Estonian beverage giants plan merger

  • 2003-09-18
Osel Foods has a 10-year history of producing such popular regional
beverages as Aura fruit juices, Gruuv lemonade, Gin Long Drink and Kali. Its
turnover for the first half of 2003 was 110 million kroons. However, it is
having a hard time meeting production demands during the busy summer season
and has no means to begin distributing outside the Estonian market.
"We don't have enough capacities here for production. In summer we cannot
produce as many beverages as we want. A.Le Coq is strong in all of the
Baltic states, and it is a good idea to start selling our products in Latvia
and Lithuania," he said.
Located in Reola, a small town near Tartu, Osel Foods' factory will handle
the production of non-alcoholic beverages ­ soft drinks, juices, juice
drinks ­ if the purchase application is accepted by the competition board.
Reola may be further developed to accommodate a growing A.Le Coq.
"There are a lot of options for development at Osel Foods. There is quite a
lot of property available. Our best option is to make investments and
develop in Reola," Noop said.
He also guaranteed that despite an increase in foreign distribution and the
Finnish ownership of the company, the corporate headquarters would remain in
the Tartu area.
"All of our management is in Tartu and will remain in Estonia."
Kaia Kaarmann, writing for the Estonian Competition Board, says that until
the decision is handed down in October, the status of A.Le Coq and Osel
Food's merger application will remain secret.
"Approval of a merger shall be based on the need to maintain and develop
competition, taking into account the structure of goods markets and the
actual and potential competition in those markets," she said.
As long as the merger does not stifle opportunities for competitors to
access the goods market, according to the guidelines set by the board, the
application should meet the prerequisites for approval.
A.Le Coq and Osel Foods currently face competition from, among others, Saku
and Coca Cola.
Cardo Remmel, chairman of the Saku Brewery, said he did not see A.Le Coq's
purchase of Osel as a threat to competition in the market.
"All over the world is a known practice to buy [another] brand when your own
is not strong enough," he said.
"In the carbonated-beverage market, our brewery already has a good position
and there are no strong product brands for A.Le Coq to get from Osel Foods,"
Remmel added.
Noop is confident that the merger does not threaten competition within the
market and expects his company's proposal to be approved by the competition
"We, at the moment, can see no reasons why they would say no to our
proposal," he said.