Interview with Arkadiusz Żarnowski - President of Clovin
Do you observe any specific market conditions or consumer habits typical of Poland? Is the Polish consumer different from others when it comes to the use of washing products?
There is no clear answer to this question. The issue is complex. Our company supplies products to more than twenty seven countries on four continents and each market has its own specificity. In some countries, customers expect highly concentrated products; in others quite the opposite, and Poland is not any special phenomenon on a global scale. For example, when it comes to encapsulated washing products, Poland is a leader in this part of Europe. The situation is totally different in Germany, for example, where the capsules have never become so popular. In Poland, the share of their sales is already over a dozen percent, while on our western neighbour’s market this level is only a small few percent. However, when it comes to dishwasher products, in the Benelux countries, France or Italy, gels not tablets dominate, while tablets are the most popular type in Poland.
What definitely distinguishes us, not only Poland but also other Eastern European countries, is quite high dynamics in launching new products and quick market response to them. Equivalents and substitutes of well-received and popular articles, especially the ones which are leaders in a given category, are introduced very quickly here, because such is the demand of our consumers.
What is the current situation of your company on foreign markets today? What are the future prospects? Are there any plans to expand to other countries?
As I mentioned, our products are available in dozens of markets around the world. It is worth emphasizing that this is a permanent presence and not individual orders. At this point, first of all, we want to strengthen our positions even more. Our presence is quite well established in the countries across our eastern border, i.e. in the Baltic States, Belarus, Ukraine, where we have our own production plant, and in Russia. At the same time, competition in these markets is quite strong. Chemical products from China and Turkey are very popular there, which makes them strong rivals for us in this region. So, our goal right now is to increase our sales there.
Acquiring a new market, on the other hand, especially with the current restrictions and bureaucratic obstacles is problematic. Sales markets have tightened, which is an evident result of the pandemic. The economy of supplies is important here. As you know, transport costs a lot and local producers in markets where we are not yet present are usually successful and well positioned. That is why at the moment our main focus is on strengthening our presence where our products are already available.
Which product segment is the crucial one for the company at the moment?
We operate in a very wide range of chemical products - from the simplest ones, such as washing-up or floor cleaning liquids, to highly advanced ones, such as capsules or dishwasher tablets, the development of which requires many years of work in the laboratory. However, the domain of our company is great flexibility.
Detergents are and will be the most crucial segment for us. Our company is one of only a few that arre part of the washing capsules market. The largest global concerns are in the lead in this segment, but we have found ourselves in this market perfectly well. We have developed high-end technologies for both product and production, and that is what we use. Washing capsules drive the entire market. Therefore, next year, two more production lines will be launched, so we will have three in total. The current one is already operating at maximum speed.
Washing capsules and gels are replacing traditional powders on the shelves - here we can observe stagnation in powders sales. However, in the case of capsules, we record an increase by 50% every year. The market and consumer habits clearly go in this direction and we, as a company, aim to meet these expectations.
What is the current demand for private labels, which you also produce?
When it comes to private labels, when we look at export markets and compare them with ours, we will notice a huge difference - our segment of such products is still very much in its infancy. It is estimated that in Poland, in the case of chemicals, it is around 17%, and in Western countries it is over 40%. Therefore, there is still some perspective for a further increase, but it must be remembered that this is not an easy product. It earns relatively the least amount of money and requires the greatest amount of work. Contractors are often not chemical experts, so their expectations are sometimes difficult to meet and not entirely accurate. This part of the market is dominated in Poland by the Jeronimo Martins company, which has its own production plant and thus, in a way, imposes prices on the shelves and quality, and thus the margin on the producer. It is therefore quite a difficult market, but you need to be present in it. Such giants as Lidl, Carrefour or Auchan are also developing their own brands very strongly. Our great partner in this area is, for example, the Dino store chain.
What is the situation regarding the line of professional products for laundries, hotels, and restaurants?
In this case, it is not so much about selling the products themselves as it is about providing customers (such as laundries, hotels or gastronomy) with the entire technology. This is what the customer expects today. They want to know how to wash, what programme to use, how long is the washing cycle, how to ensure the lowest possible water consumption, etc. Therefore, we are not talking only about the product, but about, for example, dosing devices that serve this technology. We are to provide specific and complete solutions, and that's what we do.
Due to the pandemic, turnover in this category fell by as much as 90% in April and May. Lockdown basically immobilized industries such as hotel and catering. There were therefore well-founded concerns about whether these industries would survive at all. Laundries also experienced problems. For example, one of them, specializing in services for hospitals, experienced considerable problems when hospitals were subject to the sanitary regime and significantly reduced patient admissions. Fortunately, the situation is slowly normalizing. Maybe not completely, but we can expect to have the pre-pandemic turnover in about 90 %. Having said that , though, a few clients unfortunately have not withstood this crisis.
Has the pandemic in any way affected the company's operations?
When it comes to the organization of work on the plants, we are currently working as before the Coronavirus. However, immediately after the outbreak of the pandemic, within two weeks, we switched to the production of biocidal, disinfecting and antibacterial fluids, for which there was a huge demand at that time. During this period, the laboratory and planning department worked 15-18 hours a day, while production and warehouses worked 24 hours a day, 7 days a week to ensure the constant supply of those necessities.
One of other effects that are visible may be the breakdown of cooperation with several suppliers who have not worked well during the pandemic - we had to increase orders for packaging, labels or cartons, but some long-term contractors preferred temporary, often one-time earnings, so they sold their products to other entities at a significantly inflated price. On the other hand, some of the suppliers we counted on to a lesser extent turned out to be important and reliable partners. Therefore, the pandemic allowed for verification and reevaluation of certain issues.
Despite the Coronavirus and the related problems in the economy, we are consistently implementing our growth plan. For example, just at the outbreak of the pandemic, we started cooperation with one large network to which we supplied products throughout this most difficult period. Now, it is paying off because it has opened a way for further negotiations which will be finalized next year.
What are the challenges facing the company in the near future?
Companies producing household chemicals are not usually concerned too much about ecological issues. Meanwhile, it is already becoming the norm that a company should have ecological products in its portfolio, supported by certificates. Therefore, one of the directions in which we operate is to change this image and show that chemicals can be produced in a way that is harmonious with nature. One of our goals is to ensure that by 2025 we no longer offer non-organic products. Only a few years ago, it was believed that eco products were of lower quality, which is not true. Their high effectiveness is confirmed by independent studies.
We care about ecology in a different way as well. For example, we have launched our own closed-loop industrial wastewater treatment plant, which means that we do not release waste into the environment at all. We are also expanding our photovoltaic power plant. Currently, it is 0.54MW, ultimately it is to have a capacity of 1.2 MW, which will cover approximately 80 % of our entire demand for electricity.
We also observe a strong emphasis on the robotization not only of production, which is already an obvious standard, but also, for example, of logistic processes. We are currently in the process of launching another robot park and we will certainly continue to move in this direction.