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Retailer buys dairy in bold move

  • 2004-01-29
  • From wire reports
VILNIUS - A Lithuanian retailer has bucked the trend by buying out one of its suppliers, a move that has met criticism from other local retailers.

Retailer Norfos Mazmena, one of the top five in the country, announced that it has taken over the dairy Alytaus Pienine for an undisclosed price. The dairy's property and equipment were acquired by Rivona, a transportation and logistics company that is part of the Norfos Mazmena group.
The practice of acquiring suppliers is largely shunned on the retail market, but Norfos officials believe the buyout will work to their benefit in the long run.
"The new business will not be easy, but we do hope to earn from production," said Dainius Dun-dulis, a member of the Norfos Mazmena board. He predicted that the retailer's orders with other Lithuanian dairies were likely to decrease as a result of the buy-out.
Competing retailers believe that Norfos Mazmena's purchase will force it to buy products from its own dairy even when rival dairies offer better prices.
"The acquired company would require more efforts than it could be expected to bring benefits," Antonio Soares, CEO of Rimi Lietuva, told Verslo Zinios. He added that the Rimi chain focuses exclusively on retail trade and does not buy out suppliers.
Norfos Mazmena began issuing its discount loyalty cards last year, granting holders a discount of up to 3 percent. On Oct. 1 the company increased the discount to 5 percent.
The retailer filed a complaint with competition authorities against the Svyturys-Tauras brewery after failing to renegotiate prices with the brewer. The company later reported it had cut down shelf space for Svyturys-Tauras beverages from 50 percent to 20 percent of total beer space.
The company also opened a store in Moscow as part of its ambitious expansion plans.