ZPC Mieszko S.A. has been operating on the Polish market for 15 years; the company’s income in this period has increased five times. Can you tell us about your recipe for success?

- In the last ten years, Mieszko has been growing at a various pace. We need to take into account that six years ago the company was in deep trouble, on the verge of bankruptcy. At that time, the company was managed according to the policy “more sales regardless of the margin”, which resulted in serious problems. Since 2003, when I became the president of Mieszko, I have made fundamental changes on all organisational levels of the company. We have doubled our turnover in just five years. Previously, we generated PLN 130 million a year, and now our turnover exceeds by far PLN 200 million. Our success is not only a significant increase of sales but also improved profitability. Five years ago, our margin was 30%; now it can reach even more than 40%. It is a huge success. And what are its reasons? We have an excellent team of wonderful people who effectively fulfil the adopted strategy. Our strategy is to focus on high-margin products, transform the Mieszko brand into an umbrella brand and move it to the value for money and premium category. We have successfully introduced innovative products to the market, such as the Amadorro, Chocoladorro, Cherissimo and Amoretta boxes of chocolates, or almost cult Zozole. Except Zozole, these are brands which did not even exist on the market 5 years ago. Now, they enjoy a great popularity among the consumers. Our success is the designing of a good and affordable product and good and efficient distribution. There are excellent people behind it and this is the secret of our success.

In 2008, Mieszko was awarded the title of  “the best employer of the year” among the FMCG companies for the second time (Hewitt Associates research). What does you company do to make its employees feel good?

- First of all, we are very open and honest in relations with people. We systematically assess performance of our employees, even those at the lowest positions. If they want to have trainings in order to be promoted in the future, we make it possible. We try to offer our employees satisfactory salary conditions and development opportunities. Many companies, especially international corporations, are managed based on a system of external supervision - the head office takes a decision and there are no departures from it. The situation is different at our company - our sales and marketing specialists invented and designed A’MADORRO, not the head office. They feel good because we allow them to be the authors of success, and not only executors of ideas created by others.

Also for the second time, Mieszko had one of the top positions in the Rzeczpospolita ranking of the most innovative Polish companies  - it ranked third among manufacturers and fifth among all companies. In what way do Mieszko operations differ from standard activities in the industry?

- Mieszko’s success depends not only on the product itself, but also on the way it is delivered to consumers - the form of packaging or innovative filling flavours. Some time ago, we made a decision to change the portfolio of the company. We replaced most of the products and the new ones sell splendidly. Why do they sell well? Because we know how to appeal to the taste of specific consumers. The bond between our company and the clients is quite strong. We know them and make every effort to analyse their needs and requirements. Our portfolio includes the biggest number of flavours among all praline companies. At the end of 2008, we launched gianduia – a new flavour, which until then had been considered very sophisticated. We hope that the consumers will also love this chocolate with the addition of orange peel and a pinch of chilli. We have recognised that innovation is a key to success. New products launched by our company remain on the market for a period longer than just one season. The Amoretta box of chocolates has been on the market for three years now and sells better and better every year.

Has the global financial crisis influenced the Polish market of sweets?

- So far not, and all forecasts in this matter carry a great risk of error. I hope that sweets are so important in our lives, make it sweeter and improve the mood, that even if the slowdown in the economy reaches Poland, our industry will be only slightly affected by it.

The profit on export sales constitutes 25% of the company’s turnover. In 2007, Mieszko was awarded the title of the Prominent Exporter of the Year and the Cup of the Association of Polish Exporters. What do you do to acquire new markets and promote Polish products abroad?

- We strive to keep the relation between export sales and the entire sales on a constant level of 25%. We actively operate on several markets. 50% of our exports go to the European Union and the rest to the US, Russia, former Soviet Union countries and Arab countries. We also sell many of our products in Israel. The geographical span of our export operations is quite wide. We are trying to strengthen our position in those places where we are already present. We support our distributors in many different ways - through brochures, listings. We broadcast advertisements of the Zozole brand in the Czech Republic. We cannot afford advertising campaigns in each of those countries; even in Poland, we are very cautious, yet effective in spending money on advertising. In the future, we wish to focus on a few selected markets and continue media campaigns there.

In what directions are exports at your company evolving? Are you willing to enter new markets?

- The European Union or Unites States are such huge markets that, in fact, the problem is to reach new places on those markets where we are already present. It is necessary to establish cooperation with networks or distributors we have not worked with before. If we found a prospective market we have not entered yet, we would definitely not refuse  cooperation.

What does your current access to raw materials look like? What is the relation of price to  profitability?

- The prices of raw materials in our industry rocketed last year and have not got cheaper, contrary to our expectations. The price of cocoa beans oscillated around GBP 700-800  a year and a half ago, whereas for the last year it has been around GBP 1400-1800. Therefore, we have not been able to return to the prices from a year and a half ago. It has to be noticed that producers have not been able to offset the increase of raw material prices by an increase in the final product price. They would have to double the prices, especially because not only cocoa beans but also peanuts and many other ingredients have got more expensive. Of course, milk  got cheaper, but it is not a significant ingredient in our production.

How do you cope with this situation?

- We launch high-margin goods but also increased efficiency of production provides a response to this situation – and this is where we are looking for sources of savings.

You offer a wide range of products - candies, chocolates, wafers, and halva. Which of the products sell best? Which brand is thebest recognizable?

- As many as 95% of children aged 5-11 years know the Zozole brand, which is an exceptionally high level of product awareness. The Mieszko brand is familiar to 60% of consumers. Note that five years ago, aided awareness of the Mieszko brand amounted to 30%, so we managed to double the level of awareness, which is continually growing. Acceptability of our products increases too. We sell them in elegant packaging so they can be offered as gifts, and at the same time, their price is much lower than the super premium products. All of our goods sell great, but we do have a few exceptional hit products. Three of the those launched in the last 3 years have been among fifteen best-selling products in the AC Nielsen ranking. Our novelty - A’MADORRO, on the market since August 2008, is also achieving  excellent sales results and we hope that soon it will join the leading products in our offer. Some of our goods, like Michaszki, have a regular circle of ardent fans.

Mieszko S.A. takes part in industry trade fairs in Poland and abroad. Does participation in such fairs significantly affect sales of products? Are you taking part in the ISM 2009 in Cologne? What are your expectations of the trade fair?

- The ISM is the only trade fair we regularly participate in. We visit other events occasionally. Trade fairs are an opportunity to meet our partners from around the world. Such events are always a perfect chance to meet and talk, but not necessarily to enter into a new contract. It rarely happens, although there are such situations where a complete newcomer establishes cooperation merely on the basis of a conversation during the trade fair in Cologne. Presence at the fair is rather meant to boost the company’s image and does not necessarily bring a significant change in sales.

Mr. President, you have been holding your position since October 2003. What do you consider to be you greatest success?

- Saving the company from bankruptcy and developing it to the current level. The financial position of the company is stable and its development potential is growing.

What are your plans for the upcoming 5 years?

- In the last 4 years, our company has doubled its market share. We have grown much faster than the market. We are planning to double our market share in the next 5 years.

Thank you for the interview.

Interviewer Tamara Prusak