Cheap imitations leave Kalev with bitter taste

Kalev still provides retailers with half of the candy sold in Estonia, but the 54-year-old company is facing increasing challenges from both illegal and legitimate imported imitations.

During the last two years, customs agents have seized 12,757 kilograms of illegally imported candy, much of it bearing Kalev's logo, said Aivar Pau, a spokesman for the Estonian Customs Board. Most of it was coming from Lithuania, Poland and Ukraine. While forged clothes and footwear may be passed to orphanages and other social care institutions, fake candies must be destroyed for health reasons, Pau said.

"Our seizures have been increasing since April because the chocolate producers here asked us to take more control," he said.

In addition to illegal imports, Kalev also faces the competition of companies that legally import and package cheaper foreign candy to resemble the well-known Estonian brand.

According to companies that package imported candy for the Estonian market, it is a lucrative business that still has room for growth. There are at least six companies that package foreign candy for sales in Estonia.

Makro Trade OU has been importing Polish caramels and Russian chocolate into Estonia since 1999. It packages the candy with Estonian labels and sells it in the Baltic state at prices about 40 percent lower than Kalev's.

Sales are continuing to increase, but officials declined to give figures.

"Our candy looks Estonian," said Varmo Helme, a sales consultant with Makro Trade OU. "And Estonian people like to buy the cheapest candy, so we sell a lot. Kalev is a good candy, but the price is too expensive."

For six years, Kommiparadis has also been importing candy, mainly from Russia and Lithuania, to package and sell in Estonia. In 1998, Kommiparadis sold 1,000 tons of candy. Last year it sold 1,350 tons, said managing director Artur Veide.

It's easier to compete with Kalev on small pieces of candy, he said, rather than chocolate bars because most consumers can easily recognize when a chocolate bar is an imitation.

During the last two years, companies have become more clever and do a good job imitating Kalev, said Ruth Roht, a spokeswoman for Kalev.

"The main reason for making imitations is the fact that the trademark of Kalev is very strong and well-known in Estonia," Roht said. "It's frustrating, but we can't do anything because it's legal. We can't say to them it's not nice to do it this way. It's more like an ethical question."

But industry representatives said Estonian consumers didn't consider confectioners' ethics when choosing a chocolate bar.

"Most of the population in Estonia is price sensitive," said Helve Rammel, managing director of the Estonian Food Industry Association. "If they see sweets that are cheaper, they will buy them."

But for those who do care about brands, it's often hard to tell when something is an imitation. The imported candy can often easily be mistaken for Kalev products, Rammel said.For example, Kalev makes a popular candy called Linnupiim.

Recent legal imitations of this include candies labeled Liinipiim and Luigipiim.

"The labels look the same and the fact that it is imported is written in very small print," Rammel said. "Now I must take additional equipment just to read the label."

The law only says that the labels must be "readable," said Hele Arunit, general director of the Consumer Protection Board. Some consumers have complained that labels are hard to read, but Arunit said there were no plans to change the regulation.

Rammel said some reports had estimated that 20 percent of edible goods in Estonia, including alcohol, are imported illegally. So it is natural that this is beginning to affect the candy industry, she said.

But, Rammel added, legal imports are probably healthy for the Estonian candy market because Kalev, the country's only candy maker, has controlled the majority of the market for so long.

Kalev officials said the illegal imitations were usually found at outdoor markets and small other small shops and kiosks. Because it does not track separately its sales to individuals and small companies, Kalev has no way of knowing if cheap imports are outselling its products in places like Tallinn's central market, Roht said.

"Kalev is a strong market leader, but it's very bad to have these kinds of problems," Roht said. "Sometimes, I don't understand how the prices of Russian and Ukrainian candies are so low."