Russian investors eye the Baltic dairy market
Russian dairy businessmen Andrey and Sergei Beskhmelnitsky and their business partners, who have invested quite heavily into Latvia’s dairy market, are also eyeing the sector in Estonia.
The unconfirmed rumours are that the Russians are looking into the possibility of buying Estonian top dairy producer Tere AS.
Joakim Helenius, head of Trigon Agri, thinks the Russians’ interest makes sense. Russia is the world’s largest dairy products importer and is not able to produce the needed quantities of raw milk itself. Neighbouring countries are interesting to them, especially the Baltics because of their long traditions in dairy production.
However, Oliver Kruudasaid, owner of Tere AS, said that it is quite risky to sell dairy products to Russia because of constant problems in crossing the border. He further states that food production needs to be domestic, and exporting products to distant countries does not have long-term potential.
Head of Valio Eesti AS, Maido Solovjov, said that there have been rumours about the Russian interest, but no real steps yet. There is a need for consolidation in the market as there are too many players and the domestic market is not growing. The producers need to make their production more effective and find beneficial export markets, he said.
Estonia’s export figures per person are as high as in Finland
Estonians can be proud over export statistics which show that its exports per person are almost the same as in Finland. However, experts say Estonia needs to have more of its own brands as export success stories.
Robert Kitt, director of corporate banking at Swedbank, said that in terms of GDP, Finland is ahead of Estonia four times, but when comparing exports Finland has only a 15% lead over Estonia. Estonia exports goods worth 9000 euros per person, compared to 10,500 in Finland.
Anu-Mall Naarits, organiser of export trainings, said that the export level is really high in Estonia, however it is dependant on a couple of big players. “There are over 10,000 export companies, but the five largest account for 21% of total exports. Outsourcing is dominating, as well as subsidiaries of international corporations which export to their parent companies. In addition to these we need more of our own brands, products and design,” Naarits stated.
One of the success stories is snowplow producer Meiren Engineering OÜ, which exports 90% of its production, selling goods to Finland, Sweden and Norway. It is also planning to expand itself to the German market. Another successful company, wooden house constructor Matek, is exporting 95% of its production, mainly to Scandinavia.
Estonian wooden house exporters among the most successful in Europe
Due to the Norwegian fondness for wooden houses, Estonian wooden house production has become one of the engines of Estonian export.
Estonia is today Europe's fourth-largest exporter of wooden houses, Argo Saul, head of the Estonian Woodhouse Association and owner of Nordic Houses, told Estonian daily Eesti Päevaleht.
While the local banks are forecasting a 3% GDP increase, wooden house manufacturers are expecting their business to grow by 10%. The optimism is backed by the rapid growth in 2012 of several wooden house producers, such as Matek, Estnor and Timbeco. Nordic Houses expects even bigger growth – by 20%.
A third of wooden house production is sold to Norway. Saul said that one of the major factors for the success is the relatively low salary of employees. In total, 85% of wooden house production is exported, which also helps to keep the domestic competition low and motivates the sector’s companies to cooperate. In addition, there is an association to promote Estonian wooden houses abroad which is active with up to 30 local producers as its members.
Owner of the Nordic Houses controlling interest Argo Saul
Nordic Houses OÜ sells its production via dealers to Norway, France, Sweden and Germany. The production takes place near Tallinn, in Kuusalu. The production facility operates as a logistics centre, which has outsourced the production of details to several other companies in Estonia. For example, carved decorations, which are loved by Norwegians, are made by a local self-employed person (FIE). The wood comes from RMK, the State Forest Management Centre, furniture from local producers, etc. Most of the parts are insulated at the factory and made into walls, which are then transported for easy assembling at the customer’s building site. The modules may also include kitchen furniture. So far, Nordic Houses has been strong in the summer cottage market, but its newly established company Nordic Urban Houses aims for a stake in the living house sector.
Estonian-based Nordic Houses OÜ has been able to keep its turnover of 5 million euros level for the past several years. The 2012 profit was at a modest 20,000 euros, about five times less than the year before.
Russia a growing trend for Estonian exports, specialist says
A leading export consultation company in Estonia, JM Corporation, said that Estonian companies are more and more interested in exports to Russia.
The company said that in 2012, half of its customer projects had to do with exports to Finland. The race to Finnish market is however gradually decreasing, probably because Finland has already become the second home-market for the Estonian exporters.
JM said that it has noticed that its customers are more interested in Russia – including the companies who are already exporting as well as those which are planning to start exporting.
„Despite political obstractions, it seems to be that interest to Russian market is a growing trend. During previous years, we have not had so many customers in our portfolio who are about to enter the Russia market,“ the JM export specialist Rene Sildvee said.
The company added that the year 2013 will be a challenging year for Estonian exporters because the Estonian Investment Agency has suspended state-finance to export activities and the companies need to invest themselves into these activities.
Small sour milk drink producer makes a breakthrough in Europe
Lightfood OÜ, a tiny, two-year-old Estonian company specialising in producing natural sour milk drink Ayran, has managed to put a foot in the door of several European countries. By 2013, it plans to sell its sour milk products in 10 different countries.
The sour milk drink Ayran has its roots in Caucasia and is quite famous there, as well as in Russia. The Estonian company’s version is made with healthy Lactobacillus bulgaricus bacteria, ensuring a high level of biochemical activity in the product, and with natural gas. Lightfood’s product line has two drinks: in addition to Airan 2LIFE, a lighter Dietan is produced which contains only 0.5% fat. Both products are made without any synthetic preservatives. “The drink has a specific taste, but as soon as people get used to it, they become loyal customers”, company board member Raul Altmäe told the weekly Ärileht.
These sour milk drinks are today sold in the big supermarkets of Estonia, Latvia and Lithuania, but are also making their way onto the shelves of Polish, Czech, Slovakian, German and Swedish shops. The company believes that it will be able to expand into two additional countries.
Its international success is based on participation in carefully chosen international fairs. For example, it has been present at the Anuga fair in Cologne, Germany, and at SIAL at Paris. In 2011, at Anuga, the Ayran drink was chosen as one of the TOP 54 innovative products of the fair and this title helped the company receive a lot of needed attention.
In November 2012, it participated in the world’s largest and most prestigious food exhibition – SIAL 2012 in Paris. In addition to the sour milk drinks, it introduced a new novelty product – ice cream called “Pure Line” – and made a lot of new contacts also from outside of Europe.
Lightfood has also teamed up with the Chistaya Liniya (Clean Line) company in Moscow, which is the leading producer of a similar product in Russia. The Russian company has been willing to share its extensive experience with the small Estonian company.
Source: Potisepp, P. (2012). Väikefirma, mis murdis üle piiri. Ärileht, 17. detsember