Coca-Cola HBC Poland boss sees ‘huge challenges’ in growing discount dominance

Speaking at the recent 2013 InnoBev Global Beverages Congress in Warsaw, organized by Zenith International, Ahmed Elafifi, general manager and president, Coca-Cola HBC, said that Poland represented a very large RTD opportunity.

In terms of growth potential, Poland has quite a high starting point in terms of consumption with 821 NARTD servings per capita in 2012 (Canadean), Elafifi said. “However, there’s a long way to go to watch Western European levels, and obviously the highest EU level in Germany – 1,453.”​

Coca-Cola contributes 1bn+ unit cases of beverages per year to Polish NARTDs, and was 2012 market leader with a 12.5% volume share (22% value): with a 32% volume share in sparkling beverages, 31% share in RTD tea, and niche positions in Energy (6.5%), water (3%) and juices and juice drinks (2%)

Sports, energy, water, teas are hot…​

Noting exponential Polish growth in RTD teas, sports drinks and energy from 2007 to 2012, Elafifi explained that in 2012, 48% of the Polish NARTD market was water, while juice (17%) and sparkling soft drinks (28%) were the two other main segments.

With 14.6% CAGR from 2007-2012, teas, sports (+20%) and energy (+21.1%: CCH began distributing Monster Energy and Burn in Poland last year) grew fastest, he said, albeit from a smaller base (4% share for teas, 2% for sports and energy) while juice sales fell 1.6% across the reporting period.

Elafifi cited Canadean data forecasting growth 2.2% CAGR for NARTDs as a whole from 2013-2020, with sports (5.5% growth) and energy (5.9%) predicted to outstrip other categories.

Going forward, the continued of discount retailers in Poland was the “most important dynamic in Poland” ​and made the nation’s market very peculiar, Elafifi said, referring to Nielsen data.

“Yes, there continues to be some growth, around 2% in the next years,​ However, there is a very big shift within this market,”​ he said. “Traditional trade is declining – 52% in 2007 to 40% in 2012 – and there is a huge growth in discounters – reaching over one third (32%) of the market by 2020.​

‘A time to work closer with our customers…’​

“This is something moves Poland more in the direction of Germany, and this is a huge challenge, from one side, but also, a very big opportunity,”​ he added.

Challenging, because beverages sold via traditional channels had offered suppliers strong profit margins, Elafifi said, whereas servicing discounters with very big contracts created margin pressure.

“But this is a big opportunity, because discounters are where the big growth is happening in Poland, with consumers coping with economic challenges by moving to value-driven products,”​ he said.

Price sensitive Polish consumers were particularly astute in regard to value: what they bought, and where they bought it, while there was “relatively low brand loyalty and relatively high usage among different brands,”​ Elafifi explained.

BeverageDaily.com asked Elafifi about the market dynamics behind a predicted growth slowdown in Polish NARTDs from 2013-20, with no one category expected to exceed mid-single-digit growth.

“This is the time to work much closer with our consumers, think of their needs more, and take some tough decisions. Not necessarily in terms of producing short-term results, but in terms of joint value creation – understanding consumer insights, needs, the value they are seeking,” ​ he replied.