Butter bullied by the low-priced spread

RIGA - Bread that lands on the kitchen floor butter-side down in Latvia will more likely stick to the floor with margarine, not butter, market researchers have found.

In July, a study by Amer Nielsen Research Latvia, 86 percent of the yellow bread spread on Latvian knives was margarine. A margarine maker told Baltic News Service that's partly because low import duty of 0.5 percent has allowed margarine to drive butter out of the kitchen.

Currently margarine comes to Latvia through importers, but in the spring, butter's competition will come from home.

A Latvian food group, Cido Partikas Grupa, has plans to make 2 tons of margarine daily at its plant opening in Ogre. Some of the margarine will be for industrial use, some for consumers. That means some for bakers, some for the dinner table. The company, with a capacity of 10,000 tons a year, wants to export the product to Lithuania and Estonia.

"We are mostly a Baltic company and our market is Baltic," Cido market director Glen Elliott said. Polish investors have some money in Cido. The remainder is Latvian.

While Latvia has a butter tradition, the margarine sales are picking up, Elliott said.

"You never until recently saw margarine imported before," Elliott said. "The popularity is probably more in terms of cost. There is a slight health consciousness in Latvia today, so it also has appeal for the diet cola crowd."

Cido will have competition in the Baltics from a company put together by Vilnius-based cooking oil company, Alejius, and Danish margarine producer, Dragsbek and several other investors. Vilnius Margarine Plant plans to make 5,000 tons of margarine a year beginning in January.

Ainars Lodzins said that Cido and Vilnius Margarine will have a common enemy, big Western margarine producers.

Lodzins, market director for food producers and traders, Ave Lat Grupa, which includes a dairy products company, said that Cido will not be able to compete with big margarine companies exporting to Latvia from the West.

"I don't think that local margarine production will be successful. I don't think a local, smaller company can compete with big international producers like Rama and Voimix (margarine brands). Western companies have reliable quality and are priced really low because they have economy of scale.

He does not see an increase in per capita consumption of margarine, Lodzins said. Lithuanian dairy products are pressuring Latvian butter, Lodzins said, because there is state export support in Lithuania. "While butter costs 1.4 lats per kilo in Lithuania, it costs only about 0.8 lats in Latvia.

"We can judge this situation as dumping," he said.

Elliott, who said he was previously in dairy products marketing, thinks that Latvian butter can hold its own. "Two years ago there was a worry that Lithuanian dairy products-Lithuanian cheese, butter and milk could hurt us, but in a study we found that with not counting ethnicity, Latvians would almost always prefer to buy Latvian produced goods, while Lithuanians are more open to imports."