Polish vodka trouble gives Stock a headache

No Polish home is complete without a bottle of Zoladkowa Gorzka, a herbal vodka traditionally used as an aperitif, but its British owner is finding the current Polish spirit market a little tough to stomach.

Shares in London-listed Stock Spirits, which distils one in every three bottles of vodka sold in Poland and relies on the country for 60 per cent of its revenues, fell almost 25 per cent on Wednesday to 226p after it warned that full-year profit on an ebitda basis could lag estimates by €5m-€10m. Nomura's previous estimate for full-year ebitda was €76m.

Last year's 15 per cent excise tax increase on strong spirits in Poland led to bulk-buying from shops prior to it taking effect, boosting wholesale deliveries but also stuffing retailer inventories.

Since then, as wholesale demand naturally fell, producers have begun undercutting each other in an attempt to increase their slice of the market as it returns to a natural level.

"The hike has disrupted the normal trading patterns . . . and that needs to flush its way through the system," said Chris Heath, chief executive of Stock, who warned of "very aggressive competitor pricing and promotional activity" as producers fight for supply agreements.

"Frankly, we had a couple of bad months in September and October where we didn't have the volumes or the margins that we were hoping for," said Mr Heath. "There is just a disjoint in the market at the moment."

In Poland, which proudly claims to be the birthplace of vodka, each citizen knocks back almost 14 shots of the alcohol every month, according to Euromonitor. That is second only to Russia, which reckons it brewed the clear stuff first.

But sales of vodka in Poland, which produced 290m litres of the alcohol in 2013, are down almost 4 per cent so far this year, a fall almost entirely attributed to the excise rise, which added around 2 zloty to an average 500ml bottle, costing around 23 zloty (£4.30).

"The higher prices are visible especially in the economy and mainstream segments," said Magdalena Winiarska, editor-in-chief of Rynki Alkoholowe, a Polish alcohol industry magazine. "Producers say that this year will be really difficult and it will not be easy to recover the market."

While vodka remains the undisputedly most popular spirit in Poland, and is the tipple of choice for weddings, birthdays and raucous Christmas parties with a healthy side of herring and pickle, it faces competition from other alcoholic drinks.

Whisky consumption in Poland rose 22 per cent between 2008 and 2012, as more global brands moved into the country. Warsaw's foreign cuisine restaurants are increasingly promoting their wine lists and keeping their vodka bottles tucked away behind the bar. At trendy burger joints popular with the city's youth, punters are drinking bottles of wheat beer, not shots.

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