour
Hypermarkets
17
Champion
Supermarkets
70
Auchan
Hypermarkets
19
Elea
Supermarkets
12
Leroy Merlin
DIY
14
4,730
1,059
4,616
980
62
1,612
75
N/A
1,045 (e)
(incl. VAT)
12,298 (own)
3,851
849
3,800
853
(incl. VAT)
3,680
812
2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats* 149
Poland
No
Group name
8
Casino Group
9
Ahold Polska
10
Lewiatan Holding
11
Tengelmann
12
MILO S.A.
13
Rewe
14
Kolporter
15
Store brands
Retail formats
Number of
stores 2004
Geant
Hypermarkets
17
Leader Price
Discount stores
162
Hypernova
Hypermarkets
25
Albert
Supermarkets
168
Lewiatan
Supermarkets/
Convenience
stores
>1,600
Plus Discount
Discount stores
160
OBI
DIY
25
Milo
Wholesaler
14
Selgros
Cash and carry
9
Minimal
Supermarkets
27
Kolporter
Convenience
stores/Kiosks
976 (own)
Avans
Home
appliances
600
Mega Avans
Home
appliances
2
E. Leclerc
Hypermarkets
12
E. Leclerc
Supermarkets
3
Intermarché
Supermarkets
101
Bricomarché
DIY stores
29
Avans
2004 net sales 2004 net sales
(PLN m)
(EUR m)
3,499
772
3,120
688 (e)
2,800*
610*
2,665**
581
2,525
557
2,217
489
2,136
471
1,912
422
1,698
375
(incl VAT)
1,690
373
(incl VAT)
16
E. Leclerc
17
Musketers Group
18
Eurocash
ABC
Cash and carry
83
1,608
355
19
KDWT
KDWT
Cash and carry
39
1,416
312
Eldorado
Cash and carry
16
Stokrotka
Supermarkets
43
1,130
249
Groszek
Convenience
stores
> 350
Empik
Media &
entertainment
59
Empik Photo
Photo
43
Smyk
Children’s wear
20
1,124
248
Galeria Centrum
Department
stores
12
Franchise (incl.
ZARA, Esprit)
Clothing
32
20
21
Eldorado
NFI Empik Media &
Fashion
Sources: Rzeczpospolita 500; Polityka 500; Trade Press - Supermarket, Companies’ Annual Reports
* Expected
** Year ended 30 April 2004
(e): estimation
150 2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats*
Poland
Food retail channels
Hypermarkets
At the end of 2004, there were 240 hypermarkets in
Poland(compared to 202 in 2003 and less than 10 outlets
in 1995); 224 of them foreign chains. German Kaufland
has become the leading player in the hypermarket sector
with 62 outlets, followed by UK-based Tesco, the German
Metro Group (Real), Dutch Ahold (Hypernova), and French
players Auchan (Auchan), Casino (Géant), Carrefour
(Carrefour) and Leclerc. Polish hypermarkets include Alma
(Krakchemia), Piotr i Pawel.
Despite growing popularity and increasing share in
food retail sales, there is still room for improvement in
hypermarkets. According to ACNielsen, only 22% of
Poles acquire fresh meat/fish and vegetables/fruits in
hypermarkets. The trust in this segment remains with
the traditional trade. Although Polish consumers are still
price-oriented, the quality and wide range of products is
becoming more important in their shopping habits.
Supermarkets
Supermarkets are an important sales channel in
Poland, accounting for 10% of the retail trade turnover.
Supermarkets have increasingly come in the spotlight
recently as tougher planning regulations have made it
harder for retailers to open outlets larger than 2,000sq m.
As with hypermarkets, the sector’s group of leading
players is clearly dominated by foreign operators. Dutch
Ahold (Albert) is the leader, followed by the French ITM
group (Intermarché), French Carrefour (Champion), the
German Spar (Spar), Rewe (Minimal), UK-based Tesco
(Savia) and French Auchan (Elea). After a considerable
gap, Meinl (Julius Meinl) and French Leclerc (Leclerc) are
also worth mentioning. Among the Polish chains, the most
significant players are Eldorado (Stokrotka) and Lewiatan
(Lewiatan).
Together, all supermarket operators had a combined
network of some 960 supermarkets at the end of 2004,
although there are many more supermarkets available for
shoppers run by small local businesses and co-operative
societies.
Discount stores
The Polish discount market continues to be dominated by
the formerly domestic Biedronka chain, which was taken
over in 1998 and subsequently expanded aggressively to
725 outlets by Portuguese retailer Jerónimo Martins.
Behind Biedronka, important operations in the Polish
discount market include German Tengelmann (Plus),
French Casino (Leader Price), Danish Dansk Supermarked
(Netto) and the German Schwarz Group (Lidl). Społem,
a Polish co-operative organisation, is a significant player
among discount chains and convenience stores.
It is expected the discount stores will develop more rapidly
in the future, reaching small cities and remote areas,
where there is still room for new entrants. This segment
of modern trade presents a challenge for fast moving
consumer goods (FMCG) producers, as they are only
marginally present in this retail channel, with many private/
own label products.
Convenience stores
Given the relatively low incomes in Poland (by Western
standards), independent convenient, neighbourhood
stores continue to play a key role in the national food
supply – especially in the small towns and poor rural areas,
but to a certain degree also in the large cities, including
the capital Warsaw, where they usually cater for people
who pick up some ingredients for their lunch at the office
or factory. These convenience stores face increasing
competition from discount stores.
Cash and carry
At the end of 2004 there were 113 cash and carry stores,
which is four times more compared to the previous year.
After a long quiet period and a sharp decrease in 2003, the
segment has started to grow again.
The national cash and carry sector is dominated by the
German grocery giant Metro Group. In 2005 the group is
planning to launch its new own label “Cali”. The label is
specifically for fresh, high-quality fruits and vegetables.
Apart from Metro, German Rewe’s Selgros operation and
the local C&C network of Eldorado are, together with the
Eurocash stores, dominating the market. Społem is also
present in the wholesale market.
Non-food retailers
A specific feature of the Polish retail environment is the
huge numbers of kiosks spread across the country,
where people can buy standard kiosk products, such as
newspapers, tobacco products and confectionery, along
with a range of health and beauty items. Key players
include Ruch S.A. with 976 kiosks and 12,298 news
agencies supplying in total more than 37,000 outlets, and
Kolporter S.A. with 25,500 kiosks. In the capital Warsaw
it is difficult to walk a distance of 300 metres without
encountering such an outlet.
2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats* 151
Poland
A strong position on the non-food market is held by
companies belonging to NFI Empik Media & Fashion
Group, operating in the media and entertainment, and
fashion and beauty sectors. There are more than 60
Empik media stores offering a full range of products in this
segment.
The main competitors include bookstore chain Matras,
Ruch and Kolporter (press), Media Markt, Saturn (music,
film and software) and Traffic Club media store. Both Traffic
and Empik are considering expansion to e-commerce.
E-Commerce
We can observe the visible revival of e-commerce in
Poland. Although the number of internet shops has
remained at a similar level for the past few years (600700 shops), the development of internet shops offering a
niche assortment is growing. Entrepreneurs, aware of the
challenges of the new market, know it’s not enough to
have an internet shop – the key to success is selling niche
products and delivering them faster to the customer than
the competition.
Together with the e-commerce development, the average
value of transactions has also been growing, due, in part,
to the higher number of transactions in the airline services,
tourist agencies services and shops offering GSM
products and services.
RETAIL & CONSUMER CHALLENGES,
OPPORTUNITIES AND EMERGING TRENDS____________________________________
Challenges
Competition and innovation
Poland has become more open in regard to the consumer
market because of its accession to the EU and continuous
standardisation process. There are a growing number of
companies present in the market – both new Polish entities
and known international companies. At the same time, the
range of products and services offered is expanding. With
no legal and administrative barriers, more players benefit
from Poland’s advantages. This encourages competition,
improvement and innovation. Poland becomes a dynamic
market watching world trends and novelties.
Growing expectations
As a consequence of the market development and growth,
Polish consumers have become more demanding. The
cautiousness of Poles is growing in the area of consumer
protection and they are more aware of their rights. Brand
awareness is developing. The premium segment is
becoming more visible.
Diversity of consumers
Despite the growth of consumers in the premium segment,
the majority of consumers remain price-oriented. Although
disposable income is growing, it is still at a much lower
level than Western Europe. About one-third of Poles live in
a rural area where incomes are significantly lower than in
cities.
152 2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats*
Transport network
Poland is a strategic geographic point in Europe. The
road infrastructure, one of the most crucial factors for
foreign direct investment, remains a priority for the Polish
economy. The length of the motorways in Poland is
expected to almost triple by 2010 in comparison with
2005. The main plan for the development of the transport
network in Poland is to build up to 1,990km of new
motorways by the end of 2017.
Opportunities
38 million consumers
Poland represents the biggest market among the new EU
countries. With the rising buying power and consumer
awareness, Poland’s population is an attractive target,
being one of the youngest in the EU.
Strategic location
Poland in Europe is a junction linking east and west, and
north and south. It could also become a great central
location for businesses to develop and expand from.
Easy launch
The growth of the foreign direct investment in recent years
confirms the favourable changes in Poland. There are no
more legal and administrative barriers for capital inflow,
and there is a variety of grants and tax relief for investors.
Poland
Shopping domain
More new trading space in shopping centres is going to be
introduced in Poland in 2005 and 2006 than in any other
country in Europe. The planned expansion will reach about
10 million sq m of shopping or leisure area. Retail parks in
the suburbs of large urban areas will dominate. Investors
will also see opportunities to focus on revitalisation
of urban space in city centres and the construction of
shopping centres in smaller towns.
Increased interest will be placed on the development of
entertainment space. There is a trend towards increasing
the share of leisure area in shopping malls. Discount and
retail outlets are predicted to develop simultaneously to
an increased demand for luxury centres. This tendency is
in line with Polish market division into price-oriented and
premium segments.
Emerging trends
Factory outlets
After a temporary slow down, factory outlets are gaining
their popularity in the EU. It is expected that the greatest
percentage increase in this type of shopping area will
occur in Poland. The advantages of such outlets are
noticeable from both the consumers and producers
perspectives. For consumers it is the possibility of buying
labelled goods of high quality at reduced prices (with at
least 30% discount). For producers it is an opportunity
to sell surplus or seasonal stock. The biggest of such
ventures in Warsaw (Factory Outlet) and Sosnowiec (Outlet
Company) turned out to be great successes. The investor
of Outlet Company is not only planning on expanding its
existing factory outlet but also opening similar centres
in Gdansk, Poznan, Wrocław, Szczecin and Piaseczno
(Warsaw). In general, eight such factory outlets are
scheduled to be opened in Poland by the end of 2008.
E-commerce
At the end of 2004 there were more than 8 million internet
users in Poland and the number is continuously growing.
Moreover, most of Polish users are either wealthy people
with higher education or students, both attractive groups
of consumers.
It is estimated that one-third of internet users purchase
goods via this channel in around 700 e-shops and it
seems to be the fastest growing sector of retail. The
biggest auction portal in the world eBay started operating
in Poland in 2005. Individual consumers buy mainly
books and CDs. However, there are new products gaining
interest, for example cheap airplane tickets sold online.
Online purchases have grown in popularity in the businessto-business sector with 80% of companies claiming to
be making online purchases. Most of the companies
operating on the internet are beginning to earn profit.
Winning formats
According to the latest market research, despite the
constantly growing popularity of supermarkets, 49% of
Poles still say they go for both traditional and modern
trading outlets. Only 35% declared they do their shopping
only in modern shops and 16% claimed that they
exclusively shop in traditional outlets. This seems to be
contrary to the latest concerns about the future of such
traditional shops, which often have the advantage of
addressing personalised needs of their customers, offering
them a tailored product mix.
In line with the growing number of wealthy Poles, the
patterns of their needs are continuously changing. Such
customers – mostly living in cities and working for foreign
companies – are increasingly seeking the possibility of
shopping in specialised shops offering high quality, rare
and premium products.
Wholesale market consolidation
The wholesale sector in Poland is still subject to ongoing
changes and, following expectations, the main trends are
capital consolidation and integration. The reason for this
situation is mainly the growing competition in the market,
especially medium-sized companies willing to increase
their competitiveness by merging with bigger partners.
As a result of a successful consolidation in 2004 between
the BOS, DLS and Sygiel Jool, the newly formed group is
to join top players on the Polish wholesale market among
Makro Cash and Carry, Selgros, Eurocash, etc.
Medium- and small-sized companies also tend to enter
less formal forms of trade associations, especially joint
procurement, in order to improve their bargaining power in
price negotiations.
2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats* 153
Poland
Specialised markets
In Poland, the two most important groups of specialised
markets are DIY and electronic markets.
The DIYs are represented by six chains: Castorama,
Praktiker, Leroy Merlin, Bricomarché, OBI and Nomi.
These markets offer a wide range of home improvements,
building materials and gardening assortment. Before the
free market economy there was a severe lack of sense of
ownership among Poles. After the change in the political
system there is a constantly growing need to build,
maintain and own property, especially real estate. The
DIY chains developed rapidly in Poland due to this new
attitude and growing demand. Poland has more than 100
stores of this kind.
Electronic players are Media Markt, Saturn, Avans, Vobis
and RTV Euro AGD. They offer a variety of assortments
in one place (reaching thousands of items) with an
opportunity to get a loan (most often interest-free) and
with reduced price promotions for numerous devices. The
growth of this segment is related to the constant increase
of the disposable income in the Polish household and the
development towards the model of more industrialised and
modern society of Western Europe.
154 2005/2006 FROM BEIJING TO BUDAPEST – Winning Brands, Winning Formats*