KPMG IN POLAND The alcoholic beverages market in Poland kpmg.pl 2 | The alcoholic beverages market in Poland Contents 1 Introduction 3 ooi eeaes mma o nins 2.1 Size and condition of the market 5 2.2 Product and consumer trends 9 2.3 Retail distribution channels 11 3 Beer 17 3.1 Size and condition of the market 17 3.2 Consumer and product trends 21 3.3 Manufacturers and importers 26 3.4 Retail distribution channels 28 3.5 Production and exports 30 3.6 Situation of companies 31 4 Wine 33 4.1 Size and condition of the market 33 4.2 Consumer and product trends 37 4.3 Manufacturers and importers 43 4.4 Retail distribution channels 44 4.5 Production 47 4.6 Situation of companies 50 Fermented alcoholic beverages Fruit wine 52 Mead 54 Cider and perry 56 iis 5.1 Size and condition of the market 59 5.2 Consumer and product trends 62 5.3 Vodka 66 .4 iueurs and other flavoured spirits 0 5.5 Whisk(e)y 73 5.6 Brandy and cognac 77 5.7 Rum 80 5.8 Gin 83 5.9 Tequila 85 5.10 Manufacturers and importers 87 5.11 Retail distribution channels 88 5.12 Production and exports 90 5.13 Situation of companies 93 RTD independent reserved. of ise on aooi eeaes rights 6.1 The EU context, subdivision into types, and minimum excise duty rates 99 All network 6.2 Excise duty rates in Poland 100 entity. KPMG 6.3 Excise-taxed spirits in Poland in the context 102 the Swiss of of the EU and the neighbouring countries a firm 6.4 Budget revenues from excise duty on alcoholic beverages 105 7 Legal framework for alcoholic beverages market 107 member International’), a and 7.1 Essential legal framework 107 (‘KPMG 7.2 Controversies regarding the polish legal framework 108 company 7.3 Manufacturing 111 7.4 Distribution 114 liability Cooperative 7.5 Advertising and promotion 116 limited International 8 Research methodology 121 Polish a is with 8.1 Desk research 121 o.o. z 8.2 A survey of polish consumers of alcoholic beverages 121 affiliated Sp. 8.3 A survey of companies operating on the market 122 firms KPMG of alcoholic beverages in Poland 2014 © member The alcoholic beverages market in Poland | 3 1 Introduction e are pleased to present this report, prepared with the aim to offer a comprehensive picture of trends on he alcoholic beverages market W in Poland. This publication describes all key categories, from beer, wine and fermented alcoholic beverages to various spirits and RTDs. In order to offer a multifaceted view on the market, we supplemented our analysis of retail sales with a survey conducted with adult consumers as well as manufacturers and importers of alcoholic beverages. The analysis revealed a picture of a market at the stage of considerable transformation driven by consumer trends and product trends. While the categories of beer and vodka continue to prevail, the market is becoming richer as well as more complex. As premiumisation progresses, some categories are growing in popularity, for instance grape wine, whisk(e)y and specialty beers. The innovation trend also plays an increasing role, reflected in the expansion of flavoured beers and spirits. At the same time, the pressure on margins is not receding, and stems from consumers’ high price sensitivity, their efforts to seek value for money, and from the negotiating power of some distribution channels. Of no less importance is the regulatory trend, encompassing primarily an increase in excise duty on spirits since early 2014. In order to present those changes in a broader context, we undertook an analysis of excise duty regulations in Poland against the background of neighbouring countries and other EU member states. The report also brings a summary of key regulations concerning production, trade and advertising of various categories of alcoholic beverages. We would like to extend our thanks to all companies and consumers who took part in our survey. In particular, we would like to thank the managers and industry experts who spent their time answering questions during our in-depth interviews. We believe that this publication will provide many interesting insights into he alcoholic beverages market in Poland . independent reserved. of rights All network entity. KPMG the Swiss of a firm member International’), a and (‘KPMG company liability Cooperative limited International Polish a Andrzej Bernatek Tomasz Wiśniewski is with Partner, Partner o.o. z affiliated Sp. Head of Consumer Markets KPMG in Poland KPMG in Poland firms KPMG 2014 © member 4 | The alcoholic beverages market in Poland inPoland market alcoholicbeverages 4 |The © 2014 KPMG Sp. z o.o. is a Polish limited liability company and a member firm of the KPMG network of independent member firms affiliated with International Cooperative (‘KPMG International’), a Swiss entity. All rights reserved. The alcoholic beverages market in Poland | 5 2 Alcoholic beverages mma o nins 2.1 Size and condition of the market In 2013, Poles spent over PLN 41.1 billion on alcoholic beverages, buying miion ies o s os o o an onae Taiiona eoe value share belonged to beer (47%) and vodka (30.7%), i.e. two categories which have the largest groups of regular or fairly regular consumers. However, changes on the market have become clearly visible. The volume of beer sales has not changed and vodka sales have declined, yet consumers are exploring new categories of alcoholic beverages. An increasing popularity is observed for aeoies s as owoo aoe siis as we as ae wine an wiske all of which are no longer a niche and have turned into important market segments in recent years. Also, cider represents high potential, even though this category has been hardly present on the market until very recently. While the industry is almost unanimous in saying that the greatest revolutions are already behind us, the future will bring more changes, including further growth in the sales of wine and whisk(e)y, an evolution in beer towards beer specialities ananaeeae eine in oka saes ien e isin eise aes Beer market heading for saturation oka saes einin aoe drinks and whisk(e)y on the rise Beer is the most popular alcoholic beverage among Poles. It is consumed Spirits are the second largest segment at least a few times a year by nearly of the Polish market of alcoholic 73% of adult Poles, which corresponds beverages. They are consumed by to almost 23 million of relatively regular as many as 88% of adult Poles in the consumers. In the record-breaking course of a year. In 2013, sales of this independent 2012, when the European football category in Poland reached a volume reserved. of championship was held in Poland, Poles of 4. million litres, with sales value rights All network spent PLN 19.5 billion on beer, drinking of about P 1.4 billion. This means entity. 3.89 billion litres of that beverage, which that Poland is among the largest spirits KPMG the crowned the over twenty years of nearly markets in Europe in terms of quantity. Swiss of a uninterrupted growth of this category. The value of the category is still low firm 2013 saw a slight correction though: in comparison with large Western member Poles bought 3.82 billion litres of beer, European markets, which stems from International’), a and worth PLN 19.3 billion. The odds are that the dominant role of vodka in sales (‘KPMG the beer market in Poland is heading for structure. company saturation and it’s possible that further liability Cooperative growth in 2014 and 2015 will be small in terms of volume, and is likely to be driven limited mostly by speciality beers and beer International Polish a is blends. with o.o. z affiliated Sp. firms KPMG 2014 © member 6 | The alcoholic beverages market in Poland This situation has been changing The alcoholic beverages market in Poland gradually. Particularly noticeable is the growth in lowproof flavoured Consumers who drank this beverage during the year ‘vodkas’: even though they are not At least once More than once formally vodkas, they take consumption oea occasions away from regular vodka. In parallel, consumers discover other Beer sorts of imported spirits, predominantly 88% 73% whisk(e)y. In the course of last year, this beverage was consumed by one in two Grape wine, adult Poles, and 21 drank it a few oie wine times during the year. In 201, a total of anemo 76% 19 million litres of whisk(e)y were sold, reaching a figure of P 1. billion. This Fruit wine was six times as much as in 2004 in 48% 12% terms of sales volume and five times in terms of value. Moreover, the industry ie ane expects further growth in the category, even by 8–9% per annum in 2014 and 40% 11% 2015. As regards vodka, further decline can be expected, aggravated by the 15% Mead rise in the excise duty, introduced at 27% 4% the start of 2014. The surveyed market participants expect, on average, a decline Vodka by 4 in 2014 and by in 201. 43% Poles are discovering grape wine Liqueurs The wine market has seen dynamic anoe * expansion. Grape wine, fortified wine aoe siis and vermouth are consumed at least a few times a year by nearly one in two Whisk(e)y adult Poles (45%), even though in small 21% quantities. Grape wine has turned out to be a true discovery for Poles in recent Brandy years. In 2013, Poles bought 142.5 million anona 8% litres of this wine (including sparkling wine), with sales totalling PLN 2.6 billion.