RIGA - While most companies in Latvia are flailing in the crisis, Latvijas Balzams, the largest producer of alcohol in the Baltics, saw a 19 percent increase in sales in 2008 's reaching 42.85 million lats (61 million euro).
"For the first time in the company's history the volume of exports has bypassed 40 million lats. Despite the challenging economic situation, we have been very active in working on increasing our market shares in the neighboring Baltic states, Scandinavia, Russia and Poland," said Karlis Andersons, Chairman of the Board of Latvijas Balzams.
The company reported that they have seen a 15 percent increase in sales to EU countries, as well as a 22 percent increase in sales to neighboring Lithuania.
Andersons said despite record sales Latvijas Balzams, one of the largest taxpayers in the country, saw an unaudited turnover of 103.6 million lats 's a decrease of 1.4 percent.
"Keeping in mind the sharp increases of VAT and excise tax in Latvia, we can predict that the volume of our sales in the local market will continue to decrease. That's why further development and growth in export markets will become even more important," said Andersons.
In the first quarter of 2008 Latvijas Balzams recorded a loss, motivating the company to focus on improving efficiency in daily operations. The company has also reviewed the pricing policy of products.
By the middle of 2008, the company had again become profitable, with unaudited profit reaching 5.5 million lats (7.8 million euro).
Altogether, the company exports its products to nearly 30 countries worldwide.
In response to the recent crisis, Andersons said the increased taxes on alcohol, as well as weak economics, may prompt people to produce their own illegal moonshine.
In a comment to the Riga Stock Exchange, Andersons said the "rapid excise tax and VAT rate increases will lead to rapid decreases in sales volumes. It does not mean that people will reduce their consumption of alcoholic drinks. This situation will favor the production of illegal alcohol."
He said the increase in excise duty on alcoholic beverages would backfire. The Latvian state would lose income as drinkers turned to illegally-produced moonshine or alcohol bought abroad at lower prices.
According to recent data from State Revenue Service, the three most popular beverages produced by Latvijas Balzams in 2008 were "Rigas sampanietis" sparkling wine, "3 Graudu degvins" vodka and "Lucky Dog" cider.
Latvijas Balzams was founded in 1900 and today is the largest producer of alcoholic beverages in the Baltic States. The company produces over 130 different alcoholic beverages, out of which almost 53 percent have low alcohol content.
The company's products are exported to over 30 countries and on export contract with "S.P.I. Group" to over 80 countries worldwide. The major shareholder of Latvijas Balzams is "S.P.I. Distilleries. B.V.," which owns nearly 90 percent of its shares.