Poland – Fragmentation
still in milk supply but restructuring of processing

Agriculture, and dairying
in particular, has long been important to Poland. State farms never dominated
Polish agriculture as they did in the Soviet Union and a relatively large number
of co-operatives were and continue to be the main form of organisation processing
milk from the many small farms.

However in the course of
the last ten years there has been considerable change in the structure of milk
processing, if not of milk supply, following Poland’s application to join the
EU. The significant population coupled with low labour costs have attracted
Western food and dairy processing companies as well as Western distribution
companies. More consolidation in the number of local co-operatives is foreseen
as well.

At the level of basic milk
production, fragmentation is still the key characteristic. More than 90% of
farms are now privately owned but the average holding is only just under 8 hectares.
Less than five per cent of farms exceed 20 hectares. There are 1.3 million farms,
of which approximately half a million supply milk for processing.

With the breaking up of
the state farms in the early 1990s (occupying 20% of total agricultural land),
the national herd declined. In 1980 it was estimated at 6 million but had already
fallen to 4.9 million by 1990. Today about half the cattle population of 7 million
are cows and this number has stabilised. These 3.5 million cows are in approximately
1.3 million herds i.e. the average herd consists of just under 3 cows with an
average annual yield per cow of 3,325 kgs..

The restructuring programme
introduced by the Ministry of Agriculture and Food Economy in 1994 is still
proceeding. This aims to raise total milk production from 11.6 billion litres
in 1997 to 16.0 billion litres by 2006, i.e. following Poland’s accession to
the EU. The increased production is to come from the same number of cows. In
1999 it is believed that total raw milk supplies slipped slightly from 12.2
billion litres in 1998 to 11.9 billion litres. The average cost of milk production
at US$ 0.14-0.16 per kg puts Poland just above Australasian levels but at around
half the cost of supply in the EU.

GlobalData Strategic Intelligence

US Tariffs are shifting - will you react or anticipate?

Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.

By GlobalData

Learn more about Strategic Intelligence

In 1997 only 60% of the
milk produced was collected with much staying on the farms. This is targeted
to rise to just under 90%, i.e. closer to the EU pattern, and will be processed
by a forecast 20-25 co-operatives plus around 15 large private dairy processors
as compared with 290 cooperatives and 90 private processors in 1998. About 80
dairies presently process around 70% of the country’s milk deliveries with an
average milk intake each of about 57,000 tonnes a year. The top ten Polish dairies
in 1998, based on milk delivery are shown in the following table. All are coops
except for Danone, which is the only Western processor to rank in the top ten.

Source: Sparks Europe

In January 2000, new quality
standards were introduced, which will effectively take third quality milk out
of the commercial market and make more, better quality milk available to processors.

The product pattern

The production pattern in
the last few years has been as shown in the following table.

Source: based on Sparks
Europe monthly report, Dairy in Poland.

Milk beverages include both
cultured and non cultured products (i.e. kefir, buttermilk and flavoured milk
drinks).Butter and ripened cheese experienced a drop in production last year
owing to a combination of restricted milk supplies and weak demand in the Russian
market. Total ice cream production in 1997 was 137,000 tonnes, having doubled
in two years.

High rates of inflation
during the early and mid 1990’s and constrained consumer incomes led to a decline
in domestic dairy consumption – from 241 litres per capita in 1991 down to 200
litres by 1997. Sectors presently showing growth or forecast to grow over the
next few years are noticeably fresh products such as milk beverages, fresh cheeses
(not so much the local traditional variety of quark known as tvorog, but rather
spreadable fresh cheese), and yoghurt i.e. the sectors where Western investors
have chosen to concentrate their efforts.

Poland has been a net exporter
of dairy products since 1992 with export volumes in 1999 80% higher than for
imports. The leading export product areas are skimmed milk powder (83,000 tonnes
estimated in 1999), cheese (30,000 tonnes including 12,000 tonnes of ripening
cheese), ice cream, whey powder and milk drinks. Direct export subsidies for
skimmed milk powder were introduced for the first time in mid 1999. Algeria
and the Netherlands (for re-export) have been the main markets for SMP with
leading markets for Polish cheese being Russia and the US. Russia and other
former Soviet markets have been the main buyers of Polish ice cream and the
economic difficulties in these countries over the last few years have constrained
development of this business.

Western investment attracted

Since the fall of the iron
curtain, Poland has been a magnet for Western food processors. According to
some observers, Western processors now account for around 30% of the Polish
dairy market and are especially strong in short life products and cheese. Danone
claims a market share of 29% for the fresh sector overall. Danone has 45% of
the homogenised fresh cheese market, dominates in the cream sector (22%) and
is strong in yoghurts and kefir (approaching 30%). Campina is a significant
player in yoghurts, kefir (9%) and dairy desserts with two plants. Nestlé has
a dairy in Slupsk producing yoghurts and milk powder. In the cheese sector,
Hochland and Besnier have local plants. Besnier is probably the largest producer
of Parmigiano type cheese. Hochland controls the spreadable fresh cheese sector
with a third of the market, while Bongrain has nearly 20% of the same product
area. Fromageries Bel produces processed cheese locally at Chorzele.

The German yoghurt producer,
Zott, has gained 20% of the yoghurt market based on imports alone but is planning
to start local production this year. Their domestic competitors, Onken also
have a plant under construction in Poland at Makow Mazowiecki. Other European
investors include MD Denmark (ripening cheese), Hoogwegt Netherlands (cheese,
milk powders), Sodiaal France (yoghurts), Numico Netherlands (liquid milk and
milk powders) and Molky of Switzerland (cheese, butter). Land O’Lakes (cheese
and butter) the largest co-operative in the US has also invested in dairy processing
in Poland.

Unilever’s Algida operation
and Scholler (Sudzucker) of Germany account for around 40% of Polish ice cream
production with a further 30-40% held by four domestic firms – Zielona Budka,
Ekko, Augusto, and Kroal Bros. In 1990, local production of ice cream only met
50% of demand. Since the mid 1990s, Poland has become a net exporter of ice
cream.

Western wholesalers and
retailers have also been attracted. Macro from the Netherlands is the major
player in the wholesaling sector. Several retail chains have invested in Poland
including Billa (Austria) one of the first to recognise the opportunities, Globa
(Belgium), and Rema (Norway). The UK’s, Tesco with Poland’s Savia company operates
36 stores in southern Poland. Leclerc, the French hypermarket group plans to
open over 50 outlets throughout the country and Auchan has already opened in
a suburb of Warsaw as has Robert, a Polish-French joint venture. Allkauf Ahold
Poland (a German-Dutch joint venture) has acquired part of Mitex trading and
is planning to open a chain of supermarkets. Discount supermarkets have also
made an appearance with the opening of two Netto (Denmark) outlets.

IMES gratefully acknowledges
the assistance of Sparks Europe’s office in Poland in preparing this article
(email sparkeup@sparkseurope.com.pl)

Sign up for our daily news round-up!

Give your business an edge with our leading industry insights.

Sign up