Poland - the Future of Foodservice to 2021

04/10/2017 - 12:29
Poland is regarded as an economic powerhouse in Eastern Europe, with a GDP growth averaging 4% per annum since the fall of communist rule over twenty years ago. The EU country’s economic stability in recent years has made it a hotspot for foreign direct investment in recent years.

Whilst the 2015 election of the populist Law and Justice party caused concern among some economists, these fears have yet to materialize.

Unemployment stood at 6.2% in 2016, comfortably below both EU and CEE average rates of 8.7% and 10.4%, respectively. The country’s low unemployment rate has, however, created labor supply concerns, with emigration becoming a hot topic. The Polish population has declined at an average of 26,746 people per year since 2010.

Sales value across the Polish foodservice profit sector rose at a strong CAGR of 4.0% between 2014-2016. Fast growth has encouraged a host of international foodservice brands to enter the market in recent years,

Although Polish consumers typically prefer traditional home cooked meals, time scarcity, combined with rising levels of discretionary income, are allowing for increasingly frequent out-of-home meal occasions.

Whilst a global trend towards healthier eating can be seen within the Polish market, there appears to be a significant consumer attitude-behavior gap. As a result, operators have largely focused on making improvements to the quality of existing menus, rather than on the introduction of solely health-focused products.

Quick service restaurants summary

In 2016 the Polish QSR market was valued at approximately PLN 45.4 billion, making it the largest foodservice channel and accounting for 27.6% of the total profit sector.

Between 2014 and 2016, value growth reached a CAGR of 4.4%, outpacing overall profit sector growth (with a 4.0% CAGR) over the same period. Against a backdrop of stagnation across much of wider Europe, this has attracted the attention of international QSR operators looking for expansion opportunities. Indeed, Max Burgers, Papa Johns and Dairy Queen have all recently entered or announced plans to enter the market. Incumbent operators have also entered into a ‘space race’, with shopping malls becoming increasingly desirable outlet locations.

This has brought about further consolidation of the market, with traditional cafeteria –style ‘milk bars’ declining in popularity. These do, however, continue to vastly undercut chained QSR operators in terms of price.

A global trend towards healthier eating has left many incumbent operators between a rock and a hard place. Having built their reputation through indulgence-based fast food, many of these operators have already ‘crossed the Rubicon’. The introduction of solely health-focused food would therefore only serve to muddy their value proposition in the minds of consumers. Fortunately for these operators, however, the Polish marketplace is notably unreceptive to the concept of ‘healthy fast food’.  Indeed, just 32% of Polish consumers believe that ‘convenient food can also be healthy’, which is well below the overall European average of 49%.

Over the next five years, revenue growth in the QSR channel is forecast to accelerate to a CAGR of 5.4%, resulting a valuation of PLN 59.2 billion in 2021.

Full service restaurants summary

In 2016, Poland’s FSR market was valued at PLN 38.2 billion, following value growth at a 4.2% CAGR since 2014. Revenue growth in the channel is forecast to accelerate to a CAGR of 4.4% over 2016 – 2021.

The Polish FSR channel is currently dominated by independent operators, which accounted for 95.7% of outlets, and 92.0% of total channel sales value, in 2016. Chained operators in the channel are led by Sphinx, a chain of casual dining restaurants with just under 100 outlets generating a 0.7% share of the FSR market.

The growth of home delivery will continue to breathe new life into the channel, opening up additional revenue streams for operators. Poland already represents the UberEATS’ third largest market within the European Union, with many major cities still outside of the brand’s catchment. Over the next five years, revenue generated by takeaway transactions in the channel is forecast to grow at a CAGR of 9.6%, far outpacing value growth in the dine-in sector (expected to rise at a 4.0% CAGR).

As consumers tire of the homogenous ‘burger and fries’ available across QSR, trendy casual dining FSR are likely to catch the eye of young consumers looking for high-touch service and greater product customization. This will drive a ‘casualization’ of the market, as operators chase income-rich urbanites looking to make more frequent visits to the channel.

Coffee and tea shops summary

Between 2014 and 2016, revenue in Poland’s coffee and tea shop channel grew at a CAGR of 3.7%, reaching a valuation of approximately PLN 6.5 billion in 2016. Market growth has been primarily driven by an expanding middle class, with rising numbers of consumers indulging in discretionary out-of-home occasions.

Channel growth has been largely driven by increased consumer spending, coinciding with the growing presence of premium chained operators. Between 2014 and 2016, average consumer spend rose by PLN 0.96, reaching PLN 25.60 per transaction.

Although Poland is typically thought to be a ‘tea drinking nation’, the drink is largely unpopular within the channel. Indeed, just 7% of surveyed consumers ordered tea during their most recent visit. Consistently with much of wider Europe, operators have failed to successfully position tea as a premium product in the minds of consumers.

Coffee shops are not widely perceived as eateries, with just 8% of consumers opting for ‘main’ or ‘light’ meals. Desserts, however, are notably popular, which has enabled ice-cream parlor/coffee shop hybrid ‘Carte D’Or Café’ to record significant growth over recent years.

Operators in the channel are threatened by a significant overlap between themselves and QSR , especially regarding drip coffee and snack sandwiches. In order to avoid competing against McCafé and other QSR coffee providers, key players in the market are almost exclusively quality-focused.  This has, however, left a gap in the market for a ‘disrupter’ capable of offering the atmosphere of a specialty coffee shop, whilst also drastically undercutting incumbents on price.

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