Exporter Guide for Poland and the Baltic Countries

An Expert's View about Food , Beverages and Tobacco in Poland

Posted on: 12 Jan 2012

Opportunities exist for U.S. agricultural products in Poland, Lithuania, Estonia, and Latvia but there are challenges in light of the region’s EU membership and the Euro zone situation.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/20/2011 GAIN Report Number: PL1131 Poland Exporter Guide Exporter Guide for Poland and the Baltic Countries Approved By: Michael Henney, Agricultural Attaché Prepared By: Michal Cichowlas, Student Intern, Jolanta Figurska, Agricultural Marketing Specialist Report Highlights: Opportunities exist for U.S. agricultural products in Poland, Lithuania, Estonia, and Latvia but there are challenges in light of the region’s EU membership and the Euro zone situation. Poland has been described as an oasis of economic performance in a turbulent Euro zone while the Baltic States have begun a recovery from a crisis that was felt very deeply. This region highly regards America and products displaying their American heritage with a flag or geographic emphasis are popular. However, among some consumers American cuisine’s image is defined as fast food laced with genetically modified ingredients. The regions’ HRI and Food Processing sectors are expanding, providing room for investment by American companies and opportunities for U.S. suppliers of a wide variety of ingredients. Many consumer-ready and high-value food products, such as confectionary products, are performing well. The primary challenge for U.S. products remains access to the European market. With joining of the EU in 2004 Poland and the Baltic States adopted the EU tariff structure for agricultural products and food regulatory standards. U.S. beef and poultry trade were most affected by their accession. Post: Warsaw Executive Summary: Opportunities exist for U.S. agricultural products in Poland, Lithuania, Estonia, and Latvia but there are challenges in light the region’s EU membership and the Euro zone situation. U.S. exporters should first determine if their commodity has market access to the EU. Poland has been described as an oasis of economic performance in a turbulent Euro zone. Indeed, real GDP growth is expected to be 4.4 percent in 2012, a half percentage point increase on the pr evious y [1]ear. The Baltic States have begun a recovery from a crisis that was very deeply felt: the region experienced a double digit recession in 2009 but growth was positive on average in 2011. This region highly regards America and products displaying their American heritage with a flag or geographic emphasis are popular. However, American cuisine has a negative image among some consumers as being of unhealthy fast food and of genetically modified ingredients (Note: In September 2011 Polish President Bronislaw Komorowski vetoed proposed legislation that had proposed cultivation of GM crops for not being based on sound science.) The HRI sectors in Poland and the Baltic states are expanding, providing room for future investment by American companies. The region's expanding food processing sector also provides opportunities for U.S. suppliers of a wide variety of ingredients. Many consumer ready and high value food products, such as confectionary products, are performing well on the Polish market. The country also imports baking ingredients, seafood, wine and spirits, pet food, almonds, pistachios, sunflower seeds, protein isolates, grapefruit and cranberries in large quantities. The primary challenge for U.S. products remains access to the European market. With their joining of the EU in 2004 Poland and the Baltic States imposed a higher tariff on agricultural imports and modified their food safety standards to comply with EU regulations. U.S. beef and poultry trade were affected the most. Poland is one of the largest beneficiaries of centralized EU subsidies: by 2016, €68 billion is to be spent on infrastructure, human resources, innovation, environmental protection, and the modernization of agriculture [2]. Translation: U.S. products will face additional scrutiny as for meeting EU regulations and conforming to EU societal agendas, as competitive forces seek to narrow domestic competition in the Polish and Baltic markets. [1] Emerging Europe Monitor: Central Europe and Baltics, Macroeconomic Forecast Poland [2] Rising demand for confectionary in Poland Euromonitor SECTION I - MARKET OVERVIEW POLAND Poland is the only country not to experience a fall in GDP throughout the ongoing economic crisis. Growth is forecast to resume its pre-crisis pace by 2012, when the economy could grow by nearly 5 percent. The trade balance is forecast to worsen meaning that Poland will look to importing products to satisfy growing internal demand: from 2010, imports are set to more than triple by 2012. Though this may put pressure on Poland’s budget, analysts predict that the government will stick by its plans of fiscal consolidation and see the deficit narrow to 3.2 percent of GDP, reassuring investors. Poland’s population of 38.3 million is increasingly concentrated in cities with 61 percent living in urban centers. The median age is 38 years of age and increasing. A trend toward smaller families is becoming more apparent in Poland’s 13.3 million households, with an average household size of 3.07. Polish families eat together and households buy for only a few days to stock the house. Convenience foods are growing more popular, but traditional women roles to shop and cook remain in place. Although Poland has a strategic position at the centre of Europe, the poor state of its roads, as well as financial pressures, have prevented the country from fully capitalizing on its geographical position. Exports accounted for 32.5 percent of GDP in 2009 and this share has been falling for several years. Overreliance on a few trade partners is a significant concern: in 2009, 79.2 percent of all exports went to the EU. In 2009, machinery and transport equipment accounted for 42.5 percent of Poland's total export goods. The current account deficit was 4.5 percent of GDP in 2010 and is set to reach 5.5 pe rcent in 2011 [1]. Basic economic indicators for Poland are as follows: POLAND 2009 2010 2011f 2012f Population, mln 38.2 38.3 38.3 38.3 Nominal GDP, PLN bn 1,343.4 1415.4 1549.8 1613.1 GDP per capita, US $ 12,262 12,294 14,302 15,167 Real GDP growth, % change y-o-y 1.6 3.8 4.6 3.5 Budget balance % of GDP (7.3) (7.8) (6.2) (4.3) Consumer prices % y-o-y, eop 3.5 3.1 3.4 2.5 Exchange rate PLN/US$, eop (November 2011) 3.05 2.96 2.79 2.74 Exchange rate PLN/EUR, eop (November 2011) 3.87 3.96 3.99 3.67 Goods Imports, EUR bn 107.2 131.0 151.8 171.6 Goods Exports EUR bn 101.8 122.4 138.3 156.6 Balance of Trade in Goods, EUR bn (5.4) (8.6) (13.5) (15.0) Current account, % of GDP (3.6) (4.5) (5.5) (5.4) Foreign reserves ex gold, US$bn 75.9 88.8 99.7 102.7 Total external debt stock, % of GDP 59.9 67.7 65.6 69.4 Source: Emerging Europe Monitor: Central Europe and Baltics, Macroeconomic Forecast Poland Advantages and Challenges of the Polish Market for U.S. Exporters Advantages Challenges Central Europe’s most populous country with a U.S. products face high transportation costs as compared domestic consumer market of nearly 40 million to many European competitors. people. A strategic location within a dense, major Complicated system of product registration in some international market offering re-exports potential. cases delaying or even preventing products from entering the Polish market that are new to the EU. Transshipment from other EU countries of import Poland’s EU Accession puts United States products at a now possible with Poland’s EU integration. competitive disadvantage versus EU-27 duty-free EU internally traded products. A very productive, young, and skilled labor force Despite rising incomes, Polish consumers indicate that therefore, good potential for finding trading price is still the primary purchasing factor for food and partners and favorable conditions for establishing beverage products in at least 75 percent or more of their joint ventures. retail food purchases. Polish consumers associate United States Food recalls in the EU have had a negative impact on products with good quality. Polish consumer views of imported products, and GMO issues hamper imports of United States products. Market niches exist in consumer ready food Foreign investment in the Polish food processing products - i.e. dried fruits, nuts, wine and distilled industry results in local production of many high quality spirits, and microwavable products. products that were previously imported. Economic growth has been rising While the export of some U.S. goods has been encouraged by EU trade regulations, some goods, namely poultry and beef, remain limited due to EU sanitary restrictions. BALTIC STATES The Baltic economies seem to be back on track with an average GDP growth rate of above 4 percent forecasted for 2011, but they have a lot of ground to make up after having contracted by more than 15 percent on average between 2008-2010. Latvia and Lithuania need to work hard to improve their finances as their budget deficits are above the EU target, 8.1 percent, and 7.1 percent of GDP respectively. The situation will only improve if these countries fulfill their growth prospects. All Baltic States look about to increase their imports in 2012 but exports will grow in tandem as the trade balance stays stable, at a healthy rate of between 0 and 1 percent of GDP in Lithuania and Estonia. Estonia and Latvia are also experiencing a slowdown in birth rate and diminishing household size due to the same cultural changes happening in Poland, which is tied to economic advancement of younger people after the countries, joined the EU market. In Lithuania, natural increase has accounted for the majority of population growth, which is at a level to offset the ageing of its population unlike its neighbors. It is worth noting that both Estonia and Latvia include a substantial Russian minority, 25.6 percent and 27.8 percent respectively. In Lithuania, 6.1 percent of the population is of Polish origin, due to the shared history of these nations. Basic economic indicators for the region are as follows: LITHUANIA 2009 2010 2011f 2012f Population, mln 3.3 3.3 3.3 3.3 Nominal GDP, 91.3 94.5 102.7 107.9 GDP per capita, US $ 11,032 10,904 12,919 13,228 Real GDP growth, % change y-o-y (14.7) 1.3 2.0 2.2 Industrial production index, % y-o-y, avg. (5.8) 6.6 10.8 7.0 Budget balance, % of GDP (9.2) (7.1) (5.0) (3.8) Consumer prices, % y-o-y, eop 1.3 3.8 2.5 3.0 Exchange rate LTL/US$, eop (November 2011) 2.4 2.6 2.4 2.6 Exchange rate LTL/EUR, eop (November 2011) 3.1 3.5 3.5 3.4 Goods Imports, EURbn 12.6 16.9 19.8 21.3 Goods Exports EURbn 11.8 15.7 18.5 19.7 Balance of Trade in Goods, EURbn (0.8) (1.2) (1.2) (1.7) Current account, % of GDP 4.3 1.9 0.5 -0.6 Foreign reserves ex gold, US$bn 6.7 6.8 5 5.5 Total external debt stock, % of GDP 90.1 86.2 59.9 54.6 Source: Emerging Europe Monitor: Central Europe and Baltics, Macroeconomic forecast Lithuania 2011 ESTONIA 2009 2010 2011f 2012f Population, mln 1.3 1.3 1.3 1.3 Nominal GDP, EURbn 13.9 14.5 15.6 16.8 GDP per capita, US $ 14,478 14,354 16,649 17,375 Real GDP growth, % change y-o-y (13.9) 1.9 5.0 4.7 Industrial- production index, % y-o-y, avg. (26.0) 24.0 25.0 6.0 Budget balance % of GDP (1.8) 0.1 (0.6) (0.2) Consumer prices % y-o-y, eop (1.7) 5.4 3.5 3.0 Exchange rate EUR/US$, eop (November 2011) 0.79 0.75 0.7 0.75 Goods Imports, EURbn 7.1 9.0 12.5 13.3 Goods Exports EURbn 6.5 8.8 12.3 13.0 Balance of trade in Goods, EURbn (0.6) (0.2) (0.2) (0.3) Current account, % of GDP 4.5 3.5 1.0 (0.1) Foreign reserves ex gold, US$bn 3.5 3.93 2.67 2.7 Total external debt stock, % of GDP 124.5 113.7 102.4 95.7 Source: Emerging Europe Monitor: Central Europe and Baltics, Macroeconomic forecast Estonia 2011 LATVIA 2009 2010 2011f 2012f Population, mln 2.3 2.3 2.2 2.2 Nominal GDP, LVLbn 12.6 11.8 12.5 13.4 GDP per capita, US $ 11,054 9,885 11,364 11,783 Real GDP growth, % change y-o-y (18.0) (0.3) 2.9 3.5 Industrial production index, % y-o-y, avg (15.7) 14.0 9.0 7.5 Budget balance, % of GDP (9.5) (8.1) (5.0) (2.5) Consumer prices, % y-o-y, eop (1.2) 2.5 3.2 3.4 Exchange rate LVL/US$, eop (November 2011) 0.56 0.54 0.49 0.53 Exchange rate LVL/EUR, eop (November 2011) 0.71 0.72 0.71 0.71 Goods Imports, EURbn 6.6 8.0 8.5 9.0 Goods Exports, EURbn 5.3 6.8 7.3 7.9 Balance of trade in Goods, EURbn (1.3) (1.2) (1.2) (1.1) Current account, % of GDP 6.5 3.9 3.6 4.0 Foreign reserves ex gold, US$bn 6.9 7.9 8.3 8.8 Total external debt stock, % of GDP 123.8 113.8 89.4 84.7 Source: Emerging Europe Monitor: Central Europe and Baltics, Macroeconomic forecast Latvia 2011 Advantages and Challenges of the Baltic States Market for U.S. Exporters Advantages Challenges Consumer market of 7 million people. U.S. products face high transportation costs as compared to many European competitors. A strategic location offering re-export potential Complicated system of product registration in some cases to The Russian Federation, Ukraine, and the delaying or even preventing the product from entering the Balkans. Baltic States’ market. Transshipment from other EU countries of Baltic States’ EU Accession puts United States products import now possible with Baltic’s EU at a competitive disadvantage versus EU-27 duty-free EU integration. internally traded products. A very productive, young, and skilled labor Given the current economic conditions the Baltic States force therefore, good potential for finding indicate that price is still the primary purchasing factor for trading partners and favorable conditions for food and beverage products in at least 75 percent or more establishing joint ventures. of their retail food purchases. Local consumers associate United States Food recalls in the EU have had a negative impact on products with good quality. Baltic States consumer views of imported products, and GMO issues hamper imports of United States products. Market niches exist in consumer ready food Foreign investment in the Baltic States food processing products - i.e. dried fruits, nuts, wines, and industry results in local production of many high quality microwavable products. products that were previously imported. Despite an economic slowdown sales of high European exporters tend to offer credit term (30-90 days) end goods continue. payments; while many of the U.S. exporters require pre- payment. SECTION II - EXPORTER BUSINESS TIPS POLAND The best way to understand the Polish market is to visit and speak to importers and distributors in order to prepare the best entry strategy for your product. Personal contact is considered very important when conducting business in Poland as most purchases are made after meeting an exporter or their representative in person. English is increasingly common as the language of commerce, but it is important to check in advance to see if translation service may be necessary. It is customary for business people to shake hands upon meeting. Poland is a rather formal and hierarchical culture. As a result first names are rarely used initially in the business context. Address people with Pan (Mr.) and Pani (Mrs.) followed by their surname. A relationship may warm up to the degree where first names can be used but the Polish party signal that is the case. Business cards are the norm and are generally given to each person at a meeting; therefore U.S. visitors should bring plenty of business cards to a meeting, although cards printed in Polish are not necessary. Business attire is formal, including a suit and tie for men and a suit or dress for women. Technical regulations including documentation, sanitary and phytosanitary requirements and labeling have changed since Poland's EU-27 accession. Poland amended most of its import requirements to conform to EU regulations. For detailed information on product import certificates please refer to the EU 27 Consolidated Food and Agricultural Regulations and Standards (FAIRS) Report, GAIN E60015, date 3/13/2011, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20and%20Agricultural%20Import%2 0Regulations%20and%20Standards%20-%20Certification_Brussels%20USEU_EU-27_3-23-2011.pdf For details on Poland specific regulations, such as labeling, refer to Poland’s Food and Agricultural Regulations and Standards (FAIRS) Report, GAIN PL1023, date 12/21/2010, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20and%20Agricultural%20Import% 20Regulations%20and%20Standards%20-%20Narrative_Warsaw_Poland_12-21-2010.pdf The Polish consumers are becoming more sophisticated and increasingly value variety and availability of food products. Imports are rising steadily to cater to such demands and compensate for Poland’s seasonal production. EU Member States satisfy the majority of this demand with meats primarily supplied by Germany and Denmark. Non-EU member states Poland sources products from include Turkey and the Ukraine for mainly nuts and seeds, and sunflower seed oilcake. BALTIC STATES The importance of personal contact, the rise of English as the “lingua franca” when doing business, and somewhat antique personal greeting formalities also apply in the Baltic States. More specifically, one may notice that Latvians are fairly reserved and do not have a problem with 'awkward silences.' Lithuanians, Latvians, and Estonians are very courteous in their communication and perceive interrupting others as bad manners. It is important therefore, that one give meeting attendee’s ample time to complete their statement before speaking. Many are fairly direct in their communication; however, they will also moderate what they say to avoid potential offense. When doing business in Latvia one should follow suit, not say anything that could be perceived as critical of another individual. It is also the norm in Latvia not to furnish speech with non essential information, but to be succinct and to the point. American products are not yet well known to Baltic consumers. This situation is compounded by a negative fast-food image of American products. To counter-act, an active promotion campaign of American food ingredients and products, in cooperation and collaboration with local wholesale suppliers and distributors should help turn the market situation around for U.S. products. The quality of U.S. products and unique ingredients should be attractive to regional food processing enterprises and local consume [2]rs. With accession into the European Union, the Baltic States have updated their technical regulations to conform to EU requirements, including documentation, sanitary and phytosanitary requirements, and labeling. For detailed information on product import requirements please refer to the EU-27 Consolidated Food and Agricultural Regulations and Standards (FAIRS) Report, GAIN E57011, date 12/22/2010, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20and%20Agricultural%20Import%2 0Regulations%20and%20Standards%20-%20Narrative_Brussels%20USEU_EU-27_12-21-2010.pdf Lithuania is a net exporter of food products. Lithuania’s major agricultural exports include wheat, cheese, and dog and cat food. Major imports include milk, wine, tomatoes, coffee, and fresh fruit. Estonia is a net importer of food products. Wood and wood product exports dominate Estonia’s agricultural exports, which also include cheese, shrimps, and prawns. The most significant agricultural imports included wine, coffee, pork, cane/beet sugar, animal feed, beer, and cocoa preparations. Latvia is a net agricultural products exporter. Key Latvian exports include sawn timber and wood products, wine, seafood and dairy products. Latvian agricultural imports include wine, wheat, cane/beet sugar, soybean oilcake, coniferous wood, salmon, cheese, and dog and cat food. In the Baltic States the quest for fresh and natural foods is driving the force in the food sector. Brand names, such as McCormick, Hackman, Procter & Gamble, Nestle, Kellogg's, Santa Maria, Heinz, Kraft, Master Foods, etc., engender a positive response. However, a shift in demand towards healthier and less processed foods and ingredients is opening the door for less well-known products onto the market. SECTION III - MARKET SECTOR STRUCTURE AND TRENDS POLAND Wholesale Sector Poland’s wholesale market structure has five categories: national chains, regional chains, regional wholesalers, local wholesalers, and buying groups (consisting of regional chains and regional wholesalers). The national chains are the least numerous and operate several branches throughout Poland with central management. Regional chains have recently grown through consolidation and purchase of bankrupt firms; they cover specific areas, usually several provinces, and supply mainly retailers. Regional wholesalers have a strong presence in local markets and offer a wide range of products and greater service than centralized companies. However, local wholesalers are feeling the pressure of larger firms that now primarily deal in cash and carry. Buyer groups operate in several market segments and are increasing their integration with specific retailers. In Poland, the cash and carry format has gained popularity quickly, as small, traditional retailers (of which there are many) appreciate the wide selection of products sold at competitive prices. Indeed, most of the major chains in the cash and carry channel target small, traditional retailers, HORECA outlets, and institutions. Consolidation of the market is highly likely in coming years but new entrants should be expected given its attractiveness to small retailers. Jeronimo Martins Dystrybucja SA, the owner of the ubiquitous Biedronka discount supermarket chain, is considering launching a cash and carry outlet line. Major players are likely to strengthen their positions, as sales are predicted to rise due to the growing number of outlets. The main companies operating in the cash and carry market are: Makro Cash and Carry Polska SA, Selgros Cash & Carry Sp zoo, Eurocash SA, and Emperia Holding SA [3] . Retail Sector The distribution system for consumer ready food products, as with all other branches of the Polish economy, is still undergoing a rapid transformation and remains one of the most dynamic and fastest growing areas of the Polish economy. The retail sector is much diversified. It ranges from small family operated stores, through medium-sized stores to large distribution centers which can be easily compared with those found in other countries in Western Europe and the United States. Annual disposable income is expected to rise by 17 percent between 2010 and 2014. As income grows, Poles are becoming more fastidious buyers, which are forcing retailers to pay more attention to issues such as quality of product and customer service, the availability of additional services as well as store design, to make shopping more pleasant and convenient [4] . Foreign investors are attracted to the retail sector. As of 2009, there were over 293 hypermarkets nationwide along with many super-stores. The vast majority of hypermarkets are foreign owned, with traditional small-scale and predominantly Polish-owned shops facing steadily decreasing sales. There are approximately 30.9 shops per 10,000 inhabitants. Large retail chains are projected to gain control of as much as 80 percent of the Polish market within the next five years with only 8 major players remaining. However, market analysis also shows that almost 40 percent of confectionary retail sales occur via distribution by small grocery retailers: market consolidation appears still to be off a few years. [5] Since 2005, E-commerce has developed at a pace of over 40 percent annually. The increasing number of Internet users and their positive attitude towards on-line shopping translates to expanding opportunities in this market channel. Mostly young people shop on-line now. Older consumers are the brake on more rapid expansion in e-commerce as they distrust this form of shopping. However, with greater familiarity with the internet and the competitiveness of products offered on-line versus traditional outlets, future prospects appear bright. By the end of 2011, it is projected that the number of e-shops will have double and that growth in turn-over will have expanded 40-50 pe [6] rcent since 2005 . For additional information on the Polish retail sector please refer to the previous GAIN report PL1021, date 12/27/2010, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Warsaw_Poland_12- 21-2010.pdf Food Processing Sector The sector is varied with both domestic and international companies represented on the market. There are also a number of small companies operating in the fruit, vegetable, meat processing, and baking sectors located throughout Poland. The most important sectors of the food processing industry are meat, dairy, and alcohol, followed by confectionery, food concentrates, sugar, fruits and vegetables, juices and non-alcoholic beverages production. The proportion of food industry products considered to be value- added increases constantly. The confectionary sector can be viewed as an example of the trends associated with the modernization of the Polish market. In 2010 chocolate confectionery sales grew by 10 percent in current value terms to reach US$ 2 billion (2010 exchange rate) and benefits from a steady demand and rising consumer expectations. More Poles, particularly affluent ones, are reaching for sophisticated lines that offer additional value and excellent quality. Sugar confectionery fared well even during times of economic slowdown as such products are seen as affordable indulgences. Gum sales grew by 4 percent (calculated using fixed 2010 exchange rate) in current value terms in 2010 to reach US$300 million. Growing numbers of Polish consumers are seeking added value in gum, these consumers are open to novelties and eagerly try out products with active ingredients [7] . A growing demand for variety is reflected by the fragmentation of the confectionary market: there are over 170 different brands offered with none controlling more than a 6.7 p ]ercent of the marke [8t. For additional information on Poland’s processing sector please refer to the previous GAIN report PL6026, date 4/28/2006, available at: http://www.fas.usda.gov/gainfiles/200604/146187598.pdf Hotel, Restaurant & Institutional Sector With more Poles working longer hours, Polish eating habits have altered with eating out becoming more common. Polish, Italian, Chinese, Mexican, and Indian restaurants can be found in almost every Polish city. American chains have also started to appear in larger cities like Warsaw. These chains include T.G.I. Friday’s, Champions, Mc Donald’s, Pizza Hut, and KFC. In addition, many of the international hotel chains such as the Marriott, Radisson, Sheraton, Hyatt, Hilton, and Holiday Inn are present in Polish cities. Many local entrepreneurs, too, have invested heavily in this sector. Despite the fact that Poles still prefer home-made meals, they are gradually moving towards ready meals and American style fast-food outlets. This is particularly true of the young professional crowd. A hectic lifestyle that combines intensive professional duties with household chores, allow little free time which is preferred to be spent in leisure rather than in the kitchen cooking. Consequently, sales by food outlets offering traditional meals are increasing. Furthermore, exotic meals offered by restaurants and other food outlets are gaining in popularity as an outcrop of the increasing interest in foreign cuisine by Poles who have travelled abroad. Poland’s hosting of the European Football Championships in 2012 will have a positive impact on the hotel market. New accommodations are being built rapidly in those cities where events are scheduled to accommodate the large numbers of fans and tourists expected. The benefits from building new hotels will not be limited only to the time of the competition, but will continue afterwards. New, modern hotels will stimulate the growth of Poland’s tourism sector as the competition will increase interest from both tourists and investors in the country [9] . Several larger domestic producers have set up separate distribution channels specifically for this sector. While the other sectors of Polish food distribution are already very competitive, the HRI sector still sees excellent opportunity for growth. An HRI-targeted promotion campaign may offer U.S. exporters good opportunities for sales to Poland. For addition information on Poland’s HRI sector please refer to GAINS PL9012, date 12/29/2009, available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/HRI%20FOOD%20SERVICE%20SECTOR _Warsaw_Poland_12-23-2009.pdf BALTIC STATES Wholesale Sector The Baltic States’ wholesale sector can be divided into the following categories: international chains, national chains, regional chains, regional wholesalers, local wholesalers, and buying groups. International chains, mostly Scandinavian, are likely to dominate the markets in the future. National chains operate branches in individual countries (Lithuania, Estonia, and Latvia). Regional chains, located in individual countries, are territorial and usually serve several provinces. Regional wholesalers have a strong presence in local markets and offer a wide range of products and services, supply mainly smaller retailers. Local wholesalers, feeling the pressure from larger firms in the industry, now primarily operate in cash and carry. Buying groups operate in several market segments and are increasing their integration with specific retailers. Retail Sector The Baltic States’ retail sector is much diversified. It ranges from small family operated stores, through medium sized stores to large distribution centers which can be easily compared with those found in the Scandinavian countries (RIMI chain operating in all three Baltic States). In Lithuania the economic recovery has not necessarily been reflected by a parallel recovery in consumer purchasing power. This has led the retail sector to record only minor sales increases during this period. Among the more positive contributors in this sector, Grocery retail sales are growing steadily while internet retailing is developing rapidly. E-commerce is a key driver behind the growth in retail sales, and given its underdevelopment, expansion opportunities ex [10]ist. Latvian consumers, meanwhile, continue to review spend habits and avoid unnecessary purchases. The “economization” trend underway is forcing many retailers to adjust their strategies to cater for the limited purchasing power of Latvians. Supermarkets/hypermarkets continued to diversify their product lines to economize including scrutinizing more closely consumer interest in private label products. A majority of retailers now offer as many temporary discounts as possible to attract consume [11] rs. In Estonia, the retail landscape is moving in the opposite direction rapidly, as modern retail channels, such as supermarkets and hypermarkets, are growing increasingly more influential. Discounters that benefitted from changing consumer habits in the wake of the global financial crisis are now seeing consumer shift away. Internet retailing is experiencing strong sales growth, as consumers discover the convenience of this non-traditional channel. The retail sector performance is expected to continue strongly as consumer purchasing power expands in the country’s economic recovery [12] . Food Processing Sector The food processing sector reflects in many ways the development of the Baltic States economy since the collapse of communism. The sector is varied with both domestic and international companies represented on the market. A number of small companies operate in the fruit, vegetable, meat processing, and banking sectors located throughout the Baltic region. The most prominent sectors of the food processing industry include: dairy, confectionery, bakery, cereal, alcohol, sugar, fruits and vegetables, juice and non-alcoholic beverage production. The proportion of food industry products considered to be value-added is constantly increasing. For the Baltic region on whole, the slower economic recovery, unemployment, and low disposable income per household will lead consumers to look for economical food options. Dried fruit and nuts will increasingly become part of such a diet, fulfilling the need for balanced nutrition on a limited budget. Ready-to-eat healthy meals will be in demand by bargain seeking consumers and the busy working single population, predicted to inc [13]rease. Health and sports drinks could find a niche in the Baltic market. However, promotional campaigns may be required to familiarize consumers with such American products. A gap exists in the HRI sector for organic products, although the market is most [14] likely to remain quite small. Hotel, Restaurant & Institutional Sector In Estonia, the number of HRI establishments has grown continuously since 2001, with 392 accommodations then, to triple that number by 2010. The 2008/9 global economic crisis drove HRI management teams in Estonia to reexamine business practices. Improvements in hotel services and amenities, brand marketing, availability of conference facilities and catering to business events were all pursued in effort to attract clients and overcome the recession [15]. In Estonia, French, Italian, Mediterranean, Russian, Asian, Japanese, and Indian restaurants account for the international cuisine. KFC, McDonalds, pizza, and steak restaurants represent American cuisine. American steak restaurants seem to have a particularly bright future in this market. Gourmet foods (dried, processed, canned, and frozen), unique cuisine, food products, and beverages supplemented with vitamins and minerals intended to promote health, all promise increasing sales if current trends continue. Introducing American gourmet cuisine (e.g. Cajun-Creole) to HRI establishments could be a way of entering the Estonian ma 6]rke [1t. Latvia’s first quarter 2011 GDP totaled 3,070.86 million lats (LVL), with hotels and restaurants accounting for 32.03 million LVL. Per capita income in 2010 totaled 3,580 LVL as compared to 2008 of 4,670 LVL. The economic downturn’s influence on the market resulted in declining consumer expenditures on goods and services. Over the 2006-2010 period, consumer expenditures decreased 20 percent. In 2010 unemployment stood at 19. Optimism persists though as total consumer expenditure for Latvia is projected to rise to 8.5 billion LVL in 2015 and 9.9 billion by 2020 [17] . SECTION IV- BEST SALES PROSPECTS POLAND- Please also refer to Table in the attachment Best prospects include: - Almonds - Wine - Whiskey - Salmon - Pistachios - Sunflower Seeds - Raisins - Ground Nuts - Protein Isolates - Grapefruit BALTIC STATES The high quality and long shelf life of U.S. agricultural products and beverages make these competitive in the Estonian market as in other Baltic states. Demand of fish and fish products (salmon, mackerel, surimi, and lobster), dried fruits (cranberry, apricots, prunes) and nuts (almonds, hazelnuts, pecans) is set to increase. In the HRI sector, the supply of Angus beef could be prosperous as it gains popularity . [1] Frozen fish and fish products are another avenue to explore for U.S. businesses. Interest in salmon, herrings, surimi, mackerel, shrimps, and lobster is likely to attract local consumers as well as food processing companies. However, most fish products supplied to Estonia come from Norway and other Baltic states, competition from local and EU suppliers are very strong. The introduction of U.S. wine and spirits requires marketing and promotion of these beverages since Baltic consumers are not familiar with U.S. alcoholic beverages. Wine is growing in popularity in this region though wine aficionados are still limited in number. American liquor is well known for its historical merit and is sought for by locals and Scandinavian tourist [2] s. Strong consumer preference for local tastes and products might obstruct introduction of new products and ingredients to the Baltic food market. Another important factor for the Baltic food market is the limited purchasing power of local consumers. SECTION V - KEY CONTACTS AND FUTHER INFORMATION POLAND and the Baltic Countries One of the goals of the Foreign Agricultural Service (FAS) office in Warsaw is to assist in the market development and promotion of U.S. food and agricultural products in Poland and the Baltic States. There are a wide variety of ways in which to approach these markets and many key contacts such as importers, distributors, and retailers. Please contact FAS Warsaw if you would like additional information on any of these markets if your company is interested in selling U.S. food and beverage products to this region. There are several U.S. commodity groups, called cooperators, who partner with FAS to promote U.S. agricultural products in the region. Those cooperators who are particularly active in Poland include: Pear Bureau Northwest, California Pistachio Commission, Raisin Administrative Committee, Northwest Wine Coalition, American Hardwood Export Council, U.S. Wheat Associates, Cranberry Marketing Committee, and Food Export USA Northeast. The California Wine Institute, Cranberry Marketing Committee, Almond Board of California, and the U.S. Soybean Board-American Soybean Association have representatives based in Warsaw. Staff contacts for marketing: Michael Henney, Agricultural Counselor Jolanta Figurska, Marketing Specialist Office of Agriculture Affairs U.S. Embassy, Poland Al. Ujazdowskie 29/31 00-540 Warsaw, Poland Telephone number: 011-48-22-504-2336 Fax number: 011-48-22-504-2320 E-mail inquiries: agwarsaw@fas.usda.gov, jolanta.figurska@fas.usda.gov Web page: http://poland.usembassy.gov/poland/agric.html [1] Demand for confectionary in Poland Euromonitor [2] Food processing report Estonia [3] Retailing in Poland [4] Retailing in Poland [5] Pricing confectionary Poland Euromonitor [6] Consumer lifestyles Poland [7] Rising demand for confectionary in Poland Euromonitor [8] Brand shares confectionary Poland Euromonitor. [9] Consumer lifestyles Poland [10] Euromonitor: Retailing in Lithuania [11] Euromonitor: Retailing in Latvia [12] Euromonitor: Retailing in Estonia [13] Euromonitor: Retailing in Latvia [14] Euromonitor: Retailing in Estonia [15] Food processing Estonia [16] FAS/HRI Estonia report [17] FAS/HRI Estonia report [18] FAS/HRI Estonia report [19] HRI Latvia report APPENDIX- STATISTICS A. KEY TRADE & DEMOGRAPHIC INFORMATION POLAND Agricultural, Fish and Forestry Imports From All Countries (US$Mil)/U.S. Market Share (% ) 16,604/1.35 [1] – 2010 Consumer Food Imports From All Countries (US$Mil)/U.S. Market Share (%) – 2010 7,893/0.47 Edible Fishery Imports From All Countries (US$Mil)/U.S. Market Share (%) - 2010 1,446/1.64 Total Population (Millions)/Annual Growth Rate (%) 38.3/0.05 Urban Population (Millions)/Annual Growth Rate (%) 23.3/0-1 Number [2] of Major Metropolitan A reas 4 Size of the Middle Class (Millions)/Growth Rate (% [3] ) 4/1 Gross Domestic Product growth (forecast for 2011) 3.8 Unemployment Rate (%, forecast for 2011) 11.5 Average Monthly Food Expenditures (US$) 210 Females in Workforce (%) 46 Exchange Rate (US$1.00, Annual Average 2010) 2.96 BALTIC STATES Agricultural, Fish and Forestry Imports From All Countries (US$Mil)/U.S. Market 6,650/1.51 Share (%) – 2010 Consumer Food Imports From All Countries (US$Mil)/U.S. Market Share (%) 2,900/0.8 – 2010 Edible Fishery Imports From All Countries (US$Mil)/U.S. Market Share (%) – 2010 830/4.0 Total Population (Millions)/Annual Growth Rate (%) 6.8/(0.51) Urban Population (Millions)/Annual Growth Rate (%) 4.62/0.2 Number of Major Metropolitan A [4] reas 2 Size of the Middle Class (Millions)/Grow 5] th Rate (% [) 0.7/0.1 Gross Domestic Product (average expected growth in the region, %, 2011) 3.2 Unemployment Rate (%, forecast for 2011) 17.1 Average Monthly Food Expenditures (US$) 210 Females in Workforce (% ) 47 Exchange Rate (US$1.00, Annual Average 2010) Lithuania – Litai 2.60 Estonia – Euro 0.75 Latvia – Lati 0.54 [1] Global Trade Atlas, data from 2008. [2] Population in excess of 1,000,000. [3] These are unofficial estimates due to the lack of reliable statistics. [4] Population in excess of 500,000. [5] These are unofficial estimates due to the lack of reliable statistics. Author Defined: BEST SALES PROSPECTS - POLAND U.S. Exports to Poland and the Baltic States
Posted: 12 January 2012

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