One of Riga's oldest factories, Rigas Raugs (Riga Yeast), has announced that it will shut down operations in mid-May due to the unfavorable economic climate in both Latvia and the European Union, which is deregulating the sugar industry.
The yeast producer, which was established in 1847, has been pinched by rising prices for molasses, a by-product of sugar production necessary for making yeast, ever since Latvia closed its two sugar factories last year.
The factories were closed as a result of the European Commission's efforts to cease subsidies for the sugar industry and open up the European market to cheaper, foreign-made sugar.
Riga Yeast has tried to survive by importing Belarusian molasses but, logistically and financially, importing the raw material has not proven itself.
Sweden's Jastbolaget became the sole owner of Riga Yeast earlier this year, and according to Bizness & Baltija, a Russian language daily, recently decided to mothball operations at the factory in downtown Riga.
Jastbolaget is owned by Orkla, a Scandinavian food concern.
Riga Yeast currently accounts for 70 's 80 percent of Latvia's yeast market, according to the daily.
Marina Suvorova, director of the factory, said that the owners had mulled over establishing a new factory, but after considering the current economic environment of high inflation and rising energy and labor costs, the plans never materialized.
She also said that investing in such an old factory was not an option giving the extraordinary capital outlays.
Suvorova said the company would continue producing yeast while there was enough raw materials and that in the future Latvia's bakers would have to import the product.
Valdis Circenis, an official at Latvia's association of bakers, said that the loss of Riga Yeast could trigger a new wave of price increases on bread products.
As he explained, Riga Yeast sold yeast at 0.36 lat per kilogram, while Polish yeast costs 0.48 lat and the French equivalent is 0.56 lat, Bizness & Baltija reported.
Suvorova said the factory closure would result in some 45 job losses.
"Ceasing of our operations will be most painful to our employees," she told the Baltic News Service.
