After years of economic reforms and efficiency gains, Poland was admitted to the European Union (EU) in May 2004. Experts agree that international trade in Poland will continue its current upswing.
One of Poland's most important economic reforms as the country moved away from communism was the removal of punitive tariffs on imported liquors. With those tariffs gone as of May 2004, CEDC reported an immediate jump in sales of some 40% which was directly attributable to the tariffs' removal.
CEDC should be a major beneficiary of Poland's positive developments, since alcohol continues to be a profitable commodity even in times of global strife and economic downturn. Just ask any bar, restaurant, night club or convenience store owner.
Since 1997 CEDC has distributed locally produced Polish beverages. CEDC now imports major international brands names like Johnny Walker scotch. The company operates the largest next-day alcoholic beverage delivery service in Poland with 15 distribution centers and 78 satellite branches that ship over 700 brands of alcoholic drinks to more than 30,000 Polish establishments that sell alcohol. CEDC employs some 3,000 employees, and owns over 500 deliver trucks.
The firm has expanded into the liquor-making business by buying local vodka distillers. In June, CEDC announced that it is expanding outside Polish borders through the acquisition of Bols Hungary. The Hungarian deal gives CEDC control of Royal Vodka, the country's No. 1 vodka brand, as well as major liquor imports into Hungary.
And The Winner Is...
CEDC's size and volume-production abilities make it without peer in the Polish market. CEDC continues to consolidate its position by buying smaller local rivals. Also CEDC is relatively insulated from competitors entering the Polish liquor business, since barriers to entry in this market are onerous especially for foreign firms.
The company's profitability is also benefiting from Polish consumers' shift toward higher-margin foreign liquors. Many analysts believe that within the next 15 years, Polish gross domestic product (GDP) per capita will approach the EU average -- that implies an enormous increase in consumer spending power. It's only logical to assume that consumers will continue to shift their preferences to more expensive, higher-quality (and higher-margin) liquors.
Based in the U.S. and listed on the NASDAQ, CEDC may be an attractive internation trade investment since it is in the unique position of distributing alcoholic beverages from the rest the world into Eastern Europe. This contrasts with most other alcoholic beverage makers including the world's largest Diageo which export products to the rest of the world.
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Sources: www.cedc.com.pl
