VILNIUS - Just under half of Lithuania's meat processing firms are expected to face closure for failing to meet EU hygiene and production standards.
With EU accession less than a year away, there is a bureaucratic rush to ensure that Lithuania's food producers are accredited to export their goods to the single market.
Darius Remeika, deputy director of the State Food and Veterinary Service, stated that of the existing 360 meat producers registered in Lithuania, some 162 companies will meet the target of adapting their manufacturing practices to EU requirements. However, even within the smaller group, 37 are beginning to fall behind.
Sixty companies have already closed down so far this year, said Remeika.
"With 80 percent to 90 percent of the market dominated by a few big retailers who want business with certified companies, there is little room for small producers. Many of these small companies will not have the finances to survive," he said.
Eight companies have been offered a grace period until 2007. However, only half of these appear to be making any preparations for the common market.
Those failing to abide by the new regulations may continue to trade with non-EU partners but will be blocked from doing business with member countries.
The State Food and Veterinary Service cooperates with its counterpart organizations throughout the expanding EU to monitor meat processing firms, maintaining lists of those whose production measures and facilities meet the required standard.
Regulators have set benchmarks in five separate criteria: slaughter, processing, cutting joints, refrigeration and packaging. A plant may be certified for any number of these, but to ensure the product is suitable for export each of the five links of the production chain must take place within a certified plant.
Currently, only 13 plants are licensed to export produce to the EU. But this number is expected to almost double by the time of accession.
Audrius Rudys, president of the Lithuanian Meat Producers Association, said that the reduction in numbers of plants was not an entirely negative trend.
"Many of these plants are amateurish, garage operations, employing very few people. Or they operate in the former Soviet style, where standards aren't sufficient. Only those that really want it will survive," he said.
Rudys said that the real problem was the fractured nature of the industry: too many producers and too little product consistency.
"Biovela is [Lithuania's] biggest processor, but it is still quite small by European standards. It wouldn't be able to supply a large Western supermarket chain with all of its outlets around the country."
The industry's atomized structure has also hindered attempts to appeal to foreign consumers through industry-wide advertising or marketing campaigns. The net result has been poor consumer knowledge of Lithuanian produce in Western Europe.
All this points toward a need for consolidation between the major producers, something Rudys said began with Biovela's acquisition of Utenos Mesos last year.
Biovela's marketing director, Birute Kantauskiene, said the scheme was most welcome. "Of course our company likes the EU certification system. It [has been] a great investment which will give our company greater weight in the market and will attract clients."
The investments required to reach EU standards are hefty. Biovela had to completely rebuild its premises and facilities. Vilniaus Paukstynas, Lithuania's largest poultry processor, has recently finished building a new slaughterhouse and purchasing new machinery from Holland in an effort to win accreditation.
So far overseas investors have expressed little interest, with the exception of a few opportunistic companies seeking bargains.
Obvious benefits exist for those that remain standing to fill the market gaps left behind by processors pushed out of business. Those firms that survive the initial expansion are likely to find themselves in a strong position.
As Lithuania accedes to the EU it will also enter the union's single market, curtailing the export of subsidized produce to Lithuania from Western Europe. But the challenge from established European producers is still expected to impact the local market. Analysts expect 15 percent to 20 percent of Lithuania's market to be filled by their goods.
Conversely, Lithuania should also benefit from gaining EU agricultural export subsidies, helping to increase its sales to non-EU markets, such as Russia.
Many of Lithuania's exports became uncompetitive after the Russian ruble's devaluation in 1998.
Rudys feels confident that fond memories of Lithuanian sausage and ham, in addition to their subsidized prices, should boost sales. He noted the relative progress of Lithuania compared with Estonia and Latvia, where only a handful of companies have met the necessary standards to continue exporting after May 2004.
However, this advanced preparation has had its costs: Estonian and Latvian producers have advanced well into the Lithuanian marketplace, according to Rudys, because they are less hindered by the stiff regulations that govern the Lithuanian producers' supply sources.
