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Wednesday 22.11.2017 | Name days: Aldis, Alfons, Aldris

Laima: national companies choice – change or die

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Baltic news, News from Latvia, BNN-NEWS.COM, BNN-NEWS.RU, Dans Bertulis

Dans Bertulis

Nordic Partner Foods (NP Foods) Board Chairman Dans Bertulis told the business news portal BNN about their challenges to boost profitability, keep the local market positions and break into the Chinese market.

Your latest product – alcohol filled chocolate candies show they contain 2.7% Riga Black Balsam, therefore the label «Not for children.» Wasn’t it enough with Prozit?

Dark chocolate candies with Riga Black Balsam filling is a cherished project. Many people were concerned about how it will feel to produce under another brand. We make profit with Prozit, and hopefully, we will keep doing that for the next 10-20 years. We are operating in the global market conditions, competing with Marss, Kraft, Cadbury and Hershies in launching new products. Moreover, companies listed on the Stock Exchange have more options to attract money and conquer the international market with huge advertising campaigns afterwards. In addition, all the money we make is by selling our production. We turn special attention to technologically new products promotion, for example, candies Fantasy (Fantāzija) with three different fillings. We have acquired new equipment to produce small balls filled with liquor. We have added new flavours to the marshmallow Maigums. This year we are launcing fitness bars with vitamin C and calcium. We have also joined EU programme Competence Center, where we collaborate with Latvian Academy of Agriculture and the Scientific Institute Sigra, because we want these bars to have a positive effect on female health.

Bio-sweets are becoming more and more fashionable. Do Laima products fit into the global concept of sweets market development?

Yes, you could say so. There is nothing more biologically natural than chocolate, 70% cocoa dark chocolate even reduces stress. Moreover, we are producing «fresher» chocolate by obtaining it from cocoa beans after Latvian traditional methods – roasting, grinding, extracting cocoa butter and adding sugar and vanillin to get flavours. We are renovating our roaster oven and importing cacao beans from Ghana ourselves. Their Ministry of Cacao has arranged this issue well, guaranteeing quality and prices, depending on the bourse price. We care a great deal for the quality of the beans (fermentation), because when the beans are harvested they are green, but we need a light brown shade. A guy puts the beans in a sack and they mature. Next to him there is another guy with a Kalashnikov gun, guarding the first one. You cannot extract cacao butter from a green bean. Fat content of beans ranges from 45% up to 55%, depending on the fertilization. We can judge about the political situation there after opening the sacks before steam debacterization. If we find bullet shells there, it means the political situation is bad. It is important for us that the delivered sacks do not differ in quality, because it has an impact on the technological cycle.

Do foreign headhunters «chase» your technologists?

They do not, because they are efficient together with conveyor lines. The fact they can make everything in their own kitchens is only half of the victory. Technologists have to be good at different kinds of machinery as well. During the last five years we have invested in technological improvements (boiler houses, flour silos, roller mills, mixers, candy machines, mills, lines, packaging, folding, wrapping, design etc.) and innovations more than 10 million lats.

What do you think about the government’s decision to combat the crisis with the help of export only, thus «suffocating» the internal consumption?

I do not know a single sweets company strong at export, but totally weak in the domestic market. It is only normal that a company grows inside the local market and only then starts exporting. Export of Laima, Gutta and Staburadze sector means fast moving consumer goods subsidising. Transporting abroad is more expensive, we cannot do anything about that. Your brand is not known there, with some exceptions and you either launch an impressive advertising campaign or sell your production at very low prices (hanging around the lowest shelves in hope someone will notice you), usually both of these things are combined. Despite our turnover comprises millions of lats, the profit is not that big at all. A single NP Foods group alone will not save the country. Currently people are only making use of best offers, thus the dealer takes his 25%, 5-7% goes to the transportation and we also have to consider merchandising, raw material, auxiliary materials, wages and amortisation. Consequently, the balance sheet shows the huge turnover did not result in as big profit, because it depends on people purchasing capacity directly. Our production ranks in the B group of consumption – you spend as much as you can afford. Bread, milk, butter, sugar, flour, fuel, slat, eggs, curd ect. rank in A group.

We – companies of the Latvian Federation of Food Enterprises could boost the national economy, if the internal consumption were promoted, if there were low VAT, high salaries and low taxes for the labour force, in order the money would rotate in the national economy. Moreover, Latvian commercial banks suggest depositing on longer terms. The state has not managed to cut its expenditure and carry out structural reforms. We have the biggest number of ministries among the Baltics. They control everything and are not ready to share the power. There is such a concept as a subsidiarity principle in a normal, Christian and democratic EU state. Each state’s function is assigned to lower authorities to carry it out. The Prime Minister of Great Britain Margaret Thatcher once said if there is a single state function than cannot be implemented by the private sector, we should consider if it is necessary at all. We have a whole bunch of agencies, for example, linked to police (security, policy, financial, rail, water, local government, tourism). It is even worse than in Hitler’s time Germany.

You export to the Baltics, Scandinavia, Russia, the USA, Canada, Israel, Slovakia, Georgia and Azerbaijan, to 25 markets in total. What kind of market challenges have you set for this year?

It would be a real challenge to enter the Chinese market. And to raise from the lower Russian shelves to higher ones. We have obtained kosher certification for Israel and the USA, it will boost our exports considerably.

NP Foods companies 2009 turnover amounted to 84 million euro (59 million lats). Is there any preliminary data on 2010?

It was better. Our turnover rose above 100 million euro. In the course of time we have carried out many reorganizations in sales, logistics, centralized procurement, marketing and administrative apparatus. We took service vehicles away from those who did not use them in work. NP Foods foundation ensured significant efficiency of financial resources and optimization of certain processes has allowed us to save up to 30% in certain expenditure sectors. Structural reforms introduced two years ago ensure efficient use of synergy, profitability boost and ground for future development, by creating recognizable, powerful and demanded brands. We had to reduce the number of employees and cut wages. There are only two sweets producing companies left in the Baltics – we and Vilnius Pergale owned by Maxima, because the Estonian Kalev was sold last year. Consequently, we as a company owned by Latvians have a choice – you either change or die. Laima took up 55% market shares of candies sector and 35% of the chocolate bars one, which was a 2% growth.

What are NP Foods objectives for 2011, 2012 and the possible risks?

We made use of the economic downfall to boost our competitiveness, by eliminating the invalid business processes and costs. This is the right moment to become active, promote the demand and launch new products, thus acquiring new business niches and boost the profitability. We are expanding by acquiring Chezk, Polish, Lithuanian and Russian companies. There are some companies we intend to gradually acquire, add to our concern and transform. Despite many do not have access to financial resources, our situation regarding long-term loans has improved considerably. We are about get one of Latvian companies this year already.

There are three types of possible risks, first of all, it is ecological danger (for example, Russian harvest burnt down, while ocean took the Malaysian one etc.), all this has resulted in a global food crisis, for example, in 2012. If everyone started eating chocolate, prices would skyrocket. Secondly, high raw material prices, due to speculations, endanger us as well, because they are linked with the currency war between the USA and China. Thirdly, it is the drop in people’s purchasing capacity.

Is your labour force satisfied with the current wages?

Compared to the average wages in the state, our professionals get highly competitive salaries. Most of the employees have been working here for 7,10 up to 20 years already. Speaking about whether they are satisfied or not, they thank God they have a job at all. Having arranged many issues, we can afford paying bonuses to those who really deserve it. Everyone has his or her own Key Performance Indicator.

Why are job openings first advertised within your company?

Several thousand people are working in the concern, including seasonal workers. Certain vacancies are linked to specific skills, for example, financial analysts. We do, of course, give preference to a son whose father is already working for us.

People make up business, not machinery, especially, in those positions where you really need knowledge and talent to make up something. You cannot simply get away with mechanical weighting of ingredients. Those people making candies are invaluable…

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