NYT > January 14, 2001 > > THE BUSINESS WORLD > > For Poles, Privatization Is a Flask Half-Full > > By PETER S. GREEN > > [P] OZNAN, Poland -- The > only thing that is > clear about the future of > Poland's soon-to-be > privatized vodka industry > is the 80-proof Wyborowa > vodka itself. It streams > from stainless- steel > vats into tall glass > bottles at a tidy factory > on the edge of this > bustling western Polish > city. > > Poland's vodka industry > is not well, with sales > down 67 percent in the > last five years. High --------------- > taxes, cheap smuggled > liquor from neighboring > countries, a dispute over > foreign marketing rights > and changing drinking > habits are wreaking havoc > on one of the country's > favorite industries, and > one of the few in which > Poland makes a > world-class product. > > It's not that Poles have > suddenly reduced their [ > heavy consumption of > alcohol. But they are > turning from the cheaper > vodka to finer and > lighter products like > wine, beer, cognac and > whiskey. > > "In a very short time, we > have changed the way we > drink," said Krzysztof > Kilijanek, an editor at > Rynki Alkoholowe, a --------------- > Polish liquor industry > trade publication. At > parties, he said, "it is > very badly perceived if > you serve pure vodka; now > we serve alcohol in mixed > drinks." > > While Polish vodka sales > are slowing at home, they > are growing abroad, led > by brands like Wyborowa, > the greenish Zubrowka > flavored with bison grass > from the Polish prairie > and a few new luxury > vodkas that sell for more > than $30 a bottle in the --------------- > United States. > > Now, as Poland moves to privatize its vodka > factories beginning this spring, it is waking > up to the fact that vodka can be a lucrative > export, and everyone wants a measure of its > potential success. In a spirited battle for the > right to sell abroad, the country's 21 vodka > makers, who see exports as their only > salvation, are facing off against the local > Polish distributors and the French drinks giant > Pernod-Ricard, which owns the export rights to > most of Poland's top vodka brands. > > The problems began when a free- market > government reclaimed power from the center-left > and pulled vodka from the list of protected > industries in 1997, slating it for > privatization. Each manufacturer was awarded a > group of brands. The Poznan factory won > Wyborowa, and Zubrowka went to the Bialystok > refinery in northeast Poland. > > Dividing the brands was essential for > privatization, but it probably means bankruptcy > for those manufacturers (known as Polmos, from > the Polish words for Polish monopoly of > spirits) that did not win the rights to top > brands. The reluctance of the government to let > any vodka maker fail is one reason that it has > taken so long to begin privatizing. > > "It was so difficult that no government wanted > to face this problem," Mr. Kilijanek said. > "After the privatization of the Polmoses, > everyone knows that the number of Polmoses will > decrease. From 12 to 15 there will remain 5 or > 6." > > The vodka makers, too, recognize the problem. > > "The situation in the vodka industry is not > very good," said Janusz Michalski, managing > director of the Polmos Poznan factory, the > first scheduled for privatization. > > Mr. Michalski said he feared that privatization > would doom small refineries that lacked a star > brand. > > For all his pessimism, Poznan is the best > placed of the Polmos factories, as Mr. > Michalski acknowledges. Its mainstay is > Wyborowa, the country's best-known brand, and > its new owner is widely expected to be > Pernod-Ricard. > > Officials at Pernod-Ricard have said they will > spend millions of dollars over the next several > years to promote Wyborowa and the country's > other top vodka, Zubrowska. > > "We are only really interested in two brands of > vodka," said Alain- Serge Delaitte, a > Pernod-Ricard spokesman. "The others aren't > really exportable." > > Poles regard vodka as a national treasure and > the world's best. If their favorite vodkas > vanish, they say, so will a part of the > nation's soul. > > "We as Poles are very anxious about the process > of privatization. The fear is that when foreign > producers buy the Polmoses, they will introduce > their global brands on our market and our > brands will disappear," said Jerzy Piechocki, a > liquor wholesaler and president of the Polish > Chamber of Alcohol Trade. > > They have reason to be fearful. Already, the > Dutch distiller Bols and Smirnoff, a > British-owned vodka with a Russian name, have > grabbed a large chunk of the Polish market. And > Poles are glancing nervously at the Czech > Republic, where privatization of beer brewers > in the 1990's resulted in the closure of dozens > of local breweries and the abandonment of > centuries-old brands. > > Seeking to avoid that outcome, Polmos factories > have united to win back their foreign marketing > rights from Pernod-Ricard, which they contend > holds the rights illegally. > > Parliament passed a law in 2000 that would > clear up three decades of legal muddle and > require Pernod-Ricard and the Polish food > products company it controls, Agros, to return > the trademarks and marketing rights to the > vodka producers. But heeding Pernod-Ricard's > protests that the law amounted to nationalizing > its property, President Aleksander Kwasniewski > of Poland asked the Constitutional Court to > review it. > > While lawyers argue over that case, market > share for Polish vodka is evaporating faster > than alcohol in an open bottle, amid tough > competition from Western-owned brands in Poland > and abroad. That has pushed the remaining > Polmoses to try to create luxury brands or to > remarket traditional Polish marques that have > never been exported, much as the Scotch whiskey > industry rescued itself in the 1980's with the > mass commercialization of luxury single-malt > whiskeys, said Izabella Gazda, export manager > of Polmos Warsaw. > > The first efforts came in the early 1990. > Managers at two smaller state- owned Polmoses, > Zyrardow west of Warsaw, and Siedlce, to the > east, created brands with trademarks that are > not controlled by anyone else — and marketed > them abroad as luxury vodkas. > > The results have been two of Poland's finest > and most profitable vodkas — Belvedere, made at > Polmos Zyrardow from organically grown rye, and > Chopin in Siedlce, made from locally grown > stobrawa potatos. Marketed and distributed > mainly in the United States by Philips > Millennium, based in Minneapolis, 50 cents' > worth of spirits is selling in a bottle covered > with gold leaf for more than $30 at retail, and > many times more by the glass in specialized > vodka bars. > > Now the remaining Polmoses are looking to > emulate that success. > > "It is our dream to create a market and export > to the U.S. a whole line of Polish vodkas like > luxury vodkas," Ms. Gazda said. > >
