Estonian dairy prepares itself for common market

  • 2003-12-18
  • By Justin Petrone
TALLINN - Dubbing itself "Estonia's own dairy company," the Tallinna Piimatoostus (Tallinn Dairy) conglomerate announced impressive gains in output, turnover and profit for 2003, giving it new confidence that it could compete in the European Union and continue to grow on the local market in the coming years, managers said.

At a press seminar on Dec. 11, Tallinn Dairy manager Aare Annus announced that the company's profit increased from 600,000 kroons (38,000 euros) to 15 million kroons in the past two years and that the company was predicting a net profit of 18 million kroons for 2003.
Exports have grown by almost 40 percent since 2001, and circulation of products had grown by 24 percent, Annus said.
In addition, production grew 20 percent year-on-year and is expected to grow an additional 6 percent in 2004.
"We are ready to compete in the EU," said Annus.
"At the moment we are selling mainly on the home market, but in the future we will begin expanding into adjacent local markets," he added.
At present the main importers of Tallinn Dairy's products, which include the Tere and Meieri dairy brands, as well as the Largo and Rio juices, are Finland, Lithuania and the Czech Republic.
Annus stressed that finding a niche in the widening EU market would be a top priority for the company in the next two years, but the local market would not be neglected.
"In the future 60 percent - 65 percent of the Estonian dairy market should belong to Tallinn Dairy," he said.
In the past several years Tallinn Dairy has been given a dramatic facelift. Of the 269 million kroons that have been invested in the company since 1994, 90 million were invested in the last three. In addition, the company received 20 million kroons in funding from the European Union through the SAPARD program.
The big investment for Tallinn Dairy was its acquisition of the Meieri Group, a large dairy producer, in autumn 2002. According to Annus, Meieri is only producing at 80 percent of its capacity, and the company expects to increase output in the near future.
In highlighting the company's success at home, Annus stressed that the Estonians favored local products.
"Estonians prefer products from their home markets," he said.
Tallinn Dairy, he emphasized, was the sole Estonian dairy wholly owned by Estonian capital.
Its competitor Polva Piim (Polva Milk) is owned by the Netherlands, while the Alma brand is Finnish-owned and the Valio and Farmi brands are connected to the U.K.
"For us it is important that Estonia should have at least one of its own dairy industries when it begins to compete in the European Union," said Annus.
Competitors, however, were quick to downplay this aspect, pointing out that Hansabank, the main stakeholder in Tallinn Dairy, is a Swedish-owned company.
What's more, although admitting that Tallinn Dairy was certainly growing, its plans were over-ambitious.
Besides, foreign ownership was an asset, not a liability, said Viljar Veivo, finance director at Polva Milk.
"I don't think it's important to consumers who the owner of a dairy company is," he said.
Veivo also pointed out that Polva Milk's Dutch owners have helped the company break into the Finnish market.
"Their ownership is good for us because they have worked in the EU market for quite some time now, and their ideas are quite good," he said.
He also speculated that it would be quite difficult for Tallinn Dairy to achieve a 60 percent share of the Estonian dairy market.
"Right now they have 45 percent, and it's quite big. But 60 percent? I think that would be quite difficult to obtain."
Polva Milk currently comprises around 10 percent of the Estonian dairy market. In 2002 it received 10 million kroons through the EU's special accession program for agriculture and rural development.