RIGA - Bread has always held a special place in Baltic hearts. It makes up a staple part of the Baltic diet 's it is served with almost every meal. It has become more than just another part of the dish, however, and the distinctive black rye bread which is produced here is now a symbol of the Baltic states (see Page 11). Special kinds of bread are made for holiday seasons such as Midsummer, and bread has worked its way into fairy tales and folklore throughout the region.
"Bread has a special place in the Latvian consciousness, and respect for it is encouraged from early childhood," The Latvian Institute, an organization devoted to spreading Latvian culture, Web site reads. It goes on to explain that historically "bread baked from the flour made from the first harvest was assigned particular powers. When eating this bread, a wish was made, which would be fulfilled."
Gone are the days when each village had its own unique style of bread, however, and the market today is dominated by large multinational companies. All three Baltic states have recently seen a rapid consolidation of bakeries, with the few largest companies controlling ever greater shares of the market and many smaller bakeries being forced to close their doors.
Today in Latvia, the eight largest bakeries control 60 percent of the market, and the smallest 31 's about a third of the total number of bakeries in operation 's control only 4 percent. The number of Latvian bakeries has decreased by more than 2.5 times in the past five years. The trend is even more drastic in Estonia, where the top four bakeries control an amazing 60- 70 percent of the market.
Lithuania is experiencing a sharp amalgamation of bread companies as well. "Market entry is quite easy, everyone with an oven at home can call themselves a baker… but over the past five years there has been a lot of consolidation with the biggest five companies taking control of more than 50 percent of the market," Marius Horbacauskas, general director of the Lithuanian division of Fazer bread, told The Baltic Times.
Fazer bread is in itself a prime example. In the five or six years that the Scandinavian bread giant has been operating in Latvia and Lithuania, they have managed to become the second largest bakery in both countries.
The bread industry in the Baltics is thriving. In Estonia, where people eat an average of 35 kilograms of bread per year, bread accounts for almost 15 percent of the food and beverage industry. In Latvia, bread is the second largest contributor to the food and beverage industry.
Industry Challenges
Despite the apparent strength of the market and the relative stability of demand, the bread industry in the Baltic states faces a number of challenges. Many bakeries are being hit especially hard by the same general problems that are affecting other sectors.
"I think the biggest problem that we have is organization of labor," Heiki Hallik, general manager of the Hagar, a major Estonian bread company, told The Baltic Times. Hallik explained that the difficulty in finding good workers and low worker productivity are forcing him to look for alternative ways to improve efficiency.
"We need to improve our efficiency in the workplace by instituting different plans," he said, adding that the company was also trying to upgrade their bakery's technology to help increase their capabilities.
Hagar is quickly moving up in the world of Estonian bakeries and is now the fourth biggest bakery in Estonia. They operate all over the country, and have even begun exporting to Finland and the other Baltic states.
A recent survey conducted by Anastasija Vilcina, Ingride Kantike and Aija Eglite of the University of Agriculture in Latvia found that the labor shortage was one of the worst problems facing Latvian bakeries. "All (100 percent) [of the surveyed] experts pointed to the lack of a qualified labor force as a very important and hindering factor in the successful performance of bakeries," the survey concluded.
Horbacauskas said that the labor shortage was also stymieing his Lithuanian business. "The labor costs are increasing as people go to Ireland or Great Britain," he said. "One way to modernize is self-sufficiency, we are working for a less labor intensive process in the future, and we will incorporate more machinery."
Horbacauskas said that the biggest problem facing his company, however, is the rapid inflation and price increases being experienced in Lithuania and Latvia. "[The] price increase is the most important thing; people are reacting negatively to the increased bread prices. Also, the grain harvest will be low [this year] and so the prices will continue to increase," he said.
With an attitude that is characteristic of how intense the bread industry in the Baltics is becoming, Hallik said he welcomes the price increases. "The bread prices are so low [in Estonia] that a small increase is not so problematic. We have very good economic development, so this is not a problem for us… on the Latvian side it is good that the prices are rising because then we have more opportunity to export there," he said.
