MILK PROCESSING: Tere Plans to Double Russian Exports

15 Jun 2011 • by Natalie Aster

The largest Estonian milk processor Tere, that has doubled sales to Russia in 2010, intends to pull the same trick in 2011. Recently, the company presented its production facilities in Tallinn to 19 representatives of Russian retail chains.

"At the moment, we have ongoing negotiations with several partners, and we hope to sign contracts soon," says Rene Varek, CCO of Tere, to news2biz. "Our aim is to increase the exports of fresh milk products of Tere to Russia twice in 2011 compared to the last year," he adds.

Tere turned over EUR 99.6m in 2010, an increase by 8.6% compared to the previous year. In Q1 2011, the company's turnover rose by 12% year-on-year to EUR 25m, suggesting that the current year's results will be even better for the Estonian milk processor.

The exports accounted for 41%of the company's total sales in 2010, and about half of the exports comprised of sales to Russia. "We sell not only to Russia but also to the Baltic and Scandinavian countries," says Varek. "I consider the logical outcome would be that our exports would comprise 45-50% of total sales. Estonia is still our home market and in the future I would also expect us to sell approximately half of our produce in Estonia," he adds.

According to Varek, the lion's share of Tere's exports to Scandinavia consists of private label production, while in Russia, the company sells mostly under its own brands. "It would be possible to boost production and increase the Russian exports further, as the market is so enormous and ready to consume much larger amounts of quality products. However, we have to proceed carefully while considering other factors as well – for instance, the output of raw milk of Estonia's farms, which has certain limits," notes Varek.

Tere is the largest milk processor in Estonia, with processing plants in Tallinn, Viljandi, Paide and Polva. The latter was acquired in September 2008 when Tere's owners acquired the South-Estonian dairy Polva Piim and consolidated it with other milk processing assets.

Up to 2008, Tere was owned by Rubla, the holding company belonging to the Estonian businessman Oliver Kruuda. On 1 January 2009, the company was transferred to Luterma, where Rubla has a majority stake. At the moment, however, Tere's shares are deposited on the unnamed bearer account in Nordea, suggesting that Kruuda outmaneuvered its flagship from Luterma, which was declared bankrupt in the beginning of April.

Luterma, which was listed under the name of Kalev up until September2009, sold the sweets producer Kalev Chocolate Factory (KCF) to the Norwegian Orkla a year ago. Luterma bankrupted due to inability to return EUR 6m to another holding firm Alta Capital Partners. The sum was given to Luterma as an advance payment for KCF and Tere (see no 239 page 4), but Alta failed to deliver the rest of the agreed EUR 44m price due to the worldwide banking crisis, and defaulted in March 2010.


Estonia lost "sugar row" with the EU

The European Court rejected in May Estonia's appeal to the verdict made in 2009 regarding the penalty imposed by the European Union on Estonia for stockpiling sugar above normal amounts when joining the EU. Thus, the final decision in Estonia-EU "sugar row" has been reached, and the EUR 45.7m penalty imposed to Estonia remains unchanged.

From the total sum, Estonia has paid to the EU EUR 34.3m, the rest were left to administration costs. Estonia tried to claim that some of the excess sugar was stockpiled by households and tried to recover about EUR 12.8m from the EU. The state has ongoing disputes with 20 enterprises, among them Luterma, the former parent of the sweets manufacturer Kalev, regarding the excess sugar.

All these disputes were delayed due to Estonia's appeal to the European Court, and are now expected to proceed.

The above news abstract has been taken from a bi-weekly newsletter to professionals doing business in Eastern Europe "news2biz – Food and Agriculture".

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