CEDC strengthens its hand ahead of Bialystock auction
another Polish alcohol distribution company, taking the number of
companies owned by the Florida-based holding to 13. But the company
is now keen to launch its own products, and will bid aggressively
for the Polmos Bialystock distillery in a bid to win control of
several popular Polish vodkas.
The latest acquisition, Polnis Distribution, is in the central city of Lodz, Poland's third largest, and will add around 1,000 customers to CEDC's portfolio. The US company paid $2.37 million for 100 per cent of the company, with 20 per cent of the sum in shares and the balance in cash. William Carey, president and CEO of CEDC, welcomed the "We are pleased with this transaction as it is expected to strengthen our position in the city of Lodz. Polnis has been in the alcohol business for over 10 years and brings solid management to our group.
"Polnis' annual net sales are approximately $25 million, and we expect Polnis to add approximately $6 million to the company's consolidated net sales for the remainder of 2004."
As a result, Carey said that the company expected to lift its full year sales from $543-$553 million to around $549-$559 million, although the cost of necessary restructuring at the new acquisition would mean that earnings per share remained in line with original expectations of $1.28-$1.33, nonetheless an increase of approximately 36 per cent over 2003 levels.
Polnis is the third acquisition for CEDC this year. Back in June the group bought an unnamed alcohol distributor in the southeast of Poland for an investment of approximately $2.5 million, while in May it acquired Miro, based in the southwest of the country for $1.6 million.
Indeed, the steady expansion of the group in 2004 matches that of earlier years. Since its entry into the Polish market in 1998, CEDC has recorded a compound average growth rate of 37 per cent for net sales and 36 per cent for earnings per share, and shows no sign of stopping its ambitious growth strategy.
Speaking earlier in the year, Carey said that CEDC intended to "remain aggressive in 2004 in terms of increasing our vodka market share through continued organic growth and acquiring targeted niche distributors that can fill market voids," adding at the time that the group was looking at "three to four distribution companies" - of which it has subsequently acquired three.
But CEDC is content to stop there. In a country the size of Poland, the second largest in the EU after Germany with some 38 million inhabitants, a company such as Polnis with 1,000 customers is small fry, but there will eventually come a time when the group will be obliged by the regulators to stop its expansion through acquisitions, and so it is already mulling the launch of its own alcoholic beverages.
As a result, CEDC is one of several interested parties bidding for the Polmos Bialystock distillery - one of the many former state-owned vodka makers currently being privatised, maker of the popular Zubrowka and Absolwent brands - although an earlier bid for a smaller, unnamed distillery was scrapped after due diligence revealed it was not worth the investment.
The creation of its own portfolio of drinks is also becoming increasingly important for CEDC for another reason. The company is one of the leading Polish distributors of a number of major drinks brands, including Guinness, Johnnie Walker, Jose Cuervo Tequila, Beck's, Grolsch and Budweiser Budvar, but as Poland's economy continues to strengthen it could face the loss of many of these products as groups like Diageo and InBev move into the Polish market themselves, taking back distribution of their own brands.
This state of affairs may yet be some years off - Pernod Ricard, V&S, Rémy Cointreau and Belvedere have invested in various Polmos distilleries, but Diageo is yet to express more than a passing interest - but CEDC is clearly preparing itself for the eventuality, and will be keen to outbid its rivals for Bialystock.