Poland is the largest of the new EU accession countries, with a population of over 38m, and the prospect of rising living standards has already attracted international soft drinks groups. But local firms are making an impact too with juices and waters. Ute Ballay reports.

Coca-Cola and Pepsi together control 25% of Poland's soft drinks sector, where annual sales have grown by an impressive 50% to almost 5 billion litres over the last five years. But consolidation among leading Polish firms such as Hoop and Agros Nova suggests local suppliers and brands will also prosper in a pan-European market.

Local producers still dominate the fruit/vegetable juice sector, where Polish consumers remain loyal to traditional brands and flavours. None more so than carrot-based juices and juice drinks. Polish producers Maspex and Agros Nova dominate this category, which accounts for almost 20% of juice sales.

The importance of this sub-market was underlined last year, when Agros threatened legal action over new carrot juice brand Karotella from rival producer Maspex. Agros claimed consumers might confuse Karotella with its own established Karotka range of carrot-based drinks. Hortex also has its own carrot juice range, Witaminka.

Apple and tomato are other popular flavours sourced from local crops, while orange juice - hardly available in Poland until the 1990s - is also gaining market share. Fruit-flavoured drinks recorded volume sales growth of over 10% last year. But the more than doubling of sugar prices in the first half of 2004, a direct result of Poland's EU accession, hit demand in this price-sensitive segment.

Maspex has a 40% share of Poland's juice market - where sales reached 950 million litres in 2003. Maspex is the country's biggest domestically owned food group, with leading juice brands such as Kubus and Tymbark. Last year it successfully launched the Kubus brand (acquired in 1999) in Germany. It also added a childrens' juice to the Kubus range - a move followed this year by
leading firms such as Hoop and Hellena.

Maspex's main domestic rival is Agros Nova (AN). Formed last year from the merger of Agros Fortuna and Sorda, AN, which is backed by Enterprise Investors, aims to capture the Maspex crown within three years - it already has an 18% share of the juice segment - though analysts have suggested this is an ambitious target.

AN is also looking to expand abroad. "We might decide to enter the Russian market, but to do that we would need to establish a production plant there," said AN President Robert Niewiadornski. The group will export some 10% of juice output this year.

Sales at Hortex rose 25% in the first three-quarters of the 2003/04 financial year, as the group almost doubled its juice range - it now has 27 brands. More product launches and a big increase in marketing will bring further growth this year. "We are very happy with Hortex's development tempo in the juice market," said marketing chief Wojciech Planer. "We consider growing our share by 3.3% in such a competitive market to be a great success. It is even more satisfying that the company met the goal it had set for itself a few months ahead of schedule."

Hortex is itself under pressure from Sokpol, the Myszkow-based juice and soft drink specialist. Sokpol lifted sales by 12% to €42m in 2003, and expects similar growth this year.

Demand for carbonates is still growing - sales rose 6.5% last year to 1.9 billion litres. Coca-Cola has a 30% market share, well ahead of Pepsi and twice the size of leading Polish challenger Hellena. However the fruit-flavoured carbonate range from Hellena remains the single best-selling brand.

Light cola is one of the most dynamic areas of this segment. Local firms scrambled to repeat the success of Coca-Cola's 2003 light cola brand launch, Silver Temptation. Local output is significantly cheaper than Coca-Cola and Pepsi brands, and the expansion of domestic production has brought carbonates to a much wider market. So too has the growing role of private label production for discount supermarket chains. Poland is still dominated by small and medium stores serving a mainly rural population, but European discounters have targeted Poland since Portuguese chain JMR took over leading local discounter Bierdronka in 1998. German giant Lidl entered the neighbouring Polish market in 2002.

Carbonates look set to grow on the back of higher living standards and further expansion of both private label and new premium brands. Smaller Polish firms may find a niche market in the development of new flavours based on local taste.

With regard to the water sector, Hoop has enjoyed huge success with its Arctic water brand promoted by Cindy Crawford. "Our brand recognition has gone up from 10% to over 50% compared to the previous year, while sales have jumped 60%," said Hoop's Marketing Manager Jedrzej Szynkarczuk. However, Hoop's total water sales fell sharply in the second quarter, part of an overall 17% decline in soft drink sales that saw the firm's market share slip 1% to 12%. "May and June were so cold the whole beverage trade faced problems," explained Deputy President Marek Jutkewicz. "The fall in demand might also have been caused by a 15% price increase in our drinks due to increasing sugar prices."

Total consumption of bottled water has now passed 50 litres per head, helped by Poland's hot summers (demand is very seasonal) and the dubious quality of tap water in some regions. Table and spring water each have some 40% of the near 2 billion litres per year market. Sales are forecast to grow 10% annually over the next few years, ahead of carbonates and in line with fruit and vegetable juices.

Hoop acquired the Woda Grodziska brand in 2003, and is looking to acquire further bottlers - it still has funds available from last summer's public flotation. Coca-Cola is also well placed in this segment; last year it added the Multivita brand (bought from Maspex) to its range of waters, led by Bonaqua table water.

Energy drinks are another fast-growing segment, although one limited to a few urban areas. As ever, Red Bull leads the way, and local firms have launched the usual bunch of rival brews. Koop from Hoop and Hellena's Grom are two of the best promoted Polish energy brands.

Western and local firms alike expect to profit from the emergence in Poland of an aspirational middle class with money to spend. Yet not all Poles are rushing to embrace western lifestyles; hence the success of local Coke-imitation Polo-Cofta, which is tapping the curious nostalgic demand for communist-era products from the 1950s.

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