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Business appetite takes Latvians onto Klaipėda pond, Lithuanians to risky Belarus

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

Linas Jegelevičius for the BNN

Estonia‘s BAUHOF, a construction supply chain, has failed to create a firmer footing in Lithuania and had to leave as a result. But now it’s the Latvians’ turn who are resolved to find their way into Lithuanian construction materials buyers’ hearts and pockets. That is what the Latvian construction supply retailer  DEPO is set to do in the nearest future.

Latvians want to do better than Estonians

With water in the projected site of the to-be store in Klaipėda still churning, the developers of LTL 30 million (EUR 8.7 million) project remain upbeat, drawing up the plans how to best drain the pond and weighing the strategies against JSC SENUKAI and ERMITAŽAS, the two Lithuanian building materials market’s giants who slightly sighed off with the Estonians gone.

«We don’t make a big deal about the water there. It will be dried up soon and covered with a construction cover on which the store will spring up. There’s no danger the store will get submerged whatsoever,» said Rimantas Grigauskas, a project coordinator at JSC KITA KRYPTIS, a company representing the project developers.

According to him, the water should be gone with a pipe installed one meter under the water surface and, when interconnected with the city’s sewerage system, the murky, discouraging water will be pumped out through the pipe into the Curonian Lagoon.

«The dry bottom will be immediately buried with lots of sand and it will do the job – the place will be ready for the construction,» the project coordinator told.

The drainage works are said to begin yet this year and will last around a month or so before the bottom-coating starts.

If all goes well, at the crossroad of Šilutės and Dubysos streets, a mega-store of roughly 12,000 square meters will spring up, enticing all buyers looking for household, construction, horticulture and gardening stuff. A car parking lot nearby will be overlooking the bustling Šilutės plentas and is thought to be able to accommodate as many as 540 cars.

The construction itself is expected to start in the second half of 2015 and should be over before the year winds down.

Whether it is an omen or not remains to be seen, but the Latvian business will move into the same neighborhood which has witnessed  the BAUHOF failure.

DEPO does quite well in Latvia, but eyeing the operation in the Lithuanian market, it still has to prove itself over the border.

Can the Latvian newcomer muscle up on the Lithuanian coast against the heavyweights in the ring? Or will it follow into the footsteps of  the Estonian chain?

The bigger supply, the better for all

«Well, it remains yet to be seen, but the arrival of the Latvians is very welcome. I reckon the more players out there are the better is for all. The demand for construction materials is definitely there and the supply-side can really be better», Vytautas Banys, chairman of the Board at VĖTRŪNA, a major Lithuanian construction and real estate company, told BNN.

Juozas Motiejauskas, head of JSC ALVETOS KARJERAI, a construction company in the resort town of Palanga on the Baltic coast, also hailed DEPO plans in Lithuania.

«It is very simple: the bigger the supply, the better for the consumer, price-wise, I mean. I’m just wondering where the materials they will have on the shelves will be coming from? If it will be some Chinese stuff, then it bids nothing good to them, I’m convinced. I really can get upset when SENUKAI foists my people some cheap low-quality Chinese stuff,» the builder told.

As a big construction materials buyer, he said he wants to know beforehand whether the Latvians will work along with some Scandinavian suppliers.

«If they do, then they’re sending a good message. If not, some questions remain, but the bottom line is the arrival should push the prices down anyway,» Motiejauskas told BNN.

If he was in the Latvian chain managers’ shoes, he wouldn’t be repeating the blunders BAUHOF has done, the builder insisted.

«What comes off the top of my head in that regard is their zero activity in marketing. I’ve never been approached in any way by any of  BAUHOF sales people, when my e-mail box is constantly crammed with other construction materials sellers’ sales offers. Some of them are ready to knock at the door if affirmatively nodded. I want to see how active the Latvians will be from the day one,» the construction company owner said.

Lithuanians investing in Belarus

Meanwhile, Mindaugas Zaremba, director general of JSC CAPITAL CITY GROUP, cautioned  DEPO might be meeting a very tough competition from the rivals,  SENUKAI and ERMITAŽAS.

«It doesn’t necessarily mean immediate a bad thing for the Latvians, but their success will rely on what composure they will assume in the highly competitive market. What the ratio of the quality and price of their goods will be? How will they market the products? Too many questions still unanswered for now,» Zaremba reasoned.

Alike DEPO, Zaremba’s CAPITAL CITY GROUP is making inroads into the Belarusian construction market, where the company is developing «several construction projects», according to him.

Reportedly, the Lithuanian company has already completed around 10 construction projects in Belarus, but the director didn’t elaborate on that.

«We’ve completed some projects and are on a lookout for new ones,» he told BNN.

The Belarusians, however, praise the sleek state-of-the-art buildings that the Lithuanian developer has put its hands on, particularly the mall BONUS, one of the newest company’s launches in Belarus, especially complimented for its unique European style.

Its design was drawn up by the Lithuanian company CITY PROJECTS belonging to the controlling parent company CAPITAL CITY GROUP which reportedly heavily chipped in for the much-talked-about project.

Humbled by the compliments, Zaremba agreed, nevertheless, the new mall is a stand-out in the Belarusian capital for its European features, overshadowing the hard-to-describe Belarusian architectural landscape.

«It is rewarding to hear really good feedback on the work done. With much for the company at stake, the building turned out to come pretty aesthetic, perhaps even too much in that sense for a residential neighborhood,» the CEO admitted to Lithuanian media.

BONUS was among the first ones to have popped up in the area, but with it springing up, local developers started catching up with their own construction projects.

Still, the difference in style-and in quality, some say- is evident, possibly giving the Lithuanian company an edge when bidding for future construction projects.

Around 70,000 shoppers turned up in the mall over the first three days since the opening and they spent nearly 300,000 euros.

A luring investment programme

Although Lithuanian investors tend to generally complain about adverse business environment in Belarus, Zaremba insisted on the contrary – it is pretty good.

«I just wish they had more suppliers of reputable construction materials. In Lithuania, for example, you’ve got from 10 to 20 suppliers to choose from, when in Belarus, meanwhile, over 100, but many of them are too tiny for a country as big as Belarus. And besides, the quality they have is questionable sometimes. In a SENUKAI store in Lithuania, one can find around 20,000 names of commodities, when, in comparison, in a Belarusian building-materials’ store there are four-fold less of them. Sure, business risks remain as they always do when investing in a foreign country, but the larger risks, the bigger return on the invested capital,» Zaremba said.

The investor especially praised Belarus’ investment program from a couple year ago that allowed foreign investors sign investment agreements with the state and get thereafter lots for foreign investment.

«The favorable investment conditions have attracted many local and foreign investors alike. Now the investment conditions have changed, but the demand for that kind of objects like ours is still there,» Zaremba admitted.

Ref: 020/111.111.111.1916


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