Latvia's manufacturers gear up for union

Though the business environment will change dramatically if Latvia joins the European Union next spring as planned, the changes will not take Latvia's manufacturers by storm.

"We did not wait until Latvia would join the European Union - we have been working since 1991 to instill the demands of the Western markets," said Viktors Aispurs, vice president of the lingerie and textile manufacturer Lauma.

Like Lauma, the majority of Latvia's manufacturers began adopting European and international standards long before Latvia became an EU candidate country.

Many have already obtained EU quality certificates for their products and manufacturing facilities and are exporting goods to Western markets.

"The standards do not scare," said Aispurs, adding that the company is already exporting 50 percent of its goods to EU markets.

"What scares (us) is the raise in prices," he said. "Salaries will increase, the price of electricity will increase, and the price of the product will increase. The more expensive the product, the less able it is to compete."

More money will have to be invested in the brand in the future because of the higher price, Aispurs said.

To withstand the power of the European market and the pressure of competition, Latvian businesses should study other European manufacturers, master concrete niches and innovate, said Vitalijs Gavrilovs, president of Latvia's largest beer manufacturer Aldaris.

Along with clearly identifying the competition, buying modern technology and ensuring product quality are key elements in withstanding increased market pressures, Gavrilovs said.

"Competitiveness comes with experience, and it is not possible to achieve it by only studying theory," he said. "In the future, competitive enterprises will be those that in the beginning have been successful in the Latvian market and then have gone out in the Baltic and European markets, mastering the market environment, its peculiarities and the ability to adapt," Gavrilovs said.

To promote competitiveness, Rigas Piena Kombinats - Latvia's largest milk processor - has invested heavily in modernizing its manufacturing facilities and is now one of the most modern dairies in the Baltics, said Janis Skvarnovics, general director of Rigas Piena Kombinats.

Along with adopting EU demands, the company is working on developing original products and creating an international structure, Skvarnovics said.

Last autumn, Rigas Piena Kombinats created a joint company with Finland's Valio, a milk processing company and one of the world leaders in research and development of so-called "functional" foods like a new twist on the dairy product kefirs. Manufacturers are beginning to add organisms to it to produce "bio kefirs," which scientists say is healthier.

The aim of the new company, RPK Valio, is to develop third-generation functional food products in Latvia.

A novel concept of a natural product sold with a "procedure" is what makes Stendera Ziepju Fabrika, a soap manufacturer, competitive in Latvia and abroad, according to company spokeswoman Ieva Eglite.

Specializing in soap produced with natural ingredients based on vegetable tallow, the company's strategy is to individually cut, weigh and package each piece of soap sold on location at the company's stores.

"We are competitive in the way the product is presented," Eglite said.

Since beginning work at the end of 2001, Stendera Ziepju Fabrika has expanded to Estonia and Russia, and plans to expand to Poland. The company's products have also generated interest in Germany and France, Eglite said.

"Europe is tired of all things artificial, it wants to see the good, old and fragrant (goods)," Eglite said, adding that European customers were currently searching for natural products.

"In my opinion, in order to successfully compete in the EU, Baltic enterprises should go toward regional consolidation connected with specialization in a concrete market niche," said Juris Gulbis, chairman of the board of Latvijas Balzams, Latvia's largest liquor producer.

Baltic governments, in turn, should try to attain exceptions in EU standards in case the standards could hinder the development of local manufacturers, Gulbis said.

"Of course, it will be very hard for our manufacturers to work in free-market conditions without serious investments in research, development and marketing," Gulbis said.