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.