By Kamil Tchorek
The meteoric rise of Central European Distribution Corp (CEDC) appears unstoppable, as the firm currently signs an exclusive import agreement with Grolsch beer, acquires its tenth local distributor, and plan its bid to take over the Polmos Białystok distillery. But the run of acquisitions must slow down in the near future, admits CEO William V. Carey.
"No matter how many companies we acquire, we must stick to from forty to forty-five distribution branches in Poland, until the road infrastructure improves," says Carey. "It will take about ten years for the roads to get up to the standards we'd like them to be." For now, the acquisitions continue. Earlier this month, CEDC acquired yet another distributor, the Mazowsze-based Panta Hurt Sp. z.o.o. for $2.01 million.
In order to prepare for the purchase of Polmos Białystok, the producer of world-famous Żubrówka vodka, CEDC told the Business Journal that it will be assisted by ING Investment Banking (London). Carey sees the application of ING's extensive privatization experience as vital to the plan. "It will not be easy. There have been two unsuccessful attempts to privatize Polmos Białystok," says Carey. "But the price asked was too high and so there was not enough interest. The privatization of the distillery could take up to a year, and we need ING to help us make a strong bid." Insiders say that $150 million dollars was initially asked for the distillery.
CEDC's stock has been the subject of attention of analysts from Forbes and First Albany, bringing added value to the CEDC name. "As a micro-cap, there's a constant fight for credibility," says Carey. "The analysts are encouraging people to take a risk with us." A month ago, Alabany called the investor relations department of CEDC, and on September 9 released an equity research flash that anticipates revenue growth from the expanding distribution base.
Carey says that the idea of listing CEDC on the WSE has not been ruled out. "If the Austrian bank BACA successfully lists here next month, it will be the first foreign listing. We will watch that with much interest. If it's a success, of course that opens up a possibility for us. We went on the Nasdaq to raise money to expand from beer into vodka, however. Another listing would be for very different reasons."
But the same report cautions that competition is still around. Indeed, CEDC's continued success in Poland has everything to do with its continued reliability. At a press conference on Thursday, a spokesman for Grolsch said, "We have moved to CEDC because we had to move away from Brok, our previous distributor, who were in breach of contract. By contrast CEDC has an excellent reputation for professionalism."
The partnership between Grolsch and CEDC is complementary as both of them market the process of importing - as an indication of high quality. Grolsch will suspend its Polish brewing activity, and present its product as a sophisticated, foreign beer. By distributing promotions and packaging, CEDC will help push the idea that import spells excellence. "Beer is a lot more than taste," says Elena Perepelova, Grolsch's Area Manager for Eastern Europe. "It is about image, too."
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