Polish FMCG market

The food sector in the pandemic period

Friday, 04 February, 2022 Food From Poland 38/2022
In spite of the global crisis caused by the pandemic, foreign trade in agri-food products is doing well. According to the National Support Centre for Agriculture (KOWR), the agri-food exports from Poland reached a record-breaking level of EUR 34 billion in 2020, which is EUR 2.2 billion higher than in the previous year. This means a 7% growth of the value of exports compared with 2019. In the first half of 2021, the upward trend was maintained, achieving a 5.3% increase in the value of exports.
The National Support Centre for Agriculture claims that such a good result under unfavourable conditions has been achieved, among other things, due to the growing economic activity of Polish entrepreneurs, good preparation of domestic companies for functioning under the pandemic conditions, as well as the sustained demand for Polish products on the international market. On the other hand, the price competitiveness of Polish goods was supported by the PLN/EUR exchange rate, favourable to exporters. Do entrepreneurs themselves share this opinion? We have asked Polish producers how they have fared during that difficult time.

Transport: a major challenge

Observation of the market shows that the FMCG industry is among the sectors of the economy which are less vulnerable to market fluctuations connected with the COVID-19 epidemic. “The weakening of the export demand due to the pandemic since March 2019 had not been exclusively caused by economic downturn in partner countries but also by difficulties related to the administrative blockade of certain sales channels. Due to the erratic behaviour and moves of the market, it was hard to plan which product categories or which specific products would rotate in the following period and what turnover could be expected to close the sales in 2020. The situation changed in 2021. Between January and July 2021, Polish agri-food exports achieved the result of EUR 20.5 billion, i.e. 5.2% more than in the previous year. The growth of exports resulted from the abolition of limits and restrictions in international trade, the constantly growing economic activity of Polish entrepreneurs, the good and skillful preparation of Polish companies for operation under pandemic conditions, as well as the sustained interest, and consequently demand, for Polish goods. The price competitiveness of Polish agri-food products was supported by the PLN/EUR exchange rate, favourable to exporters. Good export results were also caused by the economic recovery, especially in the countries of Poland’s major trade partners. An obstacle to an even more dynamic development of exports has been the situation concerning the transport of goods. Maritime freight prices are constantly breaking new records in relation to the 2019 prices. Starting from 2 February 2022, the ‘Mobility Package’ will come into force and significantly affect the transport situation, and thus the costs connected with shipment of products abroad. In our opinion, 2022 will be a difficult year for exports,” explains Iwona Grzybowska, the President of the Board of the District Dairy Cooperative in Łowicz.

The market situation remains dynamic, but the experience gleaned so far allows us to make more precise business decisions and production plans. “In 2021, we have recorded a high increase in comparison with 2020 in the category of UHT Milk – by as much as 20% – as well as UHT Cream by 38%, i.e. in product categories with prolonged shelf life. Powdered products, milk and whey have also recorded a 10% increase in revenues. The fourth product category recording an 18% growth in sales is Curd.”

“Today, we export our products to more than 50 countries, with emphasis on Asian and EU countries, and we are constantly gaining new customers. The share of exports is approx. 30% of the company’s turnover. Our brand hero, Łowiczanka, visible in the brand’s logo, conjures positive associations in customers from foreign markets, since it has already become a guarantor of high quality for many and associates the product with a European producer of well-established reputation,” Iwona Grzybowska says.

New directions compensate for losses

Another dairy producer from Poland, „Mlekpol” Dairy Cooperative, has fared just as well. Małgorzata Cebelińska, Trade Director, admits, „The initial period of the pandemic meant, above all, a change in the work system and the adaptation to new safety principles and the related restrictions. In the case of exports, the greatest difficulties were connected with the lockdown of Chinese ports, causing a temporary halt of production and the previously scheduled loading of Mlekpol’s products. However, the PRC market quickly recovered, and after a period of down time, Chinese dairy imports recorded a considerable increase. Simultaneously, many countries with internal dairy production deficits started looking for new supply possibilities at the time, especially concerning long-term products, such as UHT milk. With our available production capacities, the experience of our sales team, and openness to new projects, we have expanded our exports into new directions that we had never explored before. Restrictions and lockdowns in different countries caused a drop in the sales of many products, especially in the food service channel, particularly in tourism-reliant countries, such as Italy, Greece, or Cyprus. On the other hand, a large portion of the sales lost in this sales channel has ultimately been realised by our distributors in retail chains. This is why, despite many perturbations and the dynamics of change, Mlekpol has achieved satisfactory results on its export sales.”

Sustained dynamics in spite of growing expenses

Although the market of chocolate products maintains a certain degree of stability, this industry has not been spared by problems either. “The main challenge is the growth of operating expenses, connected with the deteriorating availability of the increasingly expensive raw materials, as well as the rising prices of transport and energy. We try to respond the best we can by developing a diverse and high-quality offer, as well as securing the availability of the assortment and the continuity of the supply chain. An important value is contributed by long-term, good cooperation with our suppliers of raw materials and services, which proves even more important during the pandemic. Service, understood as guaranteeing the continuity of supplies to customers, has become crucial in the development of positive relations with our partners and in building competitive advantage,” says Cezary Knaś, Export Manager at LOTTE Wedel.

In this case, despite many perturbations on the market, the confectionery producer closely follows the chosen strategy. “Since the beginning of the pandemic, we have been functioning to fulfill the assumptions of our developed long-term strategy in the best way possible. Exports are an important part of this strategy; therefore, Wedel’s team exclusively responsible for this area focuses, above all, on the development of our business on the hitherto markets, with simultaneous acquisition of new ones. As a result, we are present in more than 60 countries, pursuing the set objectives of presence and activity in regions we currently consider particularly prospective. At this moment, they include Russia, the area of the former Commonwealth of Independent States, and the countries of South-East Asia. The undertaken actions, bringing good results, are all the more satisfying if we keep in mind the additional ‘turbulence’ related to the substantial exchange rate changes in the East or the consequences of Brexit, which bring administrative and custom problems. We have avoided them with, among other things, our experience, knowledge, and preparation of Wedel’s partners abroad who play a crucial role in our business model. We are closing 2021 with a sustained double-digit growth rate, which has been one of our goals. Another year is ahead, and we are focusing on even more intense activity in selected regions, flexibility of action, further development of cooperation with our partners, as well as personnel reinforcement of the export team,” Cezary Knaś says.

Quick adaptation of the offer to new consumer preferences

Alena Cimoch, Export Director at Brand Distribution Group, admits that the pandemic has significantly affected the increase of turnover in the food sector. Appropriate response to the changing conditions and flexibility in the actions taken have become crucial to many companies. “After a period of increased demand for essential products, the FMCG market had to adapt quickly to the new consumer preferences. We have observed a turn of contractors towards lesser-known brands that will ensure high quality and a competitive price. Natural, traditionally manufactured products enjoyed much interest. In a short time, we have expanded our offer to include a diverse assortment from Polish manufacturers, adapting to the structure of demand on international markets. At the same time, we have reorganized our work so as to utilize the scale of our business to the greatest extent possible, we have acquired many new markets. In the situation of increased demand, distribution turned out to be a bottleneck. Ensuring an efficient supply chain (including the supply of production raw materials and packages) will be crucial to the FMCG industry. In spite of the still unstable global economic situation, we look confidently into the future. The sector has proven quite resistant to the pandemic crisis. We have maintained sales at a stable level, acquired new customers, increased employment. This gives us a sense of safety and prospects for development,” Alena Cimoch admits.

Focus on markets and the offer

Growing costs affected most companies of the FMCG market, and the case was no different for the Polish producer of sesame snaps and halva. “During the pandemic – as every company – we struggled against certain challenges. They included the growing costs of packaging, prices of electricity, gas and raw materials, costs of logistics and transport. Production costs are on the rise in virtually every industry, which will surely translate into shelf prices. Currently, we have our specific markets and products that we are developing,” says Marek Moczulski, President of the Board at Unitop.

Despite high uncertainty, Unitop has maintained its market position. “We are developing in Poland, as well as in exports. We introduce new product lines adapted to the needs of modern consumers. We emphasize concentration – we know what we should focus on, our portfolio is not overly dispersed. Exports are crucial to us, comprising the bulk of the company’s turnover. Among other things, we have won undisputed success in North America. We are proud to have been uninterruptedly producing halva and sesame snaps, appreciated by both Polish and foreign consumers, since 1945. We are guided by tradition and care for taste. Quality plays a great role in the production process, and our halva is hand-made,” the president of the company stresses.

Success without signposts

Grupa Maspex exports over 600 products to more than 60 countries worldwide. “One third of our annual turnover is comprised by foreign sales – exports are an important part of our business. We had to face the pandemic that substantially hindered exports to certain markets. There is no shortage of transport or planning challenges either. They are additionally compounded by uncertainty and anxiety. Nevertheless, 2020 saw Maspex achieve one of its better results in foreign sales. That was affected by the situation on foreign markets and the demand for our products, but also by the innate skill of efficiently adapting to market expectations and new situations. The pandemic has upset our well-ordered rhythm of operation and threw us into completely unknown waters. No maps, no signposts. We acted quickly and responded appropriately to the earthquake affecting our partners. What has paid off was above all the many years of forging strong bonds with our strategic partners, as well as the active expansion of our group of customers. Just like the entire Polish agri-food exports, we have managed to strengthen our position. With efficient management, we responded to the demand from new markets and developed new contracts, in the previous year as well. Looking back from the end of 2021, I can say that this year’s results have surpassed our most daring expectations as well. We hope to maintain this position in 2022,” says Barbara Wieczorek, the General Manager Business Unit Export at Grupa Maspex.

In pursuit of competitive advantage

Makarony Polskie (Polish Pasta) is a holding that manufactures pasta and ready meals at 4 plants, under the Novelle and So Food brands, as well as Private Labels for the largest discount store chains in Poland, Ukraine and the EU countries. “Pasta is an international product, well-liked around the world due to its versatility and durability. It is resistant to market fluctuations but, just like other products, it changes in response to customer expectations. Consumers look for healthy, quality products made from diverse kinds of flour. Novelle products meet such needs. We manufacture semolina pasta, egg pasta, high-protein pasta, as well as pasta made of chickpeas, lentil, or green peas. Our vegetarian products under the Novelle brand bear the V-label quality marking. So Food tray meals are produced with clean labels: no preservatives, colourings or flavour enhancers. We preserve them through sterilizing, which gives them a 9-month shelf life.

Our plants hold the IFS and BRC quality certificates. We stand out on the market with the quality of our products, but also with our production capacities. Our plants adapt to the needs of the market, we have the capacities for mass production and the necessary know-how, acquired on global markets through the many years. We produce under private labels and for customers who include the largest distributors and B2B,” informs Zenon Daniłowski, the President of Makarony Polskie.

The products of this company are available in Poland and on international markets, especially the EU and Ukraine. “The share of exports in our revenue is growing year by year: in 2020, it was 9%, and in 2021, it has already reached approx. 11%. We estimate that foreign sales will comprise approx. 15% of our turnover in 2022. To build distribution on the importer’s market, we establish cooperation with a local distributor, which gives us the competitive advantage. We have the products that the customers need, the know-how, the production capacities, and the technology. We are ready for new successes and cooperation in international projects,” says the President of the company.

Constant, long-term strategies, adherence to the basic offer while emphasizing the top quality of the products, a flexible approach and adaptation of the portfolio to new preferences, or compensation for sale losses with new export directions – Polish entrepreneurs have handled the challenges posed by the pandemic in many ways. And the data may indeed show that the Polish exports are pandemic-resistant.

tagi: The food sector in the pandemic period , FMCG ,