The Rise Of Poland’s Middle Class

poland-flagJeff D. Opdyke:  WARSAW, Poland: Lamb rogan amritsari at an authentic Indian restaurant. Bánh mì, one of the world’s great sandwiches, prepared by an elderly Vietnamese woman. Beef goulash and rice-stuffed grape leaves at an authentic Georgian eatery. Weisse beer and bratwurst at a German beer hall. Sushi at a tiny but excellent sushi bar.

During my week of investment research in Poland, the only cuisine I didn’t eat was, well, Polish — though, to be fair, I was treated to a tasting menu built around traditional Polish ingredients at Poland’s only Michelin-starred restaurant.


Still, my point is this: This is Warsaw, formerly of bleak and bleary communist fame. Less than a generation ago, restaurant culture here did not exist. The best you could hope for was a so-called milk bar, a government-subsidized cafeteria offering the most basic soups, fried chops and pierogi (and, of course, milk). They were set up during the communist era as a place for workers to eat dinner away from home every once in a while for a miniscule amount of zloty, the Polish currency.

Today, whatever food you might crave is available — and typically prepared by a Georgian, a Mexican, a Lebanese, a Vietnamese, an Indian, a German, a Chinese, a Russian, a Brit, a Thai, a Japanese … all of whom have relocated to Warsaw, Gdansk, Krakow, Poznan and other larger Polish cities because they realize that Poland is Europe’s “soaring eagle,” the European version of Asia’s tiger economies.

It’s an opportunity that will likely see Poland’s middle class emerge as the best investment to make over the coming decade.

I was last in Warsaw in the winter of 2013, meeting with economists, companies and consumers for my newest book, Replay: Your Second Chance to Invest in the American Dream. One of the bankers I met back then told me that as recently as 2007 to 2008, he knew just about all the restaurants in a one-mile radius. By the time I met him, he told me that so many new restaurants had opened, and more were opening just about every week, that he could no longer keep track of them.


It speaks to the investment philosophy I write about all the time: the power of pent-up consumerism in non-Western countries — or, more simply, the rise of the new middle class.

As one of the corporate executives I met with on this trip said, “Look, there’s nothing different with our customers than with customers in Western Europe. Ours want the exact same things you have in the West, and they are pursuing them.”

It is the most powerful trend in the world.

And it’s stunning how quickly the trend can explode in size.

All the Poles I talked to on this trip and the last one shared a similar sentiment: They all expected Poland would need a generation or two to catch up to the rest of Europe. Instead, it took about 15 years.

Today, Warsaw’s per-capita GDP (on a purchasing parity basis) exceeds Vienna, Rome, Lisbon and Madrid. In short, Warsaw has become wealthy. And Poles live at an equal or higher standard of living than locals in some of Europe’s great capitals.

Poland’s Middle Class Is Swelling

This trend is far from over.

Poland’s middle class is small relative to the population. But money continues to flow into the country as Western European companies relocate production plants and call centers to Poland, and as Poland’s entrepreneurial spirit (measured as one of the strongest in Europe) continues thriving. As such, wealth is percolating through the lower classes and out in the rural areas, albeit slowly, raising their standard of living, too. It’s a process that has two decades, maybe four, to play out still.

And there are a number of companies that are benefiting from that — from financial-services providers to consumer-oriented firms. (I’ll be recommending one in an upcoming issue of my monthly Sovereign Investor newsletter.)

For us, the opportunity is in the Polish stock market, one of the most ridiculously cheap markets in the world.

The market’s overall price/earnings ratio on a 10-year cyclically adjusted basis, the way I prefer to look at a country’s P/E ratio, is in the 10 range — among the three or four cheapest markets in the world. Even the nominal P/E is cheap — just 14, well below much of the rest of the world.

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