Tallinna Piimatoostus acquires half of dairy market

The Baltic Times, TALLINN
By Kairi Kurm
Oct 24, 2002

Estonia’s largest dairy Tallinna Piimatoostus increased its market share from 30 percent to 50 percent with the purchase of Meieri Tootmise earlier this month.

The negotiations with Hansapank over the purchase of Meieri Tootmise, the subsidiary of bankrupt Uhinenud Meiereid, had lasted for two-and-a-half years.

The price of the deal was not disclosed.

“Our main aim was to buy a market share,” said Neeme Jogi, manager at Tallinna Piimatoostus, who also leads the Estonian Dairy Association.

The company’s biggest competitors are Valio Eesti, Polva Piim, Rakvere Piim and Saaremaa Liha- ja Piimatoostus.

There are a total of 47 dairies in Estonia.

Peeter Puskar, head of Valio Eesti Laeva Meierei, praised the deal. He said that it would put the dairy market in order, but would also enable Tallinna Piimatoostus to manipulate the market.

Jogi assured that the company’s leading position was not a risk to consumers. “The only advantage we have is that there is one company less knocking on the doors of the retail stores. But everybody wins here,” said Jogi.

He said that it would be normal if there were two big companies in Estonia that would control 80 percent of the Estonian dairy market, just like it was common in several Nordic countries.

The biggest competitor to Tallinna Piimatoostus is the Finnish dairy Valio Eesti Laeva Meierei, which has established local production in Estonia and imports some of its dairy products from Finland. The company controls around 22 percent of the market and has good connections with the Finland-based retailers in Estonia.

Jogi said that Valio was in a more advantageous position, because the dairy business depended largely on retail. He said that he did not know if it would soon be decided in Helsinki whose products could be sold at Estonian retail stores.

Puskar did not agree. “The business is not dependent on national characteristics. I can say that at Prisma, the Finnish store chain, Tallinna Piimatoostus is a major supplier,” he said.

Unlike Estonia, Finland does not have any barriers in exporting to Estonia, and it is much cheaper to transport dairy products from Finland by sea than from the southern part of Estonia by land.

Jogi believes that in the coming 10 years Estonia’s food industry will stay local. He also said that he would be sorry for the Estonian consumers if they had to buy imported dairy products, because these include more preservatives.

Both Tallinna Piimatoostus and Meieri Tootmine have exported in small amounts to Latvia and Lithuania. According to Jogi, only Estonian cheese, butter, cream and dry milk are exported to the EU, where they are subsequently used as raw materials for value-added products.

None of the Estonian dairy products can be found at EU stores, though when EU markets open in 2004 Tallinna Piimatoostus would like to begin exporting desserts and yogurts.

The company would also like to acquire another Estonian dairy in order to secure its position in Estonia, he said.

Jogi said that most of the dairies around the world, including theirs, were operating below full capacity. In Estonia 1,100 tons of milk is produced daily in winter, and 1800 tons in summer, though local demand is about 500 -550 tons per day.

Half of Estonia’s dairy production is exported.

“The Estonian dairy market is schizophrenic,” said Jogi. “There is a tremendous oversupply. In order to stay competitive you have to bring out newer and newer products. Together with Meieri Tootmine we offer about 240 different products, which is not normal.”

While most of the dairies in Estonia are foreign-owned, Tallinna Piimatoostus is one of the few that is under local control, belonging to three Estonian private investors. The majority owner with 76 percent, Oliver Kruuda, also manages and owns a majority share in the largest Estonian confectionery Kalev.

“Both Valio Eesti and Rakvere Piim each have a long-term strategic investor supporting them. I forecast that both companies will take share from Tallinn Dairy,” said Nevil Hewitt, managing director at Rakvere Piim.

Meieri Tootmine made a 3.9 million kroon (249,000 euros) profit on a 108-million-kroon turnover in the first half of 2002, and Tallinna Piimatoostus received zero profit on a 212-million-kroon turnover.

“It is amazing that, unlike other industries, profit making in dairy business causes rather negative than positive emotions,” said Jogi. “It looks like taking money from the farmers.”

Tallinna Piimatoostus will invest 2.5 million kroons in the facilities of Meieri Tootmine in Viljandi this year to meet EU requirements by January 1, 2003.

Source: http://www.baltictimes.com/news/articles/7106/

Estonian meat processor expects first EU license

The Baltic Times, TALLINN
By Kairi Kurm
Oct 03, 2002

After long delays Estonia’s first meat processor looks set to start exporting to the European Union, but other processors are nervous at the prospect of EU inspections and possible closure if they fail. Having been inspected by officials from the European Commission, the European Union’s executive arm, Villem Lihakaup is expected to be the first meat processor to receive a license from Brussels.

First though the commission has to approve Estonia itself as a source of meat imports, which may happen later this month.

Kalev Villem, manager of the company, declared delight at the result.

“We have done everything we could to get the approval,” said Villem. “The law requires there to be enough space for production, that it should be easily washable and sufficiently well lit – the inspectors usually demand the maximum.”

Villem Lihakaup, which produces venison, boar and goat, is now a model for other processors who under the recently passed Food Act have until Jan. 1 to gain approval by Estonia’s Veterinary and Food Board which will apply EU standards.

Companies which fail to come up to scratch will face closure, although a long backlog in inspections is inevitable, predicted Villem.

Ago Partel, head of the Estonian Veterinary and Food Board, declined to predict how many processing companies might in practice face the chop.

“It all depends on the money. It is possible to do everything necessary in a couple of months,” said Partel.

Once the system is properly up and running it is expected Estonia could administer it alone, without experts from Brussels visiting each company which applies for a license.

Of the other Baltic countries, no Latvian meat processor has yet been licensed by the European Commission while several in Lithuania have.

Villem expressed optimism about the prospects for selling specialized products on the EU market. Venison in particular is highly sought after in the EU, even if Estonians tend to turn their noses up at it, said Partel. “Our consumption traditions are less developed,” he told The Baltic Times.

Villem estimated that Estonian hunters who supply the company would be able to earn some 10 million kroons (641,000 euros) during the 10-week annual hunting season.

Out of a total 10,000 elks, 3,500 are hunted each year, of which 1,000 are currently processed by Villem Lihakaup.

According to analysts, companies next in line to get the new licenses include Rakvere Lihakombinaat, Woro Kommerts, Tallegg, Valga Lihatoostus and Saaremaa Liha-ja Piimatoostus.

But most processors continue to be mystified by the process of applying to Brussels, said Olle Horm, board chairman at Rakvere Lihakombinaat.

“Unfortunately we lack our own lobby group in Brussels,” Horm said.

While Estonian dairy and fish processing industries have been exporting to the EU for some time it has taken much longer to bring the meat sector into line, commented Peeter Grigorjev, president of the Estonian Meat Association.

For a long time Estonia lacked a proper waste management system for the industry. Other types of investment required have also been costly and returns have been low, said Grigorjev.

The industry is intrinsically less profitable than other agricultural areas such as dry milk production for which there is a big market in the EU, he added.
Source: http://www.baltictimes.com/news/articles/7022/

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