Business model and value chain

At the heart of the Group's business model is the ability to create high-end products and manage strong, recognizable brands (including: Śnieżka, Magnat, Poli-Farbe, Vidaron, Rafil and Foveo-Tech). This assumption stems from the awareness of consumers and business partners’ expectations and needs. We have worked out our development projects and processes in such a manner so that our Group would be ready to embrace challenges of the future, as well as to identify and shape trends in the market of decorative paints and construction chemicals.

Śnieżka Group’s business model

The owner of the commercial brands of the Śnieżka Group is Śnieżka Trade of Colours Sp. z o.o. (with the exception of Hungarian brands, which officially belong to Poli-Farbe Vegyipari Kft.) This is where our own marketing and sales resources are located. The process of developing a new or modifying an existing product is assigned to a specific brand. It is initiated by the marketing team by submitting assumptions to the Research and Development Centre and units responsible for production. The final stage of the process is developing a sales strategy.

The Research and Development Centre runs laboratories and conducts research teams that – in addition to the development of new recipes – ensure quality control primarily in production processes and products. FFiL Śnieżka SA acts as a competence centre in the field of Supply Chain Management (purchasing, production, distribution, warehousing, logistics, information flow), IT, technology, research and development (R&D) and quality assurance. The parent company acts also as a shared services centre.

In up-to-date production facilities of the Group located in four countries (including 3 key ones – in Poland, Hungary and Ukraine) approximately 140 million kg of products are manufactured assigned to approximately 5,000 SKUs (stock keeping units). Within individual production assets and brands, technological processes are automated and robotized to increase efficiency and reduce the workload of employees.

The Śnieżka Group Logistics Centre located in Zawada near Dębica has been operating since 2022. Owing to the ambitious investment, it was possible to permanently transform the distribution model and equalize production levels throughout the year, which in turn reduced the impact of seasonality on the business.

Since 2022, the Group has been benefiting from the company’s digitization project, estimated as the largest in the entire Central and Eastern Europe region¹. The implementation has radically changed the manner of managing the supply chain. The flow and analysis of data in real time, combined with the capabilities of the Logistics Centre, has become crucial for order fulfilment, which enables effective inventory management within the Group. Integration with the systems of most logistics operators cooperating with the Group has also been carried out. The transformation project has modernized the manner of operating with data in all areas of activity, including:
e-commerce, logistics, human resources management, finance and sales management.

A major change in the approach to product portfolio management, brand management, production, logistics and supply chain management is the inclusion of the ESG component, i.e. sustainable development, in the strategy (in which the company takes responsibility for the environment, people and business).

The Group’s objective is, inter alia, to develop products with a low environmental impact and to reduce the carbon footprint related to business activities. In the business model, the ESG approach is a kind of filter through which not only activities within the Group are analysed, but also the activities, products and services of our suppliers.

All the described components of the business model allow the Group to be close to its customers. This closeness is comprehended as the physical availability of products in retail outlets, care for appropriate level of customer experience and the collection of feedback. Since the beginning of 2024, the Group has expanded the distribution model on the independent market in Poland – selected retail outlets that were previously serviced indirectly by distributors can simultaneously make purchases directly from Śnieżka ToC. The company is to continue the cooperation with its existing partners – wholesalers. Extending the distribution model on the independent market in Poland may have a negative impact, difficult to estimate, on the Group’s performance in the coming quarters. However, in the long term, it is an important step in the further development of the Group and building its competitive advantages.

1 According to SAP data, 2022 (SAP NOW 2022)

The value chain

The Śnieżka Group identifies its value chain divided into upstream and downstream parts, own operations and supporting activities, as well as entities with which it establishes and maintains business relationships at individual levels. Its elements are described in more detail in the non-financial part of the Report.

Upstream part

At this level of the value chain, natural resources, materials and finished materials, as well as related activities are identified and acquired.

Essential resources from the perspective of the Group's daily operations are as follows:

water added to products and used on an on-going basis, including: for municipal purposes, supplied by the water supply network (and in the case of Rafil – also sourced from a drilled well),
renewable energy used in production processes, the purchase of which is confirmed by certificates of Guaranteed Sales of Energy Produced from Renewable Sources (a special case is Śnieżka Ukraina, which uses energy produced in nuclear and coal-fired power plants); it should be mentioned that in the last quarter of 2023, the Ukrainian and Hungarian companies were equipped with new photovoltaic systems, which started producing energy in the first quarter of 2024.
fossil fuels as a source of energy used to conduct business, including:
- fuel and gas for production and heating purposes,
- diesel oil for generators stored in case of failure (approx. 100 l),
- coal for heating purposes,
wood in the form of wooden pallets enabling the storage and transport of products, also on the premises of production facilities.

In order to obtain the above resources, individual companies of the Group establish rapport with appropriate external suppliers.

Among the material resources exploited by the Śnieżka Group, chemical substances that are components of products are of particular importance. All of them are purchased from external producers and distributors. Resources obtained from external suppliers include: pigments, binding agents, solvents, fillers, additives, gypsum, natural raw materials (derived from nature, ground, non-chemically processed). Finished products are also purchased from other companies as part of the product portfolio offered by the Group. A special type of resources is a narrow group of raw materials that have no substitutes, such as certain pigments, for example. They are purchased from a diversified group of producers and distributors. In the upstream value chain, there is also a group of ready-made materials used as part of the production process. These include packaging (paper, metal and plastic), protective films, shelves in warehouse areas, as well as cartons used both as dividers in pallets with products and packaging used to distribute products (in the online channel). They all come from external suppliers.

Own operations

These operations are also focused on processes around the product.

First of all, it is product design and determining the recipe composition, i.e. selecting raw materials based on specifications, impact on the environment, expected parameters and availability. Related activities include research and development, which allow for continuous improvement of products and introduction of new technologies. Work in this area is carried out in our own research laboratories, such as: water-based decorative products, construction chemicals, metal and wood products, aging, chromatographic and microbiological tests.

Each product is manufactured based on a recipe.

The plants of the Group companies produce:

paints for walls (interior) and facades (exterior) – similar processes in terms of energy consumption,
colouring pastes and colorants,
products for painting:
- wood, but due to the different energy consumption of the processes, solvent-based and water-based products as well as enamels, varnishes, impregnations are distinguished,
- metal – solvent-based and water-based, one-component and two-component enamels
  (this group of products is characterized by a long production process),
wall putties, which, due to the different nature of production, are divided into dry and wet ones,
as part of building insulation systems:
- adhesives for insulation systems (purchased and produced e.g. by Poli-Farbe),
- primer and facade paints (similarly produced),
- dispersion and mosaic plasters, distinguished by the production process,
- fibreglass reinforcing mesh – this is an exception as it is purchased (under a different brand),
paints and enamels for concrete – water-based or solvent-based, one- or two-component (they are characterized by significantly different production methods),
primers, such as priming agents for walls, wood and concrete,
alkyd, polyvinyl, polyurethane, epoxy and heat-resistant systems – a group of enamels for metal and concrete,
production for other brands and external companies, primarily emulsion paints.

Products are subjected to quality control, then packed, stored and transported between plants and warehouses.

Own operations also include processing the production waste. The largest proportion is water-soluble washings, a slightly smaller one is post-industrial washings, and the smallest is waste classified as hazardous. In addition, some of the paints and washing water are recycled for reuse as part of the production process.

Downstream part

This part of the value chain focuses on post-production activities in which the Group and its individual companies cooperate with many external entities.

Marketing and Procurement are responsible for the development, printing and distribution of promotional materials intended for the appropriate presentation of products at points of sale. All these activities take place with the participation of external subcontractors.

Another area is the sale of products and their distribution, which takes place through business partners, including wholesalers and construction materials warehouses, DIY markets, retail stores and e-commerce.

The Group monitors waste-related issues. After the end of the life cycle of goods, they are disposed of by waste disposal companies, while internal processes deal with damaged products, withdrawn ones and those that have expired.

A unique activity in the downstream part of the value chain is the mixing of colours in stores using mixers, which are used for a fee and serviced by Śnieżka. It is also responsible for the disposal of these devices unless a buyer is found for them.

Supportive activities

Most activities are carried out as part of internal processes. They include various market analyses and consumer behaviour, as well as the assessment of suppliers in terms of meeting specific criteria, including those contained in the Supplier Code, in the area of purchasing processes.

Supporting activities also include monitoring the operation of IT systems in order to ensure data security, internal controls, and risk identification and management. Another area is supervision of compliance of activities with the law and ensuring the coherence and transparency of documentation by introducing policies, procedures and internal regulations in line with corporate governance.

Human resources management, including employee development and occupational health and safety issues are also an important area of activity. Environmental and climate protection is another key issue that requires process optimization at all levels of the value chain. The management of trademarks and other intellectual property resources is supported by a law firm, while the Group’s digital transformation is supported by a consulting company. These activities are possible thanks to the effective management of the Group’s infrastructure, which allows maintaining production, sales, purchasing and other capabilities necessary for its daily operation.

Organizational structure

Value and capital creation model