RIGA - Small Latvian breweries are struggling in the current economic climate and may require state help to survive, the head of the Latvian Beer Producers Association has said.
In an interview with the Baltic News Service, Latvian Beer Producers Association executive director Peteris Linins said that many small breweries are losing their market share as the few large companies that currently dominate the market tighten their grip.
"To retain a market share, novelties have to be introduced, and large investments are needed, which are usually not available to the small breweries," Linins said.
The association's director said that most of the breweries were not in danger of filing for bankruptcy in the near future, but that in order to survive in the long term the companies would need tax breaks or other forms of state aid.
Though alcohol consumption has only dropped slightly over the first half of the year, specialty breweries are faced with consumers that increasingly turn to the cheaper mass-produced beers that larger companies provide.
"The Latvian excise authority reported a 3 percent drop in alcohol sales in the first half of the year. Changes can also be seen in shoppers' habits 's they have started to choose cheaper goods," Urmas Silman, CEO of Latvia's L.I.O.N. & Ko alcohol wholesaler, told BNS.
The problem has been exacerbated by the country's large market for imported alcohol, which is much stronger than in the other Baltic states. Silman said that approximately half of the alcoholic beverages sold in Latvia are imported, compared to only about 40 percent in Estonia and Lithuania.
Latvia's larger breweries, meanwhile, are enjoying an increased market share and rising profits.
Aldaris, Latvia's largest brewery and the driving force in the market, has reinvested increased profits into new technologies and an upgrade of its production capacity. The company has spent nearly one million euros on two new pieces of equipment aimed at improving efficiency.
"In the beginning of the year Aldaris invested half a million euros in a new depaletizer," said Inara Sure, the chairman of the board at Aldaris.
"Like the half a million worth investment in the steam generator in August, [the new machine] is aimed at optimizing the operations by investing into environmentally friendly modern technologies that would allow to save energy resources and increase productivity," she said.
A similar trend has emerged in the other Baltic states, as the alcohol market in the three countries is closely tied.
"In general the market trends are rather similar. All Baltic markets are moving towards more qualitative products. It is our direction as well. We are getting ready for offering new brands that are popular worldwide on Latvian and Lithuanian market," Janek Kalvi, chairman of the board at Livitko, Estonia's largest alcohol producer, told BNS.
The brewing industry in Estonia, meanwhile, has been further hit by a series of tax hikes that have devastated the alcohol market.
"It destabilized the market dramatically, and this year there is no point even to look at alcohol production and sales figures, as this is an emergency 's it is only possible to talk about stable trends by analyzing data of several years," Kalvi said.
Latvia's largest brewery is Aldaris, which has a market share of more than 40 percent. In the first seven months this year, Aldaris produced 40.2 million liters of beer, up 5 percent from the same period in 2007.
The company's 2007 profit rose 43 percent year-on-year to 6.8 million lats, up 30.3 percent from 2006.
The second largest brewery is Cesu Alus, which controls about 27 percent of the market.
According to the Latvian Beer Producers Association, Latvia's breweries last year sold 133.79 million liters of beer, which is 5 percent or 7.1 million litres less than in 2006.
