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The quiet revolution

FF&N editorial director Peter Sofroniou analyses Euromonitor International?s recent report on Poland, and assesses the growth potential for suppliers and manufacturers in the emerging functional foods market

Polish consumers? awareness of health issues has increased significantly since the pace of life quickened during the early 1990s — when the average Pole started to work longer hours and more intensively than ever before. As consumers had less time, fast food outlets and ready meals became very popular.

In time, however, consumers began to understand that this kind of food was unhealthy, and a growing number began to pay attention to the quality of their foods. Multinational manufacturers launched numerous high-quality products in response, and domestic companies have been forced to increase the quality of their products as the competition toughens. At the same time, the influence of Western lifestyles encouraged consumers to change their eating habits.

The growing interest in ?healthy lifestyles? has had a significant impact on product sales, and in 2004 consumers regarded a healthy diet and lifestyle as the most important factors affecting their overall condition. Despite this positive trend, however, consumer awareness of health issues still depends to a significant extent on their education and economic situation.

Although the economy in Poland continues to improve, large numbers of consumers are still not able to purchase high-quality products. The average income difference between large cities and the rest of the country limits the development of health and wellness products. In addition, the level of education of a significant number of customers is still low, and their awareness of health issues is increasing at a slow pace.

Following Poland?s entry into the European Union in 2004, research analyst Euromonitor International predicts the popularity of the Western lifestyle and consumption habits in Poland will grow. It says the constantly increasing disposable income will positively affect sales of health and wellness products.

A change is under way
The traditional Polish diet is rather unhealthy, with red meat, potatoes and fat sauces its most popular ingredients, but an increasing number of consumers are replacing traditional products with wellness brands. The most important factor limiting the positive changes is the significant difference in the attitude toward health issues between less well-educated consumers on lower disposable incomes and well-educated, wealthier ones.

This results in a mutual increase of both low-quality, unhealthy foods, as well as products providing health and wellness features. Tough competition and developing sales through supermarkets result in decreasing prices, but also in lower-quality products. On the other hand, the number of manufacturers specialising in high-quality products is also on the increase as the group of consumers willing to pay more for healthy food is growing constantly.

?Functional foods? is a very new term in the Polish food market that is not well understood by consumers. Functional foods are often mistaken for other types of ?healthy foods? or ?organic foods? in the consumer?s mind. Many soy products are advertised as functional, while many producers of low-fat products also advertise their brands as ?lowering cholesterol levels? simply by offering less fat than standard products.

According to Euromonitor, last year two breakfast cereals categories — flakes and children?s — were the largest groups of products fortified as standard practice. The brands became popular in the early 1990s — the advertising campaigns emphasised the additional wellness features of the products, especially the added vitamins. As the competition became tougher, all major manufacturers started to fortify their products.

Torun Pacific Cereals, the leading player, reinforced the trend significantly. All of its brands, such as Corn Flakes, Gold Flakes, Kangus, Cheerios and Chocapic, were advertised as fortified products.

Breakfast bars were another group where fortification has become standard practice and the number of products fortified as standard practice is expected to increase in the immediate future.

?Better for you? was the largest health and wellness category of confectionery in 2004. Only reduced-sugar products are available ? with no other categories present. The significant share of ?better for you? products is mainly the result of the high popularity of sugar-free gum. These products were introduced to Polish consumers in the early 1990s by Wrigley, which entered the market with the Orbit brand. The products were reinforced heavily in terms of advertisement and promotion, and quickly gained great popularity. Dental concerns were the main reason for the switch.

The penetration rate of reduced-sugar chocolate confectionery is low, at approximately 0.3 per cent of total chocolate confectionery. Some manufacturers, like Wawel with its Dark brand, introduced sugar-free tablets in order to attract customers who are on a diet and are looking to reduce their weight. The value of these products was $2.4 million in 2004, up 10 per cent in current value terms on the previous year.

Dairy products
In 2004, fortified/functional dairy products accounted for 2.6 per cent of the total sector value with sales of $68.3 million. Flavoured powder-milk drinks were the category with the largest share of fortified brands. Such products as Nesquik or Puchatek accounted for over half of all sales. As children consume the majority of flavoured powder-milk drinks, parents paid attention to the products? features. The manufacturers introduced brands fortified with vitamins and mineral supplements, which quickly gained popularity.

The sales of fortified/functional yoghurt have also increased, but fortified/functional milk is not very popular.

Euromonitor predicts the dairy products sector will experience further development as new manufacturers enter the Polish market, thus boosting competition. Fortified/ functional dairy products are expected to achieve the strongest growth of 57 per cent in constant value terms over the forecast period and reach a value of $107.3 million in 2009. The popularity of fortified/functional yoghurt in particular is expected to witness strong growth. Fortified/functional yoghurt is expected to achieve growth of 176 per cent in constant value terms and reach a sales value of $37 million in 2009.

New product developments
The healthy lifestyle trend has encouraged manufacturers to launch new products. In 2004, the sector?s saturation rate increased, as the main health and wellness categories, such as reduced fat milk or yoghurt, were relatively well developed, so companies invested in less developed product areas — with probiotic yoghurt in particular expected to benefit from this strategy.

Apart from the leading multinationals, numerous smaller domestic producers introduced probiotic brands. The increased popularity of regular drinking yoghurt encouraged manufacturers to differentiate their offering with their own probiotic versions. SM Spomlek?s Hipo probiotic drinking yoghurt is a good example. Its attractive quality/price relationship will enable it to compete with the leading brands, especially in rural areas.

Oils and fats
Vegetable and seed oil is the category with the largest share of fortified/functional brands, which account for three per cent of the total subsector?s value. The leading player, ZT Kruszwica, launched Bartek, a seed oil brand, additionally fortified with vitamins. Although the popularity of fortified oils is expected to remain rather limited, further growth is predicted.

Functional spreadable oils and fats is another important category with sales of $4.7 million in 2004. These products, introduced only recently, are still significantly underdeveloped in Poland, with two leading brands, Benecol and Flora Pro Activ, accounting for the total sales value. The brands, reinforced heavily in terms of advertising and promotion, quickly gained consumer attention due to their positive impact on cholesterol levels.

Despite the interest, high prices compared to standard spreadable oils and fats slowed the development. The situation is expected to change as new brands are launched and more intense competition forces manufacturers to lower prices.

According to industry experts, fortified/functional products are going to achieve the strongest growth of 96 per cent in constant value terms to reach a value of $30.6 million in 2009.

Spreadable oils and fats in particular are expected to achieve quick growth, as these newly launched products are significantly underdeveloped.

The constant growth of olive oil?s popularity will reinforce this naturally healthy category, which is expected to achieve growth of 40 per cent in constant value terms with sales reaching $49.3 million in 2009. The improving economic outlook for consumers as well as the growing popularity of Mediterranean cuisine and healthy lifestyles are expected to be the most important factors behind the products? successful performance.

Healthy snack bars
Snack bars witnessed the introduction of health and wellness brands in the 2002-2004 period, as Torun Pacific Cereals introduced fortified breakfast bars, based on the company?s leading cereal brands. Other snack bars categories did not record intense manufacturer activity.

Snack bars are still significantly underdeveloped in Poland. Foreign manufacturers are expected to become active in the sector following Poland?s entry to the EU, and this will influence snack bars? performance in a positive way, as new brands are launched.

In addition, customers are likely to search for products with health and wellness features and the higher average income is expected to allow them to buy more brands, previously regarded as a ?luxury purchase.?

Despite this trend, all the companies are going to concentrate on standard products. Therefore, health and wellness snack bars are expected to remain a niche category.

Euromonitor International has 30 years? experience publishing market research reports, business reference books and online databases.
Respond: [email protected]

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