The Poles are drinking more wine than ever, making Poland an increasingly important market in the heart of Europe. How dynamic? According to KPMG/Euromonitor, in 2013 Poles bought 107.5m L of still wine, spending a total of 2.1bn PLN ($565m). Sparkling wine accounted for a further 35.5m L ($125m in value), and fortified wines for 30.5m L ($251m). (Other research, notably by Nielsen, gives slightly lower figures.) Overall, the wine market has increased by 49% in volume and 100% in value in just under a decade, with still wine sales increasing by 73% in10 years.
Everything changing
Poles have traditionally preferred red wine, but the last decade has seen a considerable increase in white wine consumption: red wine accounts for 52% of still wine, of which 45% is white and 3% is rosé (though Nielsen lists rosé at 12%). The white wine trend is obvious at all levels, driven by more seasonal drinking, with Vinho Verde, Sauvignon Blanc, and Muscat becoming popular summer drinks, as well as by a demand for lower alcohol, and growth in the on-trade. Other trends include increased by-the-glass sales, lighter foods and outdoor eating in summer, where wine now often replaces the more traditional beer.
Rosé has doubled in sales in a few years and is expected to follow that trend, with encouraging data coming from trendsetting distributors and bars. While Polish-made sparkling wine makes up 75% of sales, imported sparkling wine is also on the rise, with Prosecco booming. Beata Gawęda, director of independent Italian specialist Vini e Affini, says: “Prosecco sells faster than we can import it. And not just in summer — the aperitif culture is spreading in Poland also in the colder months.”
So what are Poles paying for their wine? The average price of an imported bottle of still light wine in 2013 was 14.70 PLN ($3.95), a price which includes both 23% VAT and $0.33 excise. As far as pricing goes, the market can be divided into three categories: up to 30 PLN ($8.07); 30PLN to 60 PLN; and anything above. With the rise of the discounters, much of the action is happening at the lower end, where wines cost between 10 PLN and 20 PLN; 90% of the wine sold in Poland retails for less than 30 PLN. Higher-priced wines have generally been unsuccessful in supermarkets, with Lidl or Alma having to heavily discount more ambitious offerings like Barolo or Champagne. Given the small size of the Polish market, high costs of operation, and the resulting high markups, a wine retailing for 30 PLN has usually been purchased from the winery at or below $3.36.
On the other hand, 71% of the distributors interviewed by KPMG expect the strongest growth in the 30 PLN to 60 PLN category – although looking at the present market structure, this could be just wishful thinking.
While the overall Polish market shows steady growth, a single distribution channel has been responsible for most winesʼ sales in the past three to four years: hard discounters. The extent to which two major chains, Lidl and Biedronka, with their 600 and 2,600 shops, respectively, have cannibalised the other distribution channels, has been nothing short of staggering. According to KPMG, discounters now account for 46% of retail wine sales by volume, versus 35% for super- and hypermarkets, and 19% for other channels, including specialist wine stores and grocery stores.
The discounters’ success is based on a radical overhaul of the dated supermarket approach to wine. Biedronka and then Lidl reduced their ranges from 200-plus SKUs to just 20 to 30 products that rotate every month or two. They have also lowered prices: before 2010, it was difficult to buy a bottle of wine in retail at less than 19 PLN; the average price is now $4.48, and imported wine is sold as cheaply as 8.99 PLN ($2.41) a bottle. At the same time, discounters have been able to keep margins at satisfying levels by importing directly, whereas supermarkets such as Carrefour, Auchan, Tesco, and E. Leclerc have long relied on Polish distributors. Direct imports tend to favour European wines — effectively reversing an early 2000s trend, where California and Chile were the fastest-growing countries on the market.
Supermarkets are having a hard time in Poland across all product categories and wine is no exception. Generic consumer trends notwithstanding – Poles now prefer to shop more often, but at smaller shops located closer to where they live, rather than weekly at large suburban hypermarkets – retail chains have notoriously underdelivered in terms of wine service, simply putting up walls of overpriced wine organised by origin, with zero advice to shoppers.
The on-trade only represents 4% of wine sales by volume but is seen with a hopeful eye by distributors, as Poland’s exploding dining-out culture appears to guarantee steady growth in that category. Fine dining locales, although few and far between, are the only channel capable of selling blue chip bottles in any quantity. Importers are also finding it more rewarding to gear their mid-range wines towards restaurants, rather than independent wine shops. Indeed, independent retailers, as well as high-street wine chains, are struggling. The competition from discounters – which sometimes offer the same wines at half the price – is a major challenge at the bottom end, while at the top end, consumers often purchase wine online in Germany and have it shipped (illegally — private customers have no way to pay duty) to Poland. The retail market is bound to consolidate while the on-trade will likely remain niche-driven.
Geography and demography
While there is no hard data on the geographic distribution of wine sales in Poland, the top six cities account for more than 90% of the market. Warsaw alone sells 45% of wine by volume and even more by value, although it is home to just 5% of Poland’s population of 38m. Of course, Warsaw has the country’s largest companies and the biggest number of wine distributors, but also the largest expat community; business expenses are a major source of turnover in the on-trade. Kraców, Poland’s tourist hotspot with a lively restaurant and bar scene, comes second at about 10% of the market. The Western city of Poznań, halfway between Warsaw and Berlin and with historical ties to Germany, is third at about 8%, followed by the Silesian agglomeration around Katowice and the Baltic Tri-City (Gdańsk, Sopot and Gdynia), which some distributors indicate as having the largest potential. “Kraców is very fragmented while the disposable income in Silesia is low. Tri-City, on the other hand, is booming: it has a strong economy and tourism,” says Adam Drozdowski, managing director of Partner Center, a major distributor that supplies both supermarkets and HoReCa.
This concentration presents a challenge to regional distributors, whose market potential is limited. The German model of working with a different agent in each region doesn’t work: if you don’t sell in Warsaw, your growth opportunities are slim. And selling in Warsaw is tricky for companies based elsewhere because of logistics: for example, restaurants often expect same-day deliveries.
According to a KPMG survey, 35% of adult consumers have drunk wine in the last month and 76% in the last year (but that includes sparkling and fruit wines); 45% say they have drunk wine more than once within a year (55% of women and 35% of men). The over 40s are correlated with more wine consumption, as is higher education. Women drink wine more regularly than Polish men, who prefer beer and spirits.
A closer look
Interpreting imports statistics is a challenge because they may or may not include sparkling, fortified, flavoured, and bulk wine. Data from Euromonitor and the Central Statistical Office is often contradictory, too. Globally, Italy is the market leader in Poland, followed by Bulgaria, Spain, Germany and California. For imported bottled wine, California has been number one for several years following the huge success of E&J Gallo’s Carlo Rossi, which at 9m bottles, has about 8% market share. Spain overtook California for the first time in 2013, followed by Germany (but that figure includes re-exports from Germany to Poland and German-bottled wine), and then France, Bulgaria, Italy, Portugal, Chile and Moldova. Bulgaria and Moldova, two traditional suppliers, have been losing market share but remain strong in the lower-price categories. Portugal, Spain, Italy and France received a major boost from Biedronka and Lidl, where they are often the only countries listed. Importers remain bullish about this trend, with 79% of those interviewed by KPMG expecting Spain to increase versus only 57% for Chile. Georgia is also enjoying a surprising success.
Rough statistics indicate that dry, semi-dry, and semi-sweet/sweet wines each have about a third of the market. How true is that? On the one hand, many Polish consumers clearly have a sweet tooth, being new to wine or having been raised on off-dry and sweetish wines. On the other hand, distributors and retailers notoriously mislabel the wines they sell; in supermarkets and liquor stores, fruity, easy-drinking Merlots or Chardonnays will usually be labeled and marketed as semi-dry even when they contain no actual sugar. Interestingly, discounters have consistently promoted dry wines and largely avoided mislabeling, thus promoting an increased acceptance of dry wines by consumers. Clearly, semi-sweet wines are bound to lose sales. Quality sweet wines, on the other hand, have no market at all in Poland, even in the on-trade.
The Polish wine market is rather fragmented and brand loyalty is low. According to London’s IWSR, just seven brands sold more than 1m bottles in 2013. The market leader is E&J Gallo’s Carlo Rossi, followed by Fresco (Polish-bottled from imported base wines), Bulgaria’s Kadarka and Sakar, Moldavian Valley, and El Sol, which is a proprietary brand from Ambra S.A., featuring a range of versions from the US, Chile, Spain, Italy and Australia. “Low brand penetration is typical of Eastern Europe so Poland is no exception,” says Robert Ogór, Chairman of Ambra S.A., Poland’s largest distributor. “From major brands, only Carlo Rossi has consistently invested in marketing.”
But brands are weak also because the market has shifted from supermarkets, which endorse large brands, to discounters, which don’t. Biedronka and Lidl prefer to promote their own brands or have a fast-changing choice from smaller wineries. Buyer’s own brands, once a minority on the shelf, are increasing, notably at Tesco and Marks & Spencer. Furthermore, advertisement and promotion of wine is not allowed in Poland, although brands such as Carlo Rossi, El Sol and Jacobs Creek have circumnavigated this by promoting the events they sponsor or by airing clever ads with no reference to the actual product. Nonetheless, competition is stiff and it will require a major investment for a brand to seize a double-digit market share.
* category includes fortified wine
