Adam Easton in Warsaw -
Poland’s furniture manufacturers have become a global force in recent years and the country is now the fourth largest exporter by value in the world behind China, Germany and Italy.
Poland exports about 90% of its production and those exports have grown 62% since 2010, and this year they are expected to be worth a record high PLN36.5bn (€8.7bn).
Poland has a tradition of furniture making – the still-active Fameg factory in Radomsko has been operating and exporting the classic Thonet wooden chairs since 1883. But it was the fast pace of privatisation in the furniture sector following the end of communism in 1989 that first spurred the growth. German investors like Schieder Mobel bought up several plants and employed 7,000 workers, bringing in Western know-how and business contacts.
In 1990, Adam Krzanowski, the CEO of Poland’s second largest furniture company Nowy Styl Group, was earning $5 an hour in a company making chairs in New York.
When he decided to come home to start his own business in 1992, his American business partner, Henry Stern, introduced him to all his Italian suppliers. “Adam knew how to make a chair, but he didn’t know any suppliers. Henry’s knowledge was a big part of the base of the creation of the company,” says Roman Przybylski, a board member and director of sales for Nowy Styl.
A company that started with Adam, his brother Jerzy and their mother upholstering chairs in a small hall in Poland is now Europe’s fourth largest producer of office furniture with turnover of €280mn last year.
A plentiful supply of locally sourced and competitively priced wood, low labour costs and a favourable location helped grow the sector in the early 1990s. “This cheaper production was important for us in the first years. We were able to produce chairs with quality similar to Western European levels but cheaper,” Przybylski says.
Polish workers on the assembly line still earn less than their German counterparts, but the labour costs make less of a difference now. Nowy Styl still manufactures in Poland because it allows the company to meet customer’s specific needs rapidly. “If you want to have 200 work places, done with special adjustments, with the colour you need and you need them in two or three weeks, it’s not possible to do it from China,” Przybylski explains.
Today, the biggest advantage Nowy Styl enjoys over its Western competitors is its ability to leverage internationally and use more efficient, and still cheaper skilled workers in finance, IT and marketing, he says.
Leg of the economy
In the first four months of this year the furniture industry was the fastest growing sector of the Polish economy and in the last few years it has generated about 2% of the country’s GDP. “Poland has become synonymous as a cheap and reliable source of good quality furniture,” says Tomasz Wiktorski, CEO of B&R Studio furniture market analysis.
Most of the furniture made in Poland is either manufactured as components for foreign companies or is a finished product like a sofa, which is sold to a Western European company and marketed under its own brand.
About one-third of the country’s production is furniture elements such as bed and chair frames or wardrobe panels. Another third is upholstery that still requires finishing and about a quarter is made from wood-based panels such as parts for dining room tables.
About one quarter of furniture manufactured in Poland is sold in IKEA stores around the world. The Swedish company placed its first order for chairs with a company in Radom in 1961.
IKEA began building its own factories in Poland in the 1990s and now its production unit, IKEA Industry, employs almost 10,000 people making such items as its LACK table range. Its own plants produce about €1bn worth of furniture a year and it subcontracts out another €1bn worth of orders to smaller Polish manufacturers.
South African retailer Steinhoff, which owns such European brands as Conforama and Harveys, operates its own factories in Poland and also sources a lot of its furniture components from Polish manufacturers.
Part of the problem for Polish manufacturers trying to expand abroad is that it’s difficult to market Polish brands in Western Europe. It also costs billions investing in marketing and distribution to be able to compete with huge companies like IKEA.
EU countries account for about half of Nowy Styl’s sales with Germany its biggest market, followed by Poland, France and the UK. It has been helped because the office furniture segment is smaller and more specialized than the home furniture sector.
Apart from office chairs and furniture, the company makes chairs for football stadia and cinemas, so it doesn’t need to buy TV adverts and billboards to advertise to the man on the street, Przybylski said.
The furniture market in Europe is very fragmented, with each country accustomed to its own national brands, he added. That’s why Nowy Styl is expanding through foreign acquisitions.
It has bought two German furniture companies and continues to market their products under the original brand name.
“It’s not because establishing a Polish brand is difficult, it’s because establishing a general international brand in Europe is difficult. It’s better to have known brands in Germany, in France, in Poland. Maybe in the medium to long term it will be possible for us to build an international brand for Nowy Styl. But to do it we are acquiring existing, established brands on the market,” he says.
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