Entrepreneurship: The ice cream king of Poland
By Jan Cienski
Published: July 21 2009 23:23 | Last updated: July 21 2009 23:23
The biggest clouds hanging over Zbigniew Grycan’s fast-growing ice cream business are not the shadows cast by the world economic crisis, but by Poland’s grey and rainy summer.
The economic crisis has not halted his plans to have 80 ice cream cafés across the country by the end of the year, up from just over 70 currently. The business has been hurt by the recent fall in the value of the zloty, but the overall effects of the crisis have been generally positive by lowering the price of milk and other locally sourced raw materials, which had rocketed last year.
“I have the largest chain of ice cream parlours in the country, and I’m continuing to invest,” says Mr Grycan, a heavyset 68-year-old, sheltering from the sun under an umbrella outside his café on Chmielna Street in central Warsaw and sipping tea.
Mr Grycan, who became Poland’s ice cream king only to sell his kingdom to a private equity firm, and then start a new ice cream business, has bet on his compatriots’ sweet tooth in the past and has usually won.
Cream, egg yolks and sugar are in a sense in his blood – he is the third generation in a sweet-making family, which makes him a rarity in Poland. War, migration, border changes and 45 years of communism destroyed most Polish family-owned businesses and wiped out any inherited entrepreneurial traditions.
His parents operated an ice- cream shop in the western city of Wroclaw (at one point the city’s only ice cream parlour), which was taken over by the government for only a brief period at the height of Stalinist terror in the early 1950s. As a young man, Mr Grycan trained at one of the few decent hotels in the Polish capital, and in 1962 opened his own shop in western Poland. In 1979, he bought Zielona Budka (Green Cabin), a single ice cream shop in Warsaw.
“I’ve been an employer for 47 years,” he says proudly. His company currently has 750 employees.
Poles start to get a taste for cool desserts
Poland’s grey skies and cool weather have not turned the locals into ice cream fanatics.
The average Pole eats about 3.5 litres of ice cream a year, while Swedes eat about 13l and Americans shovel down about 23l annually (a statistic whose effects can be seen when comparing waistlines in America and Poland).
However, the Polish market is steadily growing – a decade ago Poles ate less than 2l each. Euromonitor, a research company, estimates that sales this year will be about 1.2bn zlotys ($400m, €280m, £240m).
The largest share of the market, with 35 per cent, belongs to Unilever, with its Algida brand, followed by 21 per cent for Koral, the largest local ice cream maker. In third place is Switzerland’s Nestlé, which has 8 per cent market share, according to MEMRB, a retail tracking company.
His first businesses were small – limited by the communist distaste for entrepreneurs and by the difficulty in getting raw materials such as sugar, which was often only available on ration cards.
That changed in 1989 when communism collapsed, and those few people with business experience and access to capital could rapidly expand their companies. By the mid-1990s, he had a factory in suburban Warsaw and his ice- cream was available across the country. Zielona Budka remains one of the best-known Polish brands of ice cream.
“I’ve been an entrepreneur all my life and I wasn’t afraid to risk my money,” he says.
But even a family background in commerce did not prepare Mr Grycan for dealing with the challenges of running a modern business in an increasingly complex regulatory environment.
His first problem came from Poland’s notoriously unpredictable tax authorities, who in 1997 alleged he had not paid VAT, and confiscated money from his accounts. Mr Grycan eventually won in court, but development of his business had been delayed.
A year later, he took Zielona Budka public and by 2001, Enterprise Investors, one of central Europe’s largest private-equity funds, had become a majority shareholder. Mr Grycan remained on the management team, but increasingly chafed at being part of a company he did not control.
The biggest friction came over the fund’s focus on the bottom line, a business model that earned profits through volume sales – but which he felt undercut the chain’s tradition of selling high-quality ice cream at low margins.
“I didn’t really agree with the way they were running things. The financial director would try to cut costs as much as possible,” he says. “I’ve always been concerned about having a good product.” Mr Grycan left the business after signing a three-year do-not-compete clause. Zielona Budka is now owned by Britain’s R&R ice cream company.
Instead of retiring quietly, Mr Grycan jumped back into the family business. His wife had retained an ice cream shop in Warsaw, so once the non-compete term was up in 2004, he set up Grycan – Lody od Pokole (Grycan – generations of ice cream).
“People warned me not to start this business because there was a lot of competition,” he says. “They said I was crazy to get back into the same business, but we did manage to find a space for ourselves in the market.”
The company does not reveal revenue and profit figures, although Mr Grycan says his company has just under 10 per cent of the Polish ice cream market worth about 1.2bn zlotys ($400m, €280m, £240m) annually. The business makes about half its income through sales at the Grycan parlours, and half through selling bulk ice cream in supermarkets. So far the company undertakes no advertising, relying instead on having a good presence in the new shopping malls that have sprung up in the country’s largest cities, and on Mr Grycan’s personal reputation as Poland’s ice cream magnate.
This time round, Mr Grycan is determined to retain much closer control with his eponymous company than when he owned Zielona Budka. Although he is conscious of costs, he devotes just as much effort to coming up with new flavours such as spice cake, poppy seed and melon, and keeping an eye on quality. “I have the final say in the company,” he says. “All the fruits we use are real. If the ice cream is mango, then we peel mangos in the factory.”
Asked if he might list the new company, Mr Grycan rolls his eyes and shakes his head.
He has abandoned most franchising, after finding that franchisees did not maintain the standards he wanted. Now his only franchisees are his 24-year-old twin daughters, Magdalena and Malgorzata. He charges them market rates, and hopes the experience of running their own operations will prepare them for taking over the whole business eventually. “I want them to know everything from the ground up. You can only learn by doing,” he says. Malgorzata, who is studying at the country’s leading business school, is his “right hand” in running the business with his wife.
Unlike many other successful Polish companies, he has no immediate plans for foreign expansion. Many other companies, particularly those involved in consumer goods such as food and clothing, undertook rapid foreign growth during the boom years and have had to retreat to their home markets.
Although the downturn has not stopped consumers slurping ice cream, it has affected the bottom line. Most rents in Polish malls are denominated in euros, as are costs for ingredients such as chocolate, coffee and exotic fruits, but earnings come in sharply depreciated zlotys.
“It has been very negative for me because I’m not an exporter,” says Mr Grycan.
Copyright The Financial Times Limited 2009
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