In October, snack maker Kraft Jacobs Suchard Lietuva set out on an ambitious plan to make Lithuania a potato chip manufacturing powerhouse when it opened a new Estrella potato chip factory. This operates alongside Kraft Jacobs' confectionery plant, which it acquired in 1993.
The total bill for construction, equipment and implementation of the new chip making center is $10 million. The project also includes farming, storage, and transportation; eventually sales and advertising programs will be included as well. At maximum production levels, the factory will employ 100 employees, in addition to scores of outside help – farmers, warehousing and distribution staff. The plant is also buying its potatoes locally and training farmers in the science of growing spuds to Estrella's specifications. (McDonald's Lietuva, it should be noted, imports its potatoes from Poland.)
However, Lithuania hasn't exactly demonstrated a craving for potato chips. In the United States, where the Estrella chip was invented, people annually consume roughly nine kilograms of chips per capita . In Lithuania, this figure is 0.6 kilos per capita, reports Rasa Bagdoniene, corporate affairs manager for Kraft Jacobs Suchard Lietuva. "We have to educate the market and to explain to people what a snack is," she said.
Still, there is plenty of competition in the snacks market in Lithuania. Currently Estrella leads with approximately one-third of the market, but foreign competitors include Pepsico's Wise, which holds more than 20 percent of the market, and Pringles.
A Lithuanian competitor is Oho, the Kaunas-based snacks producer that claims 20 percent of the potato chip market. Oho sees itself as an upstart without such ambitious goals as Estrella. Romaldas Grikstas, Oho's production manger, thinks that Kraft Jacobs will run into problems buying the potatoes locally. Another problem, says Grikstas, is that Kraft Jacobs' factory is too large for such a small market. "The capacity that they installed in the market is too optimistic," said Grikstas.
Grikstas still welcomes the competition. "Everything that was done in our company we learned from Western companies," he said. "All the time we are learning from them and from Wise. We are not best, but we want to be best in this market."
Grikstas thinks the key to making it in the snacks business in Lithuania is diversification. "We sell new types of products each year. At this moment we have 23 types of products." Also not hurting is that Oho has managed to find ways to export its snacks to Latvia, Estonia, and Germany. Grikstas also claims that Oho's capacity has been growing from 20 to 30 percent each year.
One Western chip maker has already failed in the Lithuanian market. Kim's, a potato chip maker that started production in Lithuania two years ago, has already found itself in bankruptcy.
Estrella, Bagdoniene notes, is trying to supplement disinterested Lithuanian markets by exporting its wares to Latvia and points further east. "We are working on developing exports to Russia, to the Ukraine, and to Belarus. These markets are problematic right now, but we are optimistic about the development of this part of the world," Bagdoniene said.
She adds that Lithuanian farmers have been able to deliver the right kinds of potatoes, as long as growers learned Estrella's strict recipe. "The amount of sugar, starch and other chemicals in the potato is very specifically defined in order to have yellow, crispy and good chips," she said. "The temperature influence is very important. All the processes are very accurately observed."
She adds that the potato sorts found in Lithuania have already passed Estrella's stringent test. "Potatoes were grown by local farmers and were sent back to Sweden for production," she said. "The results were good. After that we started construction of the factory."
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