Required Report - public distribution

**Date:** 11/10/2004

**GAIN Report Number:** PL4043

PL4043

**Poland**

**Retail Food Sector**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Wayne Molstad, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Business Analysts & Advisers Ltd.

**Report Highlights:**

Poland\'s food retailing sector continues to undergo radical
transformation as consumer incomes grow in this modernizing country of
38.6 million people. Hypermarkets increased from 27 in 1996 to 293 in
2003. They are projected to expand to over 300 by 2005 and will account
for about 50 percent of retail food sales within the next five years.
Prospects for U.S. sales are hampered by stiff Polish and EU
competition, stringent food ingredient regulations, and costly terms of
business to get product onto large retailers\' shelves. Nevertheless,
there are select opportunities outlined in Section V, \"Best
Prospects\".

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Warsaw \[PL1\]

\[PL\]

Table of Contents

**I. MARKET SUMMARY 3**

**General Information 3**

**Description of Retail Trade 5**

**Import Conditions 17**

**II. Road Map for Market Entry 20**

**A. Hypermarkets, Supermarkets, Discount Shops 20**

**B. Convenience Stores, Gas Marts, Kiosks 24**

**C. Traditional Markets 25**

**III. Competition 26**

**IV. Integration with European Union 27**

**V. Best Prospects 27**

**A. Products present in the market which have good sales potential 29**

**B. Products not present in significant quantities but which have good
sales potential 31**

**C. Products not present because they face significant barriers 31**

**VI. Embassy contact information 31**

**VII. Enclosures 32**

#### Table I - Largest Foreign investment projects in food-processing and tobacco Industries (\$ Million, December 2003) 

**I[. MARKET SUMMARY]{.smallcaps}**

**General Information**

In the mid to late 1990s the Polish economy grew rapidly. After a
slowdown, due mainly to the global economic conditions, Poland
has regained the pace of growth that it achieved in the second half of
the 1990s.  In 2003, GDP grew by 3.8%. Economists forecast that GDP
should grow by at least 4.3% in 2004 and 4.6% in 2005.

![](media/image2.wmf)Chart 1. GDP growth in 1993-2005 (%)

*Source: Main Statistical Service (GUS)*

Poland\'s GDP at current market prices was estimated at \$209.6 billion
in 2003, (or \$5,400 per capita). In terms of Purchasing Power Parity,
this equates to \$10,900 per capita, having grown from \$4,400 in 1990.

***Chart 2. GDP level in Poland in 2003 compared to other countries in
bln of \$***

![](media/image3.wmf)

Consumer price inflation has been dropping since the beginning of the
transformation. Average annual inflation in 2003 was 0.8% (1.9% in
2002). According to the GUS forecast, in 2004 CPI will be 2.0%.

***Chart 3. Average annual inflation in 1997-2003***

![](media/image4.png){width="4.677083333333333in"
height="2.0833333333333335in"}

*Source: GUS*

Unemployment had fallen steadily from 1993 to 1998. However, according
to the national census, the unemployment rate exceeded 20% in 2003,
while the GUS statistics estimate is 18% (roughly three million people
are registered as jobless). Unemployment is expected to decrease further
in the coming years and drop below 19% at the end of 2004 as the effects
of the economic recovery continue to be felt.

The transformation of the Polish economy into a market economy has
resulted in significant development of retail trade since the late
1990s. Dynamic changes in the domestic market have occurred, resulting
in increased competition in both the production and trade sectors;
companies trading in food products have been under particularly strong
pressure, as this segment of the market has become an area of
significant interest to foreign competitors.

Foreign capital and new standards of distribution and trade have not
only shown Polish retailers new ways of operating their businesses but
also challenged them to create their own methods to attract and retain
customers.

Polish retail trade companies also realize that they cannot ignore
globalization. They have begun concentrating and consolidating processes
to strengthen their market position.

All of these new phenomena and retail market changes resulted in
conversion of a producer market into a consumer market, as a result
there are continuous efforts to increase revenues. However, compared to
western Europe, the Polish retail trade is still very much fragmented
due to the nature of Poland's demographic structure, where 38 % (15
million people) of the Polish population live in over 50,000 villages.

## ![](media/image5.wmf)Chart 4. Number of shops per 10 000 inhabitants

\* excluding open markets

In 2003 the number of retail outlets in Poland decreased slightly to
448,000 from almost 450,000. However, it is still twice as many as in
Spain and six times more than in the United Kingdom. In addition, there
were about 400,000 other retail outlets such as small kiosks, stands,
stalls, etc. The total number of retail outlets is about 840,000.

## Retail Trade

Retail trade represented 18.5% of Poland's GDP in 2003 and its share in
terms of gross of gross added value was 21.2%. In 2000 it was estimated
that on average, not more than 35 customers shopped in a traditional
shop, where they spent less than PLN 100 (\$ 25.00). The situation was
even worse in rural areas where the number of customers was three times
lower. In 2002 the average daily number of shoppers in traditional shops
decreased by another 10-15%, regardless of their location and the unit
transaction value was also lower. This demand trend continued in 2003.

The growing popularity of hypermarkets is reflected in their increasing
number of customers. They are becoming more and more the main source of
household supplies. In 2001 the number of people who shopped at
hypermarkets more than once a week increased by over 100% compared to
1999 (from 18 % to 39 %). A further but not as spectacular increase
occurred in 2002 and 2003.

The average purchase at a hypermarket, is estimated at PLN 172 = \$41.00
(PLN 203 in Warsaw and PLN 260 in Gdansk). On the other hand, the
average value of the transaction in traditional shops has dropped
10-15%. This decrease has mainly affected shops located in places
inhabited by fewer than 10,000 people.

The increase in the total number of entities dealing with the retail
trade was solely due to efforts of private shop owners. The retail trade
was the first sector of the Polish economy to be almost entirely
privatized at the beginning of the transformation period. At present
there are only a few cooperative companies and an insignificant number
of state-owned retail units. The number of state owned retail units
continues to decrease (from 2,330 in 2000 to 1,792 in 2002, and 1,519 in
2003), and they represent only about 0.3% of the total number of shops.

**Chart 5. Number of shops**

![](media/image6.wmf)

*Source: Polish Statistical Yearbook 2003, 2004*

About 77% of shops are located in urban areas, which has been the case
for the last three years.

During the last decade a rapid increase in the market share of
super/hypermarket chains, in most cases with foreign capital, has been
noted.

***Table 1. Number of shops with foreign capital***

+-------------------------+--------+-------+--------+--------+-------+
| ### Description         | **     | **2   | **     | **     | **2   |
|                         | 1995** | 000** | 2001** | 2002** | 003** |
+-------------------------+--------+-------+--------+--------+-------+
| Shops with foreign      | 748    | 2,975 | 3,250  | 3,321  | 3,852 |
| capital                 |        |       |        |        |       |
+-------------------------+--------+-------+--------+--------+-------+
| The % of shops with     | 0.18   | 0.69  | 0.72   | 0.74   | 0.86  |
| foreign capital of all  |        |       |        |        |       |
| shops                   |        |       |        |        |       |
+-------------------------+--------+-------+--------+--------+-------+

Source: Polish Statistical Yearbook 2003, 2004

Due to the lack of capital, weak financial situation, and low
profitability, Polish companies have lost the first battle for access to
the food retail market. However, over the last two years there has been
a more active approach towards regaining lost positions.

Nonetheless, given their greater access to capital, foreign companies
are expected to play a particularly significant role in trade
development during the coming years.

Over the past three years, three main trends characterized the Polish
retail trade. Traditional retail business (shops with an area smaller
than 300 m^2^) have been gradually losing their importance, the fast
moving consumer goods market has been stabilizing, and strong
competition has surfaced within modern distribution channels. The latter
is taking place at the expense of traditional distribution channels
whose financial situation is systematically becoming worse.

The fact that 98.6% of retail companies have no more than two shops is
further evidence of the dispersed structure of the trade. Organizations
owning more than 20 shops represent less than 0.1% of the total number
of companies active in this sector.

In 2003 privately owned businesses represented as much as 82.7% of the
total number of business entities involved in retail trade, which was
0.2% more than in 2002.

## 

***Table 2. Companies and number of shops owned***

  --------------------------------- ------------- ------------- -------------
  **Specification**                 **2001**      **2002**      **2003**

  **Total**                         **408,481**   **409,721**   **404,286**

  up to 2 shops                     402,788       404,335       398,681

  3-10 shops                        4,665         4,350         4,551

  11-20 shops                       770           756           740

  21-50 shops                       225           239           264

  51-100 shops                      26            30            35

  101-200 shops                     5             9             10

  over 200 shops                    2             2             5
  --------------------------------- ------------- ------------- -------------

#### Source: Polish Statistical Yearbook 2003, 2004

Despite the fact that the number of small shops (below 50 m^2^)
decreased 3-5% in 1999, 1% in 2000, and by a further 3.6% in 2001, they
still continue to form a major group of retail units. In 2003 the number
stabilized at a level similar to that in 2001 and 2002.

In 2002 for the first time since the beginning of the 1990s, the rate of
growth of shops with floor space exceeding 400m^2^ slowed (only 4%
compared to 13% the previous year). In 2003 the pace of expansion (11%)
was slower than in 2001, but much higher compared to 2002. It is
expected that it will be much lower in coming years and that the average
sales area will also be smaller compared to hypermarkets built in the
second half of the 1990s.

***Table 3. Shops by operating area in 1996-2003***

![](media/image7.wmf)\* Represents year-by-year percentage change.

Source: Polish Statistical Yearbook, 2003, 2004

***Table 4. Selling space of shops with foreign capital***

  ----------- --------- ----------- --------- ----------- --------- ----------- ---------
  **2000**              **72001**             **2002**              **2003**    

  **m^2^**    **% of    **m^2^**    **% of    **m^2^**    **% of    **m^2^**    **% of
              total                 total                 total                 total
              sale                  sale                  sale                  sale
              space**               space**               space**               space**

  1,763,974   6.5       2,609,039   8.5       2,756,453   8.5       3,563,957   10.5
  ----------- --------- ----------- --------- ----------- --------- ----------- ---------

Source: Polish Statistical Yearbook, 2003, 2004

The rapid growth in a number of super and hypermarkets seen in the 1990s
(95 outlets at the end of 1999 represented an increase of 67% compared
to 1998) has slowed down. There were 293 hypermarkets in 2003 (35% more
than in 2002). The number of supermarkets increased from 1,863 in 2002
to 2,043 in 2003 (up 9%). On the other hand, traditional trade and
department stores decreased from 605 to 591 (down 2 %).

Total sales reported by retail outlets in Poland in 2003 reached PLN
385.1 billion (\$99.2 billion).

## Chart 6. Sales through retail outlets in Poland 

![](media/image8.wmf)

Non-food products sales are dominant and represent almost 63% of total
retail sales.

***Table 5. Structure of retail sales in Poland in 1996-2003 by %
(current prices)***

  ------------------------- ---------- ---------- ---------- ---------- ---------- ----------
  **Description**           **1998**   **1999**   **2000**   **2001**   **2002**   **2003**

  **TOTAL**                 **100**    **100**    **100**    **100**    **100**    **100**

  Fruits and vegetables     1.7        2.4        2.1        2.1        2.2        2.2

  Meat and processed meats  5.1        4.8        5.9        5.4        5.7        5.6

  Fish and fish products    0.9        1.0        1.1        1.1        1.1        1.1

  Alcoholic beverages       9.1        8.7        6.5        6.0        6.9        7.0

  Non-alcoholic beverages   1.5        1.6        2.1        2.3        2.4        2.4

  Milk, cheese, and eggs    2.8        3.4        2.9        2.8        2.9        3.1

  Bread and processed       2.1        3.0        3.3        3.1        3.2        3.2
  cereals                                                                          

  Sugar and confectionery   5.8        5.4        5          4.9        4.9        4.9

  Coffee, tea, and cocoa    1.6        1.9        1.4        1.3        1.4        1.5

  Other food products       11.1       8.9        8.5        8.5        6.9        6.4

  Non-food products         65.7       58.9       61.2       62.5       62.4       62.6
  ------------------------- ---------- ---------- ---------- ---------- ---------- ----------

*Source: Polish Statistical Yearbook 2003, 2004*

2003 retail sales grew 3.4% (in constant prices) compared to 2001. A
much higher than average increase in sales was noted for alcoholic
beverages and tobacco (7.4%); the rate of growth for food and alcoholic
drinks was lower at 2.7%. Companies with foreign capital involved in
retail trade represented 14.5% of total retail sales.

### Structure of retail stores in 2003

In 2003 the retail network in Poland included about 440,000 shops, 0.6%
less than in 2002. A further reduction of cooperative retail outlets was
the main reason for this decrease. However, the total number of shops
selling different types of food (including gas stations) increased by
0.4% or 183, 965 units, which is 41% of the total number of retail
outlets.

***Table 6. Points of retail trade^1)^*** and gas stations in Poland in
1997-2003

+------------------+------+-------+------+------+------+-------+------+
| **Item**         | **19 | **1   | **19 | **20 | **20 | **2   | **20 |
|                  | 97** | 998** | 99** | 00** | 01** | 002** | 03** |
+------------------+------+-------+------+------+------+-------+------+
| ######### Shops  | **4  | *     | **4  | **4  | **4  | *     | **4  |
|                  | 24,3 | *451, | 50,2 | 31,9 | 49,3 | *450, | 47,8 |
|                  | 62** | 785** | 32** | 91** | 39** | 434** | 98** |
+------------------+------+-------+------+------+------+-------+------+
| *Including:*     |      |       |      |      |      |       |      |
+------------------+------+-------+------+------+------+-------+------+
| Food stores      | 140  | 14    | 147  | 142  | 145  | 14    | 145  |
|                  | ,811 | 7,207 | ,366 | ,257 | ,934 | 5,238 | ,021 |
+------------------+------+-------+------+------+------+-------+------+
| Fruit and        | 6    | 6,935 | 6    | 6    | 5    | 5,308 | 5    |
| vegetable shop   | ,470 |       | ,974 | ,678 | ,251 |       | ,382 |
+------------------+------+-------+------+------+------+-------+------+
| Meat shops       | 14   | 1     | 14   | 14   | 14   | 1     | 15   |
|                  | ,315 | 5,056 | ,879 | ,045 | ,714 | 5,041 | ,357 |
+------------------+------+-------+------+------+------+-------+------+
| Fish shops       | 1    | 1,619 | 1    | 1    | 1    | 1,570 | 1    |
|                  | ,508 |       | ,574 | ,506 | ,572 |       | ,560 |
+------------------+------+-------+------+------+------+-------+------+
| Confectionery    | 3    | 3,773 | 3    | 3    | 4    | 4,374 | 4    |
| shops            | ,520 |       | ,630 | ,681 | ,101 |       | ,289 |
+------------------+------+-------+------+------+------+-------+------+
| Alcoholic        | 2    | 2,731 | 2    | 2    | 2    | 2,294 | 2    |
| beverage shops   | ,830 |       | ,539 | ,350 | ,335 |       | ,483 |
+------------------+------+-------+------+------+------+-------+------+
| **Gas stations** | *    | **7,  | *    | *    | *    | **9,  | *    |
|                  | *6,5 | 253** | *7,6 | *7,7 | *8,9 | 311** | *9,8 |
|                  | 48** |       | 07** | 44** | 01** |       | 73** |
+------------------+------+-------+------+------+------+-------+------+
| Non-food shops   | 248  | 26    | 265  | 253  | 266  | 26    | 263  |
|                  | ,360 | 7,211 | ,663 | ,730 | ,531 | 7,298 | ,933 |
+------------------+------+-------+------+------+------+-------+------+
| Number of people | 91   | 86    | 86   | 88   | 86   | 85    | 85   |
| per one shop     |      |       |      |      |      |       |      |
+------------------+------+-------+------+------+------+-------+------+

*The statistical data covers: shops, open market stores, stores, market
stalls, and movable points of sale.*

*Source: Polish Statistical Yearbook 2003, 2004*

Both the total number of shops and the number of different types of
shops have remained stable for the last two years.

In 2003 there were 447,898 shops including:

-   174,092 retail food shops which represent about 38.9 % of the total
    number of stores (38.6% in 2002 and 2001);

-   84,526 non-food stores (18.9% in 2003 compared to 18.5% in 2002, and
    18.4% in 2001);

-   14,754 automotive stores (3.3% in 2003 compared to 3.2 in 2002 and
    in 2001);

-   174,526 other stores (38.9% in 2003 compared to 39.6% in 2002, and
    39.7% in 2001).

This confirms the growing trend to offer a wide range of food and
non-food products at one location (supermarket and other shops). The
continuous concentration in the Polish food trade has resulted in the
following trends:

-   A decreasing number of specialized shops which represent 5% of the
    total number of shops (a decrease from 24,000 in 2001 to 23,000 in
    2003). These are either closed, or enlarging their product profile
    with new items.

-   A growing trend to offer a wide range of food and non-food products
    in one shopping center (a super or hypermarket and other shops).

-   Shops located in large cities are being closed because of increasing
    competition from super and hypermarkets.

-   An increasing number of small shops are being opened in areas of
    high unemployment and in rural areas.

-   An increasing share by large trade organizations in total revenue.

The structure of food shops has not changed much compared to previous
years; small shops still dominate Polish trade.

Table 7. Number of shops by forms of organization

  ------------------- ----------- --------------- ----------- -------------
  **Item**            **2002**                    **2003**    

                      **Number of **% in a total  **Number of **% in a
                      shops**     number of food  shops**     total number
                                  stores**                    of food
                                                              stores**

  Department stores   106         0.1             102         0.1

  Trade stores        499         0.3             517         0.3

  Hypermarkets        216         0.1             293         0.2

  Supermarkets and    1,947       1.0             2,200       1.2
  discounts                                                   

  Other shops         171,057     93.4            170,980     92.9

  Gas stations        9,311       5.1             9,873       5.3

  Total               183,136     100             183,965     100
  ------------------- ----------- --------------- ----------- -------------

*Source: Polish Statistical Yearbook 2003, 2004*

The increasing popularity of modern distribution channels is evident. In
2003 supermarkets, hypermarkets, and discount shops represented 36% of
the total revenue from sales of those products (compared to 29% in 2001
and 35% in 2002) despite the fact that these constitute only 1.4% of the
total number of stores involved in retail food trade. More than half of
this revenue is generated by hypermarkets. Traditional distribution
channels: large, medium, and small grocery shops, as well as specialized
outlets constitute 92.9% of the total number of food shops and 64% of
the revenue of food products, cigarettes, and alcoholic beverages sales.

## Chart 7. Structure of sales in 2003

![](media/image9.wmf)

The first hypermarkets in Poland opened 10 years ago. Today this is a
normal way of shopping for most of the population living in big towns.
Hypermarkets in Poland have undergone very dynamic development. The
first 27 hypermarkets were opened between 1993-1996. These were
individual outlets with an average area of 2,500 to 5,000 m^2^ During
the period 1997-98, thirty new hypermarkets were opened. It became a
common market practice for part of a shopping center to be designated
for small boutiques, restaurants, and other shops during this period.
The average selling floor of hypermarkets ranged between 6,000 and
14,000 m^2^ with the area of the neighboring outlets of 2,000 -- 8,000
m^2^. However, one-third of the Polish population reportedly has never
shopped in shopping centers and has no intention to do so. This suggests
that traditional channels will remain viable in the future.

Open-air markets continue to play a significant role in the Polish
retail sector. In 2003 there were 2,328 permanent markets where about
131,000 regular points of sale were registered. This indicates that a
considerable portion of domestic revenue is generated in these markets.
The scope of activities has not changed for many years. Over 85% of the
markets are retail, the remainder are wholesale traders. The majority of
goods sold in the markets is supplied by local producers. In central
Poland 40 % of shops are owned by the producers. In western Poland the
percentage is lower.

### Retail Market Situation 

The number of shops with an area below 50 m^2^ remained at the same
level as in 2001 and 2002, and their percentage remained unchanged
whereas the number of shops with an area exceeding 400 m^2^ grew by 7.3%
which was also an increase in the total selling floor space by 7.5%. In
2003 there were 888 m^2^ of floor space area per 1,000 inhabitants
compared to\
865 m^2^ in 2002.

Over the last few years the Polish retail trade sector witnessed tough
competition among foreign chain owners who want to be the market leader.
Currently, building a new shopping center has become quite difficult due
to new legal restrictions; therefore, mergers and acquisitions are the
main method for achieving this. The number of hypermarkets involved in
the food trade increased in 2003 by almost 19% reaching 202 shops, while
in 2002 170 new shops opened in Poland, a 25% increase.

In the last two years most of the stores opened in this sector were
compact hypermarkets and the majority of these were under the Kaufland
banner. This retail chain is owned by the German company Lidl&Schwartz
which started its activities in Poland in 2001 and has since opened 36
hypermarkets. The trend towards opening hypermarkets with smaller
formats is also clearly visible and this refers not only to discounters
and convenience stores but also to the large hypermarket operators who
have recently focused on developing smaller format chains (Ahols's
Albert chain, Geant's Leader Price chain, E.Leclerc's supermarket
operations, as well as Tesco's mini-hypermarkets and supermarkets).

***Chart 8. Market share in the hypermarket segment in 2003 by sales
revenues***

![](media/image10.wmf)*Source: PMR, Retail Poland 2004*

In fact, these are not hypermarkets, but discount shops that have
experienced significant growth. At the end of 2002 there were 1,200
outlets (150 more than in 2001 and in 2003 the number increased by
another 10%). Currently, these shops operate in large cities (as super
and hypermarkets) as well as in small towns. Many discount chains
continue to develop their activities. Biedronka for instance, plans to
open another 70 shops during the next three years, Plus Discount is
planning to open 1,000 outlets in Poland. Leader Price has already
opened 133 shops (25 opened in 2003). In April 2002 Lidl&Schwarz opened
in a chain of about 36 Lidl outlets and by 2003 there were 75 shops.

Among shops with foreign capital investment, supermarkets are developing
least rapidly. Compared to 2002, there was only a slight increase of 3%.

Alongside the rapid expansion of discount stores, convenience-type
grocery outlets are becoming widespread. These are often developed as
franchises or by wholesale companies which create retail networks around
their own distribution centres.

The slower rate of growth of foreign retail chains since 2002 is due to
the following factors:

-   increasing level of market saturation,

-   difficulties in finding an appropriate location (distant from
    competitors),

-   buy-outs of existing companies instead of building new shops,

-   legal restrictions

In 2002 there were two spectacular buy-outs in this sector. Ahold bought
Jumbo hypermarkets from Jeronimo Martins and Tesco acquired the HIT
chain. In 2002-2003 grocery retailers Dohle and Reitan and Rema went out
of business. Edeka was bought out in 2003 by the Royal Markets Company.

It is predicted that in the coming years the average selling space of
hypermarkets will increase to 8,000 -- 18,000 m^2^, and the area of the
shopping centers will be 10,000 -- 35,000 m^2^. There are a total of
3,852 shops with an area of 3,563,957 m^2^ owned by foreign chains
(hypermarkets, supermarkets, and discount shops).

For many years Polish traders have made significant efforts to compete
with foreign chains and build their market position. For instance, the
Polomarket chain opened 19 shops in 2003 and by end of the year they
operated 118 supermarkets. They are ranked 22nd on the TOP 50 list of
top Polish companies. Polish company, Royal Markets bought the German
chain Edeka. Royal Markets now owns 44 discount shops and intends to
open another six in the near future. The Eko company owns 112 shops, the
Groszek chain has 314 shops run on a franchise basis, and the Lewiatan
chain operates nation-wide and consists of about 1,000 shops. There are
also several chains operating on a local scale. Polish traders have
begun joining forces to compete with western "giants". In February 2000,
eleven Polish organizations established the Union of Polish Retail
Chains. Currently, this organization represents thirteen companies
operating locally, regionally, or nationwide (Polka, Rabat Katowice,
Nasze Sklepy, Berti, Rydz, 6 chains operated by the Lewiatan Group, and
Unia Detal).

The total income in 2003 for the 50 largest companies (comprising both
wholesale and retail trade units) was \$16.5 billion, which is 26% more
than in 2002. The German concern Metro, comprised of Makro Cash & Carry,
Real, Praktiker, and Media Mart is the unquestioned leader thanks to
Macro Cash & Carry activity with revenues totaling about \$ 3.0 billion.

Another important phenomenon on the Polish retail market is the sale of
products under private labels. Makro Cash&Carry (Aro brand), Robert
Discount (Robert brand), and Tengelmas's chain Plus (Plus brand) were
the first retail chains to introduce private labels in Poland in
1997/1998. Currently, most foreign retail chains operating on the Polish
market and some Polish retail chains have their own private labels.
According to Polska Organizacja Handlu i Dystrybucji, private labels
account on average for 60% of revenue in discount stores and 20% in
hyper- and supermarkets. Their share in the total product volume varies
depending on the type retailer and can vary from 5 to nearly 100%. In
the case of chains like Real or Tesco, private label sales accounts for
6 to 20%, Biedronka chain sells 60% of products under private label, and
Leader Price more than 90%. It is estimated that over 5,000 chain store
branded products are now available from retail chains and two-thirds of
these are foodstuffs. The same private label is offered in various
stores of the same retailer (e.g. Casino's Leader Price being sold in
the Leader Price stores as well as in Geant hypermarkets) or different
labels can be created for each of the store chains of the same retailer
(as in the case of Dutch Ahold which introduced a "DiT"- "Dobre i Tanie"
label in the Hypernova chain, and "Albert Q-line" in Albert
supermarkets).

Polish retailers started their private label by offering customers low
prices and relatively low quality. A typical private label price level
is about 30-60% lower than their brand equivalent prices, mainly due to
savings on advertising, promotion and selling comparatively large
quantities of such products. Falling disposable incomes in the last
couple of years has had a predictable impact on consumers' interest in
lower priced products. These private label goods are a dominant feature
in retail shops on the Polish market. The rivalry with brand names now
includes both lower prices and high quality. Examples of the new trend
are the private label products from Makro Quality (80 products) and
Tesco Brand (270 products).

According to retailers operating on the Polish market, most of the goods
sold under private label are produced by Polish companies. These are
mainly small and medium firms, who do not have their own brands. Overall
about 500 companies in Poland manufacture products sold by large stores
under their own brands. For instance, more than 90% of private label
products are produced by about 160 small and medium sized Polish
companies.

Table 8. The most popular private labels in Poland are:

  ------------------- ---------------- ---------------------- --------------
  **Private label**   **Store chain**  **Retailer (country)** **Popularity
                                                              %**

  Biedronka           Biedronka        Jeronimo Martins       54
                                       (Portugal)             

  TiP Tanie i Pewne   Real             Metro AG (Germany)     17

  Leader Price        Leader Price,    Casino Group (France)  15
                      Geant                                   

  DiT Dobre i Tanie   Hypernova        Ahold (Holland)        12

  Aro                 Makro Cash&Carry Metro AG (Germany)     8

  Tesco Korzystny     Tesco, Hit       Tesco (Great Britain)  4
  Zakup                                                       
  ------------------- ---------------- ---------------------- --------------

*Source GfK Polonia research, February 2003*

About 40% of shoppers care about the brand and more than one third of
them buy private label products "often" or "very often". The majority of
customers in favor of private labels buy them in discount stores (76.4%)
or in hypermarkets (13.5%). Polish retailers purchase goods mainly from
local producers and wholesalers. Companies with foreign capital purchase
from local producers as well as direct import.

# 

**Chart 9. Sources of supply**

![](media/image11.wmf)**Polish retailers Retailers with foreign
capital**

![](media/image12.wmf)

Expected Changes

The next five years will see very dynamic structural changes in retail
trade.

The following changes are expected in the retail trade:

-   increased importance of large-area trade outlets in the structure
    and revenue of the retail trade;

-   increased importance of companies owning chains of stores;

-   decreased number of small retail outlets;

-   integration process among small and medium companies;

-   mergers and buy-outs among large chains;

-   further consolidation of retail companies will strengthen the best
    of these, and increase the gap between them and weaker traders;

-   increasing importance of private label goods;

-   the considerable importance of traditional retail trade in small
    cities and rural areas

Supermarkets and discount shops are predicted to develop quicker than
other shops. In five years hypermarket, supermarket, and discount chains
will become the leaders in food products retail. Given the limited
investment possibilities for local companies, rapid growth in market
share by foreign companies seems to be inevitable.

According to a report prepared by Cushman & Wakefield Healey & Baker,
during the next two years the trade area in Europe will increase by
9,000,000 m^2^, and Poland is estimated to be a leader, achieving an
area increase of 1,685,000 m^2^. On the other hand, this development
will be limited to a certain extent by new regulations which are either
already in force or planned to be implemented. Amongst these are:

-   restrictions concerning location of super and hypermarkets,

-   new regulations related to trade agreements,

-   new regulations concerning prices, promotion, and advertising,

-   restrictions concerning margin levels.

### Import Conditions

According to GUS, in 2003 food articles bought from the United States,
were valued at \$91.5 million, which is 7.6% less than in 2002. Imports
also decreased from 3% to 2.3% for all agricultural products imported by
Poland. Key products imported from the USA included red meat and tripe,
fresh fruit (grapefruit) and fish.

Table 9. Structure of Polish agro-food imports by groups of countries

  ------------- --------------- --------------- --------------- --------------- ----------
  **Group**     **2002**                        **2003**                        **02/01 (%
                                                                                chg)**

                **\$**          **structure**   **\$**          **structure**   

  EU            1,902.900       53%             2,090,400       52%             9.9

  FSU           97,200          3%              114,100         3%              17.4

  CEFTA         345,200         10%             399,600         10%             15.8

  EFTA          147,900         4%              169,700         4%              14.7

  USA           99,100          3%              91,600          2%              -7.6

  Remaining     983,400         28%             1,147,500       29%             16.7

  **Total**     **3,575,600**   **100%**        **4,012,900**   **100%**        **12.2**
  ------------- --------------- --------------- --------------- --------------- ----------

# []{.mark}

Table 10. Import of some food products in 2003

+-----------------+-------------+----------+-----------+-------------+
| **Description** | **Total     | *        | **Share   | **Main      |
|                 | imports of  | *Imports | of US     | Foreign     |
|                 | agri-food   | from the | imports   | Co          |
|                 | products by | USA**    | in total  | mpetitors** |
|                 | Poland\     |          | imports   |             |
|                 | (\$ )**     | **(\$)** | (%)**     |             |
+-----------------+-------------+----------+-----------+-------------+
| Red meat and    | 86,455,000  | 17       | 20.5      | Denmark,    |
| tripe           |             | ,698,000 |           | Holland,    |
|                 |             |          |           | Belgium,-   |
+-----------------+-------------+----------+-----------+-------------+
| Poultry meat    | 19,459,000  | 798,000  | 4.1       | Denmark,    |
| and tripe       |             |          |           | Holland,    |
|                 |             |          |           | Belgium     |
+-----------------+-------------+----------+-----------+-------------+
| Fresh fruit     | 551,838,000 | 9        | 1.8       | Spain,      |
|                 |             | ,776,000 |           | Ecuador,    |
|                 |             |          |           | Italy,      |
|                 |             |          |           | Greece,     |
|                 |             |          |           | Turkey      |
+-----------------+-------------+----------+-----------+-------------+
| Fish and        | 322,947,000 | 6        | 2.1       | France,     |
| crustaceans     |             | ,913,000 |           | Germany,    |
|                 |             |          |           | Norway,     |
|                 |             |          |           | Denmark,    |
|                 |             |          |           | Russia      |
+-----------------+-------------+----------+-----------+-------------+
| Sugar           | 56,165,000  | 2        | 4.4       | Germany,    |
| confectionery,  |             | ,490,000 |           | Italy,      |
| excluding those |             |          |           | Holland,    |
| containing      |             |          |           | Spain       |
| cocoa           |             |          |           |             |
+-----------------+-------------+----------+-----------+-------------+
| Alcoholic       | 129,590,00  | 5        | 4.2       | France,     |
| beverages       |             | ,474,000 |           | Italy,      |
|                 |             |          |           | Bulgaria,   |
|                 |             |          |           | Germany,    |
|                 |             |          |           | Hungary     |
+-----------------+-------------+----------+-----------+-------------+
| Total import    | 4,          | 91       | 2.3       |             |
|                 | 012,900,000 | ,600,000 |           |             |
+-----------------+-------------+----------+-----------+-------------+

US exports are not growing significantly due to the rapid development of
local production and huge foreign investments in food processing and the
food production sector.

For the following reasons there is significant interest in this sector:

-   Poland is a big market, open to new goods,

```{=html}
<!-- -->
```
-   considerable opportunities for export to eastern European countries,

-   lower level costs than western Europe,

-   opportunities to take over privatized companies with relatively low
    capital investment,

-   permanent pressure on the government by farmers to limit food
    imports.

The latter factor as well as the cancellation of customs fees upon
accession to the European Union have crucial significance for American
export opportunities.

In addition, the need for different certificates is another factor
making exports difficult. The procedure for getting such certificates is
very complicated, time consuming, and expensive.

Foreign direct investment in Poland in 2003 was \$ 6.42 billion and the
accumulated value of foreign investment exceeded \$ 72.7 billion. France
is the most active investor in Poland (almost 20% of all investments),
Holland is the second largest investor (14%), followed by the United
States (13%). The most attractive sectors for foreign investments have
remained unchanged for several years; manufacturing (40%) and financial
services (23%) remain dominant. The trade sector is the third most
active sector with inflows of \$8.1 billion (11.7%).

A list of companies that have invested in the agri-food industry is in
Table I.

It is worth highlighting that companies involved in retail trade form a
strong group among the top 30 foreign investors and are leaders. This
refers to Metro (11^th^, \$1.1M), Tesco (16^th^, \$0.8 M), Carrefour
(17^th^, \$0.8 M), Casino (18^th^, \$0.8 M), and Auchan (25^th^, \$0.7
M).

Please note that after Poland's EU accession imports into Poland require
EU certificates. The procedure for getting such certificates can be very
complicated, time consuming and expensive. Information regarding export
procedures applicable in the EU can be found at:
<http://www.useu.be/agri/usda.html>

Additional information on Poland specific regulations can be found at
[www.fas.usda.gov](http://www.fas.usda.gov/), under attaché reports
link - Food and Agricultural Standards Report for Poland - PL4024

Please note that after Poland's EU accession, the EU's external custom
tariffs now apply for imports by Poland.  Detailed information on the
current customs tariff applicable in the EU are available at
[**http://europa.eu.int/comm/taxation_customs/dds/cgi-bin/tarchap?Lang=EN**](http://europa.eu.int/comm/taxation_customs/dds/cgi-bin/tarchap?Lang=EN)

##### 

##### Advantages and Challenges facing US products in Poland

+-----------------------------+----------------------------------------+
| **Advantages**              | **Challenges**                         |
+-----------------------------+----------------------------------------+
| Population of 38.6 million  | Rapid development of local production  |
| people; increasing number   | (supported by foreign, and in many     |
| of those who can afford     | cases American, investments) has       |
| high-quality food products. | significantly reduced demand for       |
|                             | imported products.                     |
+-----------------------------+----------------------------------------+
| The growing retail industry | Importers, retailers, and consumers    |
| and the growing demand for  | lack awareness of American brands,     |
| more sophisticated and      |                                        |
| diversified products.       | Polish consumers prefer to purchase    |
|                             | products manufactured in Poland.       |
+-----------------------------+----------------------------------------+
| Experienced and             | Imported products are more expensive   |
| increasingly reliable       | due to many certificates, high         |
| importers.                  | tariffs, short period of payment.      |
+-----------------------------+----------------------------------------+
| Opportunity for different   | Registration process is slow,          |
| kinds of market promotion   | expensive, and inefficient; Polish     |
| with retailer               | language labels are required.          |
| participation.              |                                        |
|                             | Alcohol tariffs and excise tax are     |
| Currently weakening U.S. \$ | high, and a distribution license is    |
| versus Polish zloty         | necessary,                             |
| currency (Nov. 10, 2004     |                                        |
| rate = 3.4 zloty/\$1 versus | Third-country competition is           |
| Nov 2003 rate of 4.04       | significant, especially from western   |
| zloty/\$1).                 | Europe countries.                      |
|                             |                                        |
|                             | Poland has joined the EU, which will   |
|                             | result in the same restrictions as     |
|                             | those in other countries belonging to  |
|                             | the Union including biotechnology and  |
|                             | traceability                           |
|                             |                                        |
|                             | requirements .                         |
+-----------------------------+----------------------------------------+
|                             | Farmers have a significant influence   |
|                             | on government policy concerning import |
|                             | regulations.                           |
+-----------------------------+----------------------------------------+

### [II. ROAD MAP]{.smallcaps}

***A. Hypermarkets, Supermarkets, Discount Shops***

##### Entry Strategy

Success in introducing new products in this segment of the market
depends to a large extent on local representation and personal contacts.
The local representative may or may not also be the importer and /or
distributor, however due to the very tough conditions dictated by this
type of outlet, this is a key person if the product is going to be sold
on the market.

Typical conditions for supplier when entering foreign retail chains:

-   Entry fees (amounting to tens of thousands of Polish zlotys), which
    are not paid back if the agreement is canceled.

-   30-60 day period of payment.

-   Considerable price discount - about 10 %.

-   Obligatory participation in promotional activities, which are held
    3-5 times a year and last for 1-3 weeks. This requires another price
    decrease (of about 5 %).

-   Obligatory participation in covering the cost of advertising
    promoted products.

-   Separate fees (\$ 250-3,500) for placing each type of product on the
    shelf.

-   Fees for the "display area".

-   No opportunity to influence the price level

-   Very strict delivery terms

**[Market structure]{.underline}**

-   Products may be imported either by an importer or a representative
    office, which may also be a wholesaler and / or distributor

-   The representative office deals only with your product, and so pays
    much more attention to the promotion, advertising, and marketing
    activities than an importer who buys many, sometimes even
    competitive, products.

-   Some supermarkets are direct importers.

-   Importers are distinctly separated into dry goods, refrigerated
    items, fruits and vegetables, alcohol, etc.

-   Importers or representative offices may use nation-wide logistic
    organizations for the storage and distribution of imported products.

-   Importers also have their own distribution networks.

***[Company Profiles of the most important retail chains in
2003]{.underline}***

+-------------+----------+--------+-------+--------------+------------+
| **Retailer  | *        | *      | **No. | **Location** | **         |
| Name and    | *Sales** | *Owner | of    |              | Purchasing |
| Outlet      |          | ship** | Outl  |              | Agent      |
| Type**      | **(\$)** |        | ets** |              | Type**     |
+-------------+----------+--------+-------+--------------+------------+
| *1. METRO*  | 2,997    | *Ge    |       |              | Direct,    |
|             | ,000,000 | rmany* |       |              | importers, |
|             |          |        |       |              | w          |
|             |          |        |       |              | holesalers |
+-------------+----------+--------+-------+--------------+------------+
| Makro Cash  | 1,726    |        | 20    | Nationwide   |            |
| and Carry,  | ,800,000 |        |       |              |            |
| wholesaler  |          |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| Real,       | 714      |        | 27    |              |            |
| hypermarket | ,400,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| *2.         | 1,09     | *Por   |       | Nationwide   | Direct,    |
| JERONIMO    | 0,900,00 | tugal* |       |              | importers, |
| MARTINS*    |          |        |       |              | who        |
|             |          |        |       |              | lesaler*s* |
+-------------+----------+--------+-------+--------------+------------+
| Biedronka,  | 1,090    |        | 672   |              |            |
|             | ,900,000 |        |       |              |            |
| Discount    |          |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| *3 TESCO*   | 1,087    | ##     |       | Nationwide   | Direct,    |
|             | ,600,000 | #### G |       |              | importers, |
|             |          | reat B |       |              | w          |
|             |          | ritain |       |              | holesalers |
+-------------+----------+--------+-------+--------------+------------+
| Tesco,      | 1,012    |        | 38    |              |            |
| hypermarket | ,800,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| Savia,      | 74       |        | 31    |              |            |
| supermarket | ,700,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| *4. AUCHAN* | 1,005    | ##     |       | Nationwide   | Direct,    |
|             | ,000,000 | #####  |       |              | importers, |
|             |          | France |       |              | w          |
|             |          |        |       |              | holesalers |
+-------------+----------+--------+-------+--------------+------------+
| Auchan,     | 871      |        | 16    |              |            |
| hypermarket | ,000,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| Elea,       | 103      |        | 12    |              |            |
| supermarket | ,000,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| Schiever/   | 30       |        | 2     |              |            |
| Auchan,     | ,900,000 |        |       |              |            |
| supermarket |          |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| 5\.         | 927      | *F     |       | Warsaw and   | Direct,    |
| *CARREFOUR* | ,800,000 | rance* |       | other big    | importers, |
|             |          |        |       | cities       |            |
|             |          | #      |       |              | w          |
|             |          | #####  |       |              | holesalers |
+-------------+----------+--------+-------+--------------+------------+
| Carrefour,  | 644      |        | 15    |              |            |
| hypermarket | ,300,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| Champion,   | 283      |        | 64    |              |            |
| supermarket | ,500,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| *6. GEANT*  | 850      |        |       |              |            |
|             | ,500,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| Geant,      | 623      | France | 17    | Nationwide   | Direct,    |
| hypermarket | ,700,000 |        |       |              | importers, |
|             |          |        |       |              |            |
|             |          |        |       |              | w          |
|             |          |        |       |              | holesalers |
+-------------+----------+--------+-------+--------------+------------+
| Leader      | 226      |        | 133   |              |            |
| Price,      | ,800,000 |        |       |              |            |
| discount    |          |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| *7. REWE*   | 648      |        |       | Warsaw       |            |
|             | ,100,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| Selgros,    | 506      | G      | 9     |              |            |
| wholesaler  | ,700,000 | ermany |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| Minimal,    | 141      |        | 27    | Nationwide   |            |
| supermarket | ,700,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| 8\. AHOLD   | 635      | ####   |       |              | Direct,    |
|             | ,300,000 | #### H |       |              | importers, |
|             |          | olland |       |              |            |
|             |          |        |       |              | w          |
|             |          |        |       |              | holesalers |
+-------------+----------+--------+-------+--------------+------------+
| Hypernova,  | 329      |        | 25    | Warsaw       |            |
| hypermarket | ,800,000 |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| Albert      | 305      |        | 166   | Nationwide   |            |
|             | ,400,000 |        |       |              |            |
| supermarket |          |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+
| *9.         | 554      | ####   |       |              | Direct,    |
| TENGELMANN* | ,100,000 | #### G |       |              | importers, |
|             |          | ermany |       |              |            |
|             |          |        |       |              | w          |
|             |          |        |       |              | holesalers |
+-------------+----------+--------+-------+--------------+------------+
| Plus        | 309      |        | 153   | Southern     |            |
| Discount    | ,200,000 |        |       | Poland       |            |
+-------------+----------+--------+-------+--------------+------------+
| 10\. ITM    | 373      | France |       | Nationwide   | Direct,    |
|             | ,700,000 |        |       |              | importers, |
|             |          |        |       |              | w          |
|             |          |        |       |              | holesalers |
+-------------+----------+--------+-------+--------------+------------+
| I           | 335      |        | 89    |              |            |
| ntermarché, | ,500,000 |        |       |              |            |
| supermarket |          |        |       |              |            |
+-------------+----------+--------+-------+--------------+------------+

*Source: Handel 11/04*

It is important to note that "cash and carry" outlets are becoming more
and more popular. Some of these operate solely as wholesale units and
only serve retailers. Others sell to individuals but under the condition
that a certain quantity of goods is purchased.

As a result of the economic recovery in Poland last year, most foreign
retailers reported profits in 2003 (for some of these it was their first
positive result since they first launched their investments in Poland).
Due to the progressive concentration of retail trade, the consolidated
sales revenues of the ten largest retailers increased in 2003 by as much
as 8.2% compared to 2002. Despite ever stiffer competition, a number of
new retailers (Aldi of Germany, Wal-Mart, VP Market of Lithuania) are
considering entering the market in the near future.

## Table 11. Ten leading food chains in 2003

+-----------------------------+---------------------+------------------+
| **Name of chain**           | **Income from       | **Share in the   |
|                             | sales**             | income of TOP 50 |
|                             |                     | (%)**            |
|                             | **(\$)**            |                  |
+-----------------------------+---------------------+------------------+
| Biedronka                   | 1,090,900,000       | 6.6              |
+-----------------------------+---------------------+------------------+
| Tesco                       | 1,012,800,000       | 6,1              |
+-----------------------------+---------------------+------------------+
| Auchan                      | 902,000,000         | 5.5              |
+-----------------------------+---------------------+------------------+
| Real                        | 714,400,000         | 4.3              |
+-----------------------------+---------------------+------------------+
| Carrefour                   | 644,300,000         | 3.9              |
+-----------------------------+---------------------+------------------+
| Geant                       | 623,700,000         | 3.8              |
+-----------------------------+---------------------+------------------+
| E.Leclerc                   | 366,700,000         | 2.2              |
+-----------------------------+---------------------+------------------+
| Intermarché                 | 355,000,000         | 2.1              |
+-----------------------------+---------------------+------------------+
| Hypernova                   | 329,800,000         | 2.0              |
+-----------------------------+---------------------+------------------+
| Plus Discount               | 309,200,000         | 1.9              |
+-----------------------------+---------------------+------------------+

Table 12. Top chains in Central Europe (Poland compared to other Central
European countries)

+-----------------+----------+---------+----------+--------+---------+
| **Company       | *        | **Coun  |          |        |         |
| (country of     | *Revenue | tries** |          |        |         |
| origin)**       | in       |         |          |        |         |
|                 | 2002**   |         |          |        |         |
|                 |          |         |          |        |         |
|                 | **\$     |         |          |        |         |
|                 | M        |         |          |        |         |
|                 | illion** |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
|                 |          | **P     | **Czech  | **Slov | **Hu    |
|                 |          | oland** | Re       | akia** | ngary** |
|                 |          |         | public** |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 1.Metro         | 4,505.8  | \+      | \+       | \+     | \+      |
| (Germany)       |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 2.Tesco (Great  | 3,052.3  | \+      | \+       | \+     | \+      |
| Britain)        |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 3.Rewe          | 1,788.0  | \+      | \+       | \+     | \+      |
| (Germany)       |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 4.Tengelmann    | 1,517.0  | \+      | \+       | \-     | \+      |
| (Germany)       |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 5.Ahold         | 1,503.0  | \+      | \+       | \+     | \-      |
| (Holland)       |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 6.CBA           | 1,413.3  | \-      | \-       | \-     | \+      |
| Kereskedelmi    |          |         |          |        |         |
| Kft. (Hungary)  |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 7.Auchan        | 1,325.7  | \+      | \-       | \-     | \+      |
| (France)        |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 8\. Delhaize    | 1,282.6  | \-      | \+       | \+     | \+      |
| Group           |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 9.Carrefour     | 1,208.3  | \+      | \+       | \+     | \-      |
| (France)        |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+
| 10.Co-op        | 1,169.0  | \-      | \-       | \-     | \+      |
| Hungary         |          |         |          |        |         |
+-----------------+----------+---------+----------+--------+---------+

Source: Handel 14/04

***B. Convenience Stores, Gas Marts, Kiosks***

##### Entry strategy

There are two ways to place new products on shelves depending on the
type of product. Either an exporter should use a representative for
direct personal contact with the shops or shop managers supply
themselves from the wholesalers who may import the products as well. In
this case goods should be available in several regional wholesale units,
where smaller wholesalers and retailers collect them. They should also
be delivered to the cash and carry outlets.

**Market structure**

**[Company Profile -- Convenience Stores, Gas Marts,
Kiosks]{.underline}**

There are no chains of convenience stores, gas marts, or kiosks, each
retail outlet has a different owner even when in a chain of gas
stations. These are usually small units employing up to 5 people.
According to Polish law provisions, business entities employing fewer
than 5 people are not obliged to deliver any statistical information.
Unfortunately, as a result there are no data available regarding these
units.

A significant percentage of gas station marts (about 70 %) are held by
the Polish refinery Orlen. The remaining part of the market is
controlled by a Polish Refinery in northern Poland, as well as foreign
companies (e.g. Agip, Shell, Nestle, Aral, Elf, etc).

***Traditional markets -- "Mom and Pop" small independent grocery stores
and farmer's markets***

##### Entry strategy

Shops representing traditional markets usually purchase their supplies
from wholesale units located close to the shop. Therefore it is
important for the entity dealing with the import of goods to have a
sufficient distribution system, and access to different wholesalers
(including cash and carry) all over the country.

**[Market structure]{.underline}**

##### 

![](media/image13.wmf)

##### Company Profiles -- Traditional markets -- "Mom and Pop", small independent grocery stores and farmer's markets

There are about 119,000 outlets that may be regarded as traditional
markets.

Small retail outlets generally have different owners and there are no
chains or franchises. Many of the retail outlets are family-run
businesses. These stores are usually modest in size with an average area
of 15-25 m^2^.

Farmer's Markets - vary greatly in size and facilities. In most cases
they consist of open air and / or kiosk facilities located in an area of
200-400 m^2^.

### [III. Competition]{.smallcaps}

Local production and exporters from European Union, mainly Germany,
France, Italy, Great Britain, Spain, Finland, and the Netherlands (50 %
of total Polish food imports) are the main competitors for American
exporters. Even such "American" products as chewing gum, Coca-Cola or
Pepsi-Cola are produced in Poland. It should also be noted that Polish
consumers prefer Polish products to imported products. This obviously
influences the shops to purchase products made in Poland. Many chains
use the fact that they offer Polish goods as an advertising tool to
increase sales. In 2003 Tesco started a "Buy Polish products" campaign
and is considering a stronger promotion of Polish goods in the UK.

### 

### 

### IV. Market Integration with the European Union 

The Polish retail market has been open to foreign investors for over ten
years and all major European market players have been present in Poland
during this time. Because of this, Poland's EU integration will not
negatively impact this sector of the economy. On the contrary, some
producer products accepted by foreign chains may profit from access to
the international market.

Polish authorities were obliged to adapt Polish law to EU law and to
respect decisions made by the European Justice Tribunal. The amendment
of Polish law mainly refers to protection of confidential information,
elimination of sales at below market prices, banning of bonus sales, and
promotional lotteries.

According to Eurostat, retail prices for food and tobacco products in
Poland are 30% lower than in the European Union but much higher than in
other new member states.

Table 14. Price level of food, beverages, and tobacco products, Poland =
100

  -------------------------------------------- --------------------------
  **Country**                                  **Price level**

  *Average for the EU*                         *161*

  Denmark                                      205

  Ireland                                      194

  Great Britain                                191

  France                                       164

  Austria                                      156

  Germany                                      152

  Portugal                                     130

  Hungary                                      89

  The Czech Republic                           84

  Slovakia                                     80
  -------------------------------------------- --------------------------

After Poland became an EU member state food priced increased as much as
30-40%.

### [V. BEST PRODUCTS PROSPECTS]{.smallcaps}

***A. U.S. Products Present on the Market Which have Good Sales
Potential.***

As mentioned before, the following markets have developed and will
continue to grow:

-   fish, fruit (grapefruit), and spices,

-   wine and distilled spirits,

-   dried fruits and nuts,

-   food for the HRI food service sector,

-   food consisting of many ingredients, highly processed, convenient,
    and i.e. ready-to-cook products (on limited basis),

All of these products are known to Polish consumers. The demand for them
changes in line with different phases of development. These products
will be primarily produced in Poland, but imported ingredients will
often be used. Development of this sector will result in greater demand
for imported basic elements necessary for food production (hard wheat,
processed soya, sunflower, palm oil, and juice concentrates).

***Table 15. Products present in the market, which have good sales
potential***

+-------+----------+----------+--------+------+----------+-----------+
| ***Pr | ***2003  | ***2003  | ***2-Y | *    | ***Key   | ***Market |
| oduct | Market   | Im       | r.Avg. | **Im | Con      | Attra     |
| c     | size***  | ports*** | Annual | port | straints | ctiveness |
| atego |          |          | Import | Ta   | Over     | for       |
| ry*** |          |          | Gro    | riff | Market   | USA***    |
|       |          |          | wth*** | Rat  | Develo   |           |
|       |          |          |        | e*** | pment*** |           |
+-------+----------+----------+--------+------+----------+-----------+
| fish  | 303,880  | \$       | 200    | 0    | Price    | Growing   |
| (f    | tons\    | 300      | 2/2000 | -15% | com      | market.   |
| resh, | \$       | ,069,000 | 12%    |      | petition |           |
| chi   | 477      |          |        | 0    | from     |           |
| lled, | ,000,000 | \$       | 200    | -15% | local    |           |
| f     |          | 885,925  | 3/2002 |      | p        |           |
| rozen | 345      |          | -2.6%  |      | roducers |           |
| d     | tons\    | \        |        |      | and      |           |
| ried, | \$       | $716,391 | 200    |      | European |           |
| sa    | 885,925  |          | 3/2002 |      | co       |           |
| lted, |          |          |        |      | untries. |           |
| sm    | 529 tons |          | 7.2%   |      |          |           |
| oked, |          |          |        |      |          |           |
| and   | \        |          | 200    |      |          |           |
| o     | $716,391 |          | 3/2002 |      |          |           |
| thers |          |          |        |      |          |           |
| incl  |          |          | 11%    |      |          |           |
| uding |          |          |        |      |          |           |
| fish  |          |          |        |      |          |           |
| fi    |          |          |        |      |          |           |
| lets) |          |          |        |      |          |           |
|       |          |          |        |      |          |           |
| incl  |          |          |        |      |          |           |
| uding |          |          |        |      |          |           |
|       |          |          |        |      |          |           |
| Atl   |          |          |        |      |          |           |
| antic |          |          |        |      |          |           |
| s     |          |          |        |      |          |           |
| almon |          |          |        |      |          |           |
|       |          |          |        |      |          |           |
| Pa    |          |          |        |      |          |           |
| cific |          |          |        |      |          |           |
| s     |          |          |        |      |          |           |
| almon |          |          |        |      |          |           |
+-------+----------+----------+--------+------+----------+-----------+
| Live  | 87,000   | \$       | 200    | 0%   | None     | Ins       |
| stock | tons     | 109      | 2/2001 |      |          | ufficient |
| offal |          | ,031,422 | 11%    | 6.4% |          | local     |
|       | \$139    |          |        |      |          | pr        |
|       | ,000,000 |          | 200    |      |          | oduction, |
|       |          |          | 3/2002 |      |          | co        |
|       |          |          |        |      |          | mpetitive |
|       |          |          | 58%    |      |          | prices.   |
+-------+----------+----------+--------+------+----------+-----------+
| Wine  | 52M L/\$ | \$58     | 8.5%   | 1    | Strong   | Good      |
|       | 240 M    | ,188,000 |        | 8.Eu | position | r         |
|       |          |          |        | r/hl | of       | eputation |
|       |          |          |        |      | French,  | of        |
|       |          |          |        |      | Italian  | Ca        |
|       |          |          |        |      | and      | lifornian |
|       |          |          |        |      | other    | wines,    |
|       |          |          |        |      | su       | growing   |
|       |          |          |        |      | ppliers. | market.   |
+-------+----------+----------+--------+------+----------+-----------+
| C     | 119,373  | \$130    | 200    | 7.5% | Well-est | Growing   |
| offee | tons     | ,076,000 | 3/2001 |      | ablished | demand    |
|       |          |          |        |      | p        | for more  |
|       | \$130    |          | -21%   |      | ositions | varieties |
|       | ,076,000 |          |        |      | of       | of        |
|       |          |          |        |      | present  | hig       |
|       |          |          |        |      | s        | h-quality |
|       |          |          |        |      | uppliers | coffee.   |
+-------+----------+----------+--------+------+----------+-----------+
| Choc  | 146,000  | \$       | 200    | 8.3% | Large    | Growing   |
| olate | tons     | 79       | 3/2001 |      | number   | market.   |
| s     | \$1..3   | ,079,000 |        | 9.0% | of       |           |
| weets | billon   |          | 20%    |      | western  |           |
|       |          |          |        |      | c        |           |
|       |          |          |        |      | ompanies |           |
|       |          |          |        |      | who have |           |
|       |          |          |        |      | bought   |           |
|       |          |          |        |      | out      |           |
|       |          |          |        |      | Polish   |           |
|       |          |          |        |      | pr       |           |
|       |          |          |        |      | oducers. |           |
|       |          |          |        |      | Price    |           |
|       |          |          |        |      | com      |           |
|       |          |          |        |      | petition |           |
|       |          |          |        |      | from     |           |
|       |          |          |        |      | local    |           |
|       |          |          |        |      | p        |           |
|       |          |          |        |      | roducers |           |
|       |          |          |        |      | and      |           |
|       |          |          |        |      | European |           |
|       |          |          |        |      | co       |           |
|       |          |          |        |      | untries. |           |
+-------+----------+----------+--------+------+----------+-----------+
| Grape | 30,362   | \$19     | 200    | 1    | None     | Strong    |
| fruit | tons     | ,946,271 | 2/2000 | 8.4% |          | position  |
|       |          |          |        |      |          | of        |
|       | \$19     |          | 19%    |      |          | American  |
|       | ,946,271 |          |        |      |          | s         |
|       |          |          | 200    |      |          | uppliers, |
|       |          |          | 3/2002 |      |          | growing   |
|       |          |          |        |      |          | market.   |
|       |          |          | 9.6%   |      |          |           |
+-------+----------+----------+--------+------+----------+-----------+

+---------+----------+----------+---------+-----+---------+----------+
| Dried   | n.a.     | \$       | 200     | 2   | Large   | Cont     |
| fruits  |          | 836.,787 | 2/.2000 | .4% | number  | inuously |
| and     |          |          |         |     | of      | growing  |
| nuts,   |          |          | 10%     |     | local   | demand   |
| in      |          |          |         |     | and     |          |
| cluding |          |          | 20      |     | foreign |          |
| cran    |          |          | 03/2002 |     | su      |          |
| berries |          |          |         |     | ppliers |          |
|         |          |          | 16%     |     | o       |          |
|         |          |          |         |     | ffering |          |
|         |          |          |         |     | much    |          |
|         |          |          |         |     | lower   |          |
|         |          |          |         |     | prices  |          |
+---------+----------+----------+---------+-----+---------+----------+
| Dried   | 13,715   | \$12     | 20      | 2   | Price   | Given    |
| grapes, | tons     | ,846,489 | 02/2000 | .4% | comp    | still    |
| in      |          |          |         |     | etition | de       |
| cluding | \$12     |          | -6%     |     | from    | veloping |
| raisins | ,846,489 |          |         |     | other   | market   |
|         |          |          | 20      |     | su      | for      |
|         |          |          | 03/2002 |     | ppliers | cakes    |
|         |          |          |         |     |         | and      |
|         |          |          | 14%     |     |         | sweets,  |
|         |          |          |         |     |         | oppor    |
|         |          |          |         |     |         | tunities |
|         |          |          |         |     |         | for      |
|         |          |          |         |     |         | further  |
|         |          |          |         |     |         | dev      |
|         |          |          |         |     |         | elopment |
|         |          |          |         |     |         | of this  |
|         |          |          |         |     |         | segment  |
+---------+----------+----------+---------+-----+---------+----------+
| Dried   | n.a      | \$5      | 20      | 9   | Price   | High     |
| prunes  |          | ,547,830 | 02/2000 | .6% | comp    | quality  |
|         |          |          |         |     | etition | and      |
|         |          |          | 14%     |     | from    | strong   |
|         |          |          |         |     | local   | position |
|         |          |          | 20      |     | and     | of       |
|         |          |          | 03/2002 |     | other   | Cal      |
|         |          |          |         |     | foreign | ifornian |
|         |          |          | 29.6%   |     | su      | prunes,  |
|         |          |          |         |     | ppliers | opp      |
|         |          |          |         |     |         | ortunity |
|         |          |          |         |     |         | for      |
|         |          |          |         |     |         | further  |
|         |          |          |         |     |         | growth.  |
+---------+----------+----------+---------+-----+---------+----------+
| Pis     | 1        | \$3      | 20      | 10  | Inc     | Growing  |
| tachios | ,241tons | ,733,519 | 02/2000 | .2% | reasing | market.  |
|         |          |          |         |     | imp     |          |
|         | \$3      |          | 35%     |     | ortance |          |
|         | ,733,519 |          |         |     | of      |          |
|         |          |          | 20      |     | other   |          |
|         |          |          | 03/2002 |     | sup     |          |
|         |          |          |         |     | pliers, |          |
|         |          |          | 15%     |     | rel     |          |
|         |          |          |         |     | atively |          |
|         |          |          |         |     | high    |          |
|         |          |          |         |     | prices  |          |
|         |          |          |         |     | c       |          |
|         |          |          |         |     | ompared |          |
|         |          |          |         |     | to      |          |
|         |          |          |         |     | other   |          |
|         |          |          |         |     | nuts    |          |
+---------+----------+----------+---------+-----+---------+----------+
| Peanuts | 31,545   | \$23     | 2       | 11  | Lower   | Growing  |
|         | tons     | ,410,006 | 002/200 | .2% | prices  | market   |
|         | \$23     |          |         |     | offered |          |
|         | ,410,006 |          | 3.5%    |     | by      |          |
|         |          |          |         |     | comp    |          |
|         |          |          | 20      |     | etitors |          |
|         |          |          | 03/2002 |     |         |          |
|         |          |          |         |     |         |          |
|         |          |          | 15.8%   |     |         |          |
+---------+----------+----------+---------+-----+---------+----------+
| Almonds | 2,080    | \$       | 20      | 10  | Lower   | Growing  |
|         | tons     | 8        | 02/2000 | .2% | prices  | market   |
|         |          | ,591,838 |         |     | offered |          |
|         | \$       |          | 28%     |     | by      |          |
|         | 8        |          |         |     | comp    |          |
|         | ,591,838 |          | 20      |     | etitors |          |
|         |          |          | 03/2002 |     |         |          |
|         |          |          |         |     |         |          |
|         |          |          | 32%     |     |         |          |
+---------+----------+----------+---------+-----+---------+----------+

B. Products Not Present in Significant Quantities But Which Have Good
Sales Potential

This group mainly includes:

-   ready-to-cook dishes,

-   "luxury" food and drinks, produced from exotic raw materials for
    high income consumers, who consider consumption of such products as
    proof of their high social position,

-   food ingredients for special use, e.g. vegetable fat for different
    branches of secondary processing.

## C. Products Not Present Because They Face Significant Barriers 

Such products mainly consist of additives which are not allowed in
Poland. Also, new EU implemented biotech labeling and traceability
regulations are a major new element negatively impacting sales of U.S.
food and food ingredients. Polish food additive regulations are
primarily based on common regulations within the European Union. Poland
along with other EU countries is allowed to conduct separate procedures
for approval of ingredients within its territory. Currently, there is
only one such case, a new sweetener "neotame", which is allowed in
Poland but not in other EU countries.

Four major EC-directives regarding the use of additives as well as
labeling are implemented based upon Polish food additive regulations.
These directives govern colors, sweeteners, flavors and miscellaneous
food additives in addition to the labeling directive. The EC regulation
also requires the identity and purity of approved food additives.

Poland uses a positive-additives list, which identifies additives that
are permitted for use in foodstuffs. Poland's Ministry of Health and
Social Welfare approved a new regulation (Journal of Law no. 94 dated
April 30, 2004) for food additives on April 23, 2004. The above
mentioned law does not include working regulations (positive additive
list) which will be prepared at a later date. This particular regulation
has been one of the most difficult obstacles facing imported products.
According to Polish authorities, the new list is consistent with with
current EU regulations. Please note: As each EU member state introduces
slight variations to allowable food additives, it is vital for all U.S.
exporters to check with the potential Polish importers about whether the
product intended for the Polish market meets all ingredient
requirements.

Additional details concerning EU food additives regulations can be found
at http://www.useu.be/agri/usda.html.

## VI. EMBASSY CONTACT INFORMATION

If you have any questions or comments regarding this report or need
assistance exporting to Poland, please contact the Office of
Agricultural Affairs in Warsaw at the following address:

Office of Agricultural Affairs

American Embassy

Al. Ujazdowskie 29/31

00-540 Warsaw

Poland

ph: 4822-504 23 36

fax: 4822-504 23 20

e-mail: agwarsaw@usda.gov

homepage: www.usinfo.pl/agri

Please visit the Foreign Agricultural Service home page (www.fas.gov)
for more information about exporting U.S. food products to Poland,
including "The Exporter Guide", "The HRI Food Service Sector Report",
"The Retail Food Sector Report", product briefs on the market potential
for U.S. fruit, snack foods, ready-to-eat, health products and a
complete listing of upcoming activities designed to promote your product
in Poland. Importer lists are available from our office to exporters of
U.S. food products.

For more information on exporting U.S. agricultural products to other
countries please visit the Foreign Agricultural Service home page:

*Table I Largest foreign investment projects in food-processing and
tobacco Industries (\$ Million, December 2003)*

  ------------------- -------------------- -------------- -------------------------
  **Investor**        **Branch**           **Capital      **Registration/Origin**
                                           Invested**     

  Philip Morris       tobacco products     525.7          The Netherlands/USA
  Holland                                                 

  CC HBC (Coca-Cola   mineral water and    513.0          Greece/USA
  Hellenic Bottling   soft drinks                         
  Co.)                                                    

  Imperial Tobacco    tobacco products     500.0          UK

  Nestle              Chocolate and sugar  365.0          Switzerland
                      confectionery,                      
                      mineral water and                   
                      soft drinks                         

  House of Prince     tobacco products     348.0          Denmark

  Harbin B.V          brewery              325.9          The Netherlands

  British American    tobacco products     300.0          Germany/UK/USA
  Tobacco                                                 

  PepsiCo             mineral water and    275.0          USA
                      soft drinks                         

  Heineken            brewery              220.8          The Netherlands

  Seita               tobacco products     180.0          France

  Mars Inc.           chocolate and sugar  160.0          USA
                      confectionery, pet                  
                      food                                

  Wm. Wrigley Jr. Co. chewing gum          144.0          USA

  BSN Gervais Danone  dairy products,      135.5          France
                      sugar confectionery                 

  Cadbury's Schweppes sugar and chocolate  126.5          UK
                      confectionery                       

  Ferrero Group       sugar confectionery  112.0          Italy

  Carlsberg Breweries brewery              107.5          Denmark

  British Sugar       sugar                90.0           UK

  Cargill             animal feeds,        81.0           USA
                      glucose                             

  Pernod Ricard       Alcoholic beverages, 80.4           France
                      fruit and vegetable                 
                      juice                               
  ------------------- -------------------- -------------- -------------------------

*Source.- Polish Information and Foreign Investment Agency*