Glenboden M & A Originations

Poland’s Mokate emerging as CEE regional coffee consolidation candidate

Priority Rating priority rating 3
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Origination Status buyer announcement, March 2008
Asset Marila Balirny (Czech Republic), domestic coffee and snacks producer
Buyer Mokate SA (Poland), no.4 domestic coffee producer with regional presence
Seller founders of Marila Balirny
Buyer Rationale strategic expansion in central Europe region
Seller Rationale consolidation pressures, acceptable valuation
NBs Strauss Coffee also recently announced acquisition intention and in central Europe
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Mokate is a family-owned Polish coffee and tea producer that, through acquisitions, capital expenditure and some innovations, has grown to be a € 100 mln turnover business that’s significant in several emerging Europe countries. Contemporaneously, one of its main rivals in Poland, the Israeli group Strauss, has the desire and an appropriately –sized warchest for another acquisition in that region. The fit looks quite compelling, as that market consolidates further.

Mokate is, depending on how you cut it, the no.4 coffee producer in Poland, after Nestle, Tchibo and Strauss (Elite brand). Its focus is on instants, especially cappuccino where it’s the market leader and claims to have 80% share. The group also has about a 15% share of the tea Polish market, focused on the discount segment. Total sales revenue grew by nearly 15% in 2008, to exceed € 100 mln.

In recent years Mokate has expanded into adjacent countries, especially the Czech Republic where it acquired Dukat (tea) in 2005, Timex (instants) in 2006, and now Marila Balirny. The group is also present in Ukraine and Russia. Overall about 40% of sales are now realized outside Poland.

However, and in spite of the resilience of the instants market, the future might not be rosy for a mid-sized, value segment producer like Mokate. The markets of emerging Europe continue to premiumise, as demonstrated by Poland where coffee sales grew by 15% in value terms, but only half that rate in volume, in 2008. That will mean consumers shifting to ground coffee and other premium products, where Mokate is relatively weak.

Strauss Coffee, which operates under the Elite brand name as well as Pedro in ground coffee, as well as being a coffee leader in Poland, claims to be the no.1 ground coffee supplier in CEE, and no.2 in Brazil, as well as the 7th largest global coffee company by green coffee consumption.

A few months ago, Strauss raised US$ 300 mln in new capital, by selling a 25% equity stake to the US private equity firm TPG Group. The group recently announced that this war-chest would be spent on further acquisitions, in geographies where it's already present, so in Poland, Ukraine, Russia and throughout the Balkans.

The acquisition of Mokate would allow Strauss to further consolidate the Polish market, after its purchase of MK Café and Tea in that country in 2005. It might also leave the group with change from its US$ 300 mln budget, to spend on its long sought-after acquisition of Kraft Romania.

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THIS LEAD'S VALUATION
Size (€ mln) 160
Sector coffee
Asset Quality Poland no.4 branded
Seller family
Buyer mid-cap plc
P/S 1,5
P/Ebitda n/a
Type value estimate
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