Lithuanian food exporters discovering Chinese markets

  • 2011-09-28
  • By Linas Jegelevicius

LESSONS NOT LEARNED: Sigitas Besagirskas says that exporters will again make the same mistakes with China that they did with Arab countries.

KLAIPEDA - For many, China is known as a country that has glutted the world with cheap Chinese goods, while often hindering imports to the country: let us leave alone export-oriented producers from such small countries as Lithuania.
However, following the state visit of Lithuania’s Agriculture Minister Kazimieras Starkevicius to China, Lithuanian food producers are ready to step into the immense Chinese market, which has been hardly penetrable until now. In the wake of the visit, Lithuanian foods exporters are eagerly awaiting the Chinese government’s permission to allow Lithuanian food exports into the country. No one doubts that the green light by the Chinese government would guarantee Lithuanians huge orders in the Eastern Asian country. Until now, Lithuanian producers were forced to stay away from the Chinese market, unable to obtain the export permits necessary to step into China on their own.

However, the Lithuanian Agriculture Ministry says that Starkevicius has succeeded in striking a deal with China’s Minister of Quality Supervision, Control and Quarantine, Zhi Shuping, over the needed certificates for exporters. “On the political level, we have agreed on Lithuanian food exports to China. Now both sides have to settle some technical things, whose arrangement, I hope, will not last long,” the Lithuanian minister said. The minister participated in an agriculture exhibition in China as well.
According to him, Chinese officials have promised to send quickly to Lithuania a Chinese expert group, entitled to start negotiations with Lithuanian officials over Lithuanian enterprise accreditations in China. They will open up the Chinese doors for Lithuanians.

If this happens, it will be a milestone in the Lithuanian-Chinese economic relationship, as very few Lithuanian enterprises have managed to penetrate the Chinese market.
Fermentas, the Lithuanian bio-technology venture, is the first Lithuanian company to have started activity in China. Having stepped into the market in 1999, Fermentas has successfully developed and expanded its activity in the country, opening its representation there in 2008. The company claims this stride has helped to boost marketing of its products, which include sophisticated scientific research and diagnostics-oriented products. In 2009, in a bid to strengthen its expansion in the Asian region, Fermentas established a subsidiary, Fermentas China, which, in turn, has opened a repository of Lithuanian-origin bio-products in the Chinese town of Shenjen, in close proximity to Hong Kong. Fermentas China exports its production to over 70 countries, employing over 340 high-tech specialists. The bio-market research company Bioinformatics puts Fermentas among the five world leaders in this segment of the market, and it is considered to be the DNA marker market leader in Europe.

EKSPLA, the largest Lithuanian laser technology enterprise, is another Lithuanian company to have successfully stepped onto Chinese ground, having opened its representation in Shanghai in 2009. The high-tech company manufactures laser products for processing metals, plastics, semiconductors and other materials.

Some other Lithuanian enterprises include JSC Viciunu Grupe, the surimi and fish production producer; Svyturys – Utenos Alus, the beer maker, and JSC Alita, the wine and liquor producer, who have shown much interest in China, but none has embodied their Eastern-bound expansion bids.
Therefore, the far-reaching bids of Lithuanian food producers are likely to produce concrete results soon, and are even more unexpected to many.
Provided the required export permits are granted, Lithuania intends to export milk powder, dry whey, cheeses, confectionary and fish products.

Ahead of the minister’s visit, the Lithuanian Agriculture Ministry had surveyed Lithuanian dairy and meat product enterprises over their export expansion plans. Fifteen food producers expressed a will to export their production to China. One of them, meat processor Agrovet, is excited at the possibility of the China-oriented export. Agrovet is determined to export Lithuanian sausages and hams to the Eastern Asian country.

“Due to the current packaging technologies, our production expiration date is long, therefore, it is not something we are concerned about,” Augenijus Gudziunas, Agrovet’s director general maintained.
He is convinced that “it is very useful” for Lithuanian food-processing ventures to get into a larger market, like Russia’s or China’s. “If the Chinese market opens, our company will feel much safer in the uneasy times. Especially when we have not yet employed all our potential. Will the Chinese like our sausages? In such a big country like China, there are no unmarketable products,” Gudziunas said to the daily Lietuvos Rytas.

Linas Griksas, the Krekenava Agro CEO, who travelled to the agriculture exhibition, still ongoing in China, is also upbeat about the possible collaboration with Chinese entrepreneurs. “From what I learnt, China produces itself only 50 percent of its pork, way below the huge country’s needs. Therefore, we see big opportunities in the country. No doubt, the market is very interesting to us,” Griksas acknowledged.

The Kedainiai-based enterprise intends to export frozen pork and canned meat to the Eastern Asian country.
“We have been exporting our production as far as the United States and Australia, therefore, the far China will not be some exception on our export map,” the Krekenava Agro head said in encouragement.
Dairy product producers also eye the far off huge market, expecting to nail some huge, in Lithuanian standards, deal soon. Zemaitijos Pienas, whose deputy chairman for export, Romusas Jarulaitis, has just returned home from a trip to China, announced proudly that the Chinese already have tasted Zemaitijos Pienas’ cheese Dziugas, a leading product that has become a Lithuanian household name during EuroBasket from Sept. 30 – Oct. 18, when the cheese brand was vociferously advertised.

“Chinese evaluated Dziugas very well, and we have received excellent feedback. Therefore, we are looking forward to exporting it to China in large quantities. Once the export permits are issued, the cheese will set off,” Jarulaitis said. He added: “However, we will have to compete with Italians there, who seem to have made big inroads in the Chinese market.”
The Lithuanian dairy company also eyes exporting milk powder to China. “It is the product that China buys up around the world. The Asian country is one of the very largest milk powder importers. Considering that the expiry date of the product is very long, I am optimistic about our company’s success in China,” Jarulaitis said. He has met several Chinese businessmen for talks and discussed the possibilities of cooperation.

Nevertheless, some economics experts are very skeptical about the bids of the Lithuanian companies. “I think that most of the business undertakings forget that China has always been a world leading exporter, and if it imports something, it does so in extremely large quantities, which only big exporters as, for example, Australia, can meet. No Lithuanian food producer can allow itself to ship a 3,000 container consignment to China.  Tiny companies do not interest the Chinese. In addition, are the Lithuanian food companies, known for the quality of their production, going to decrease [quality] for the China-bound products? If they keep it high, they will not be able to compete with similar cheap export goods. Anyway, I do not see good prospects for our food producers in China,” Sigitas Besagirskas, economics and finance director at Lithuania’s Industrialist Confederation, said to The Baltic Times.

He says that seemingly, some Lithuanian food exporters have not learnt proper lessons from their fiasco in Arab markets. “We simply were not able to equally compete with much larger exporters from Australia, EU and the United States. It is the exact same case with the Chinese market,” Besagirskas stressed.
He says that the only way to successfully settle in the Chinese market is in finding a niche market. “That is where Lithuanians can interest China. It is the way Fermentas and EKSPLA have taken. Speaking of niches, ecological production can be an option,” the Industrialist Confederation representative pointed out.

Lithuanian-Chinese trade volume made up 1.58 billion litas last year, with China-bound Lithuanian exports estimated at 95.8 million litas in 2010, a 26.8 percent increase from 2009.