Behind the impressive economic performance of the Baltic states, there is a core group of businesspeople helping fuel the dynamism. Using knowledge, innovation and plain old hard work, these "business superstars" are helping the Baltic economies expand far beyond their borders. The Baltic Times turned to a few of these individuals to hear more about how their companies have succeeded and what their plans are for the future.
Nils Melngailis, CEO Lattelecom
With the decline of land-line telephony, Lattelecom has been forced to change its business model and seek innovative solutions to remain viable. What, in your opinion, is the most lucrative direction in telecommunications now?
Our future is broadband Internet and all of the services related to it. This includes digital TV, voice over IP (VoIP), corporate data and IT solutions over fixed and mobile lines.
Lattelecom has expressed interest in participating in the mobile services market. Are there any concrete plans in this sphere?
Given that we are the market leader in the Wifi market, we can say we are already there 's mobile handsets are already available which can switch to VoIP services via wireless Internet. In terms of GSM services, there are a number of options, but most likely this will be cooperation with some existing operator given that application for a new license could take a very long time. We are also exploring other wireless technologies such as Wimax, which is a wide-range Wifi technology, CDMA and other solutions.
Can Lattelecom keep up its current sales/profit growth rates in a finite market such as Latvia's?
I truly believe in the saying that either companies grow or they die. Although there is plenty of room to grow in Latvia given that Internet penetration is still low, I believe our greatest growth opportunities lie in working in our neighboring markets 's particularly Scandinavia, Germany and Russia. Latvia is a relatively small market, and we believe we can be competitive in our neighboring regions, especially with our integrated corporate solutions which combine data transmission, IT and business process outsourcing services.
You have spearheaded a proposal for an employee buyout of Lattelecom. In this market, and given the price 's up to 400 million euros 's this is extraordinary. How will you work out questions of finance?
We have engaged Lazard, one of the world's leading investment banks, to raise the necessary financing if the shareholders give us the opportunity to work on this proposal. In any case, we will need to borrow a substantial sum, but believe that we can fund the purchase and continue to invest in the growth of our company.
The government seems to have reacted favorably to the proposal. But what will happen if some of the 3,000 employee/shareholders should suddenly want to sell?
There would be a number of different opportunities for employees to participate depending on levels of responsibility 's this would include options grants and shares for sale. There would also be restrictions on selling or pledging shares for an extended time period. Of course, until the shareholders decide, this is a theoretical discussion.
Kati Kusman, Chairman of Kalev Chocolate Factory
How would you characterize the Baltic confectionery market?
The Baltic confectionery market is a developing market due to ongoing integration in the European Union. However, domestic brands and products are still very strong and highly valued. Regarding the Baltic sugar- and chocolate-confectionery market, chocolate confectionery products are more favored and form a major part of sales. This chocolate products-preference of customers is very suitable for us.
Is Estonian candy still competitive in the Scandinavian market? Will the loss of the Russian market deal a financial blow to Kalev Chocolate Factory? Do you think Russian distributors will eventually do business with Kalev again in the future?
The Scandinavian market is interesting for us, but at the moment our focus is more on the Baltic market. We are also still quite positive about future developments in the Russian market, which is very large and presents lot of opportunities.
Will Kalev benefit from a deregulated sugar market in the EU?
Regarding the sugar market regulations in EU, Estonia does not produce sugar, so we certainly would benefit from lower prices. However, a common agricultural policy should be analyzed as a whole system, not just a sugar topic. At the moment it is very useful for Estonian farmers, and their progress is important to us as well.
Asta Cepiene, development director, Cilija Pica
Cilija Pica has been a model of success in the Baltic restaurant industry. What, in your opinion, are the reasons for that?
The main reason for our successful public catering chain is in synergy effects, both working on high food and service quality. Though an expansion strategy and customer-orientated marketing ensures potential clients as well.
Can Cilija Pica maintain its impressive (30 percent) sales growth over coming years?
Our plans are agressive but realistic at the same time. Having in mind our know-how, strong brand and innovative business model, we plan to keep planned sales growth.
How much does franchising play a part in Cilija Pica's expansion plans?
Franchising is a very important part of our expansion. Our franchising policy is to develop a Cili Pica chain in those markets where we are not planning to enter with our own capital. On the other hand, we are developing the franchising model in these countries where we already have our own capital restaurants. We plan to open eight restaurants based on franchise in Lithuania and Latvia this year.
Cilija Pica is now in five countries. Are there plans to open restaurants in any new countries?
We have plans to enter the Estonian (own capital basis) and Russian (franchising) markets this year. Of course we are searching some other countries as well.
How does Cilija attract finance? Will the company ever go public and list shares?
We do not have plans in the near future to go public.
Gintaras Marcinkevicius, Board Chairman of Maxima
The growth of Maxima (VP Market)Â has been phenomenal. At what point will the Baltic market be saturated?
The consumption level of the Baltic market per one person is quite behind compared to the level of other European countries. We think that consumption will grow in pace, about 10 percent within 10 years. Accordingly, our part of the market will grow as well.
As a major employer, how is Maxima coping with the growing labor deficit in the Baltic nations? Does Maxima support importing labor from other countries?
We are not thinking about importing labor from other countries. We can manage with Lithuanian citizens.
Why did Maxima leave the Romanian market? Was it just a matter of "receiving a good price" or were there other factors involved? Do the Romanian and Bulgarian markets differ somehow?
We got a very interesting take-over bid and had to make a decision immediately. Albinuta Shops were not detrimental, but we didn't [achieve] development in Romania. So making the decision to sell Albinuta Shops was not difficult. The company's priority for expansion is the Baltic states and Bulgaria.
Has Maxima had any success investing in Ukraine? What are the unique challenges in that country?
Our company doesn't have any plans to invest in Ukraine.
Can Maxima overtake Mazeikiu Nafta in terms of sales and become the largest corporation in the Baltics?
They are in two different sectors. And we do not seek that.
Indrek Rahumaa, CEO Alta Capital
Alta Capital has launched an ambitious acquisition campaign in recent months. What is the firm's ultimate goal?
Alta Capital Partners is a long-term investor seeking to create value by taking majority positions in companies with good development potential.
Why has Alta Capital focused primarily on the clothing and food industries? Are they particularly profitable?
Alta is focused on four key areas: apparel retail (through PTA), construction and property development (through LEC and Alta Real Estate Partners), branded foods (RPS and Mieszko) and high value-added specialty textiles (Desseilles International, Lauma Fabrics and Scantarp). In every area we plan to build regional leaders through further consolidation and by attracting top quality management teams. All companies are also very well positioned to benefit from the growth in the disposable income of the consumers in the region.
What makes the Riga market particularly attractive for Alta Capital? Is the property market not overvalued?
Real estate prices have appreciated significantly over the past few years, and we definitely foresee stabilization in the price development. At the same time, however, there should still be fundamentally strong demand for new real estate over the medium- to long-term. Average space per capita is low, a large part of the housing stock is old, and mortgages to GDP are well below EU levels. Although more stringent credit policies will definitely cool the market, over the long-term the demand for new quality real estate should prevail.Â
Will Alta Capital continue to invest in the Baltic energy market?  If so, why?
We are evaluating projects along with partners and will not take a lead role in a Baltic energy market project. The sector is of interest to us, and here we are working with experienced partners.
