Cream of the crop Lacpol

CREAM OF THE CROP

The Lacpol Dairy Group of Poland was recently acquired by Polmlek, making it the cream of the crop in the dairy sector and one of the biggest dairy product producers in Eastern Europe. Philip Yorke reports on Lacpol’s important milestones that led to its acquisition and how the company’s new parent company is already enhancing future business prospects.

The Lacpol group was founded in 1982 as the foreign trading arm of the Polish cooperative dairies and has since risen to become one of the top ten largest dairy companies in the area, with a turnover of more than EUR 220 million. Currently Lacpol has over 100 shareholders and these include some of the region’s biggest dairy producers, such as Rolmlecz, which is the largest single shareholder of Lacpol with more than 30 per cent of its equity.

With the growing possibility of its partner dairies able to export their products under their own brands, it was inevitable that Lacpol’s business model had to change. Therefore, in addition to increasing

its milk processing potential with its own production facilities, Lacpol also began selling its own branded products on the Polish market.

This in turn has prompted a structural change in the company, as in the past it had focused exclusively on dry dairy products that were suitable for export. However, today it is investing increasingly in the manufacture of fresh dairy produce.

From strength to strength

The leading dairy company, Rolmlecz is the most important partner of Lacpol and is also the parent company of the Lacpol Group. Rolmluecz’s activities are focused on purchasing milk and its sales to the distributors of the Lacpol Group. It is also involved in the production and distribution of packaging materials and the management of road transportation facilities.

Today the Lacpol Group is one of the region’s leading producers and distributors of dairy products. The company’s most important products include ripened cheese, cream, yoghurt, buttermilk, cottage cheese, butter, powdered dairy products and milk drinks. It is also involved in the production of a number of fruit and vegetable juices.

The Lacpol group operates an extensive range of production facilities and plants including 9 state-of-the-art, primary production plants located throughout Poland.

A new force in dairy

The recent purchase of Rolmlecz, Lacpol’s largest shareholder, has created a new strategic force in the Polish dairy industry. Overall. Lacpol’s main shareholders are dairy cooperatives who joined forces to export their dairy products abroad, and although Lacpol subsequently became a strong player in export markets, it did not have a strong position in its domestic market. The advent of the company’s takeover by Polmlek addresses this imbalance in that much of its product portfolio is now dedicated to satisfying the Polish domestic markets.

Thus the Polmlek Capital Group has become the new owner of 9 large production and service facilities. However, not all these modern plants process milk, with some involved in the manufacture of fruit and vegetable juices. In 2018 total revenues derived from these plants exceeded PLN 1.3 billion (EUR 0.3 billion).

As a result of this latest acquisition, more than 3,000 suppliers have moved over to Polmlek. In total, the new company will have almost 10,000 suppliers making it one of the giants of the dairy industry in Poland.

It is also worth noting that due to the acquisition of Fortuna, another Polmek company, the group has also become a major player in the juice and beverage market. It is understood that the directors are now looking to buy into other branches of food processing in order to broaden their product portfolio and enhance the group’s future prospects for growth.

Boom in export markets

According to milk producers and processors in Poland, the Polish dairy sector has been flourishing this year and the prospects for strong growth are good. This bodes well for the recently enhanced Lacpol Group. Poland is the 4th biggest milk producer in the European Union, and it is steadily rebuilding its dairy sector after the dairy crisis of a few years ago.

Farmers are expanding their farms and exports are booming. “I hope we can keep this positive vibe for a while, says Andrzej Grabowski, co-owner of Polmlek, a company that launched one

of the largest dairy factories in Europe just recently and saw revenue increase by 14 per cent last year. Also other dairy processors are doing well and are able to invest again. For example, Mlekpol showed a revenue of PLN 3.2 billion (EUR 0.76 billion). Polmlek came in third with PLN 888 million (EUR 211 million), however this will increase significantly with the new acquisition of Lacpol now in place.

In addition, milk consumption is on the rise in Poland, as well as in its export markets. In 2018, consumption of all dairy products in Poland increased by 5.5 per cent, reaching 220 litres of milk per person. In particular the consumption of yoghurt, aged cheese, processed cheese, milk desserts and cream cheese is seeing stong growth. In Poland, farmers produce around 30 per cent more milk than the domestic consumption.

As a result, the Polish dairy sector must export the surplus in the form of milk powder, butter and cheese. “Export of Polish dairy products in Q1 2018 increased by 36 per cent compared to the same period in 2017, explains Marcin Hydzik, president of the Polish Milk Processors Association. “The Polish dairy sector keeps on growing and it is estimated that by the end of 2019 production will reach 12 billion litres of milk, hence representying a significant increase in export sales.” n