Poland Food and Drink Report Q2 2009

Abstract

In BMI' s Business Environment Ratings, Poland remains third out of the 14 key market surveyed in
Central and Eastern Europe (CEE). Despite the deterioration in the external environment, the strength of
domestic demand has shielded the economy from adverse developments in global markets, although, we
nonetheless caution that growth is set to slow considerably. Indeed, with eurozone consumption cooling
and international credit markets remaining tight, momentum for the economic growth cycle will be
distinctly lacking over the course of 2009-2010. Consequently, we expect economic growth to continue
moderating towards 3.5% in 2009 and 2.8% in 2010. Nevertheless, the key factor driving growth
dynamics to date has been the resilience of consumer spending, boding well for food and drink
consumption, which is forecast to reach US$3.9bn in 2013, rising by 16.8% in relation to 2008 levels.
The Polish food and drinks industry is continuing to consolidate, under pressure from economic factors,
as also due to an expansion of larger foreign players, although not even multinationals are immune to the
current slowdown. To this end, in January 2009, the local subsidiary of Coca-Cola announced that it
would make 150 workers redundant, in an effort to streamline costs. A recent report by beverage
researcher Canadean indicated a deceleration in the growth of the overall European soft drinks market,
although figures for both Poland and Romania remained bullish.
In the meantime, Polish feedstock producers welcomed the overturning of the ban on import, production
and use of animal feed derived from biotech crops. Given the increased foreign competition to the
majority small-farm-based agricultural sector, the pressure to increase productivity is substantial, leaving
many with no option but to use genetically modified and higher yielding seed types. The development is
all the more significant, given the impending removal of the EU' s Common Agricultural Policy (CAP)
subsidies is imminent, as well as the recent lifting on a Chinese ban on Polish meat exports.
Competition in the country' s mass grocery retail (MGR) sector is also set to increase, following the
announcement by the Polish subsidiary of UK retail giant Tesco that it would cut the prices it pays to
some of its suppliers, in view of strong competition. French MGR operator Auchan is to rebrand its
supermarkets in Poland under a new ' Simply Market' banner, which will be complemented by significant
investments in existing stores. Nevertheless, hypermarkets are expected to remain the leading MGR
format in the coming years, although discount stores are likely to gain substantial ground in the short-term
at least, due to the increased price sensitivity among consumers.