DAIRY SECTOR: Polish Dairy Sector Sees Strong Improvement in 201016 Jun 2011 • by Natalie Aster
After two sluggish years in 2010 Poland's dairy industry took a major turn for the better. According to estimates by the IERiGZ food sector monitoring institute, the country's dairy industry turned over PLN 24bn last year, up from less than PLN 21bn in 2009.
Exports of dairy products represented slightly more than a fifth of the total figure and came to EUR 1.2bn, up from EUR 937m in the prior year. The key exports products are cheese (6th place in Europe) and powdered milk (5th), and the key markets are Germany, Czech Republic, Italy and outside the EU – Russia.
As the global demand continues to go up and prices reach new historic highs, the industry seems wellpositioned to take advantage of the favorable market conditions.
However, with 214 dairy plants in operation, the Polish dairy market is among the most fragmented and ineffective in Europe. A similar number of plants in Germany process three times as much milk with 18% less workforce. Further consolidation of the sector seems inevitable.
Over the past, decade close to 100 smaller players have already vanished from the market. Poland's top five milk processors (Mlekpol, Mlekovita, Polmlek, Lacpol, Danone) are responsible for little more than 40% of the sector's total turnover. Mlekovita boosted its sales revenues by a third and caught up with the long-time leader Mlekpol, which experienced a 10% growth. Each of the two leading giants turned over PLN 2.5bn last year. Moreover, both closed the 2010 in the black, at PLN 30.5m and PLN 35m respectively.
Growing competition between dairy processors are reflecting in the price of milk, which has been steadily on the rise from the average of PLN 0.87 in March 2009 up to PLN 1 in March 2010 and PLN 1.2 per liter a year later. The crisis of 2008-09 resulted led to a global decline in the dairy cattle stock, which now makes companies compete for precious the raw material.
This, in turn, eats away at their profitability. The latter dropped from 3.95% gross in 2009 down to 2.68% in 2010. Although the basic price of milk increased by nearly 19% in 2010, wholesale prices rose by 8% and retail prices – by merely 2%. There is a limit, however, to how long the companies will be willing to take on the growing costs, and the latter are beginning to trickle down to consumers.
The above news abstract has been taken from a bi-weekly newsletter to professionals doing business in Poland "news2biz - Poland".
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