Veikko Vaara, chairman of Eesti Pagar, the second largest bakery company in Estonia, did not disclose the financial details of this week's deal.
He said that the Estonia company had bought the controlling shares in Latvian bread, cake and pastry manufacturer, Dinella, in a move that he claims will give both companies greater leverage against the leading position of Finnish duo Vasaan and Karl Fazer in the Baltics.
Vaara said that Latvian bakery player was a financially sound company, with a stable market position. He maintains that it is ripe for further development and he added that "the experience and knowledge of Eesti Pagar in product development and marketing will help increase the turnover of Dinella".
Lithuanian based market analyst at Euromonitor, Rusne Naujokaityte, told BakeryandSnacks.com that the large share purchase by Eesti Pagar will help Dinella grow and survive in what are extremely tough economic trading conditions in Latvia currently.
Dinella, which has a workforce of 460 employees, has a 6.3 per cent share of the overall baked goods market in Lativa, she said.
And while it rode out 2009 well, recording a growth of 6 percentage points, Naujokaityte notes that the bakery manufacturer firm has only a 9 per cent share of the Latvian industrial packaged bread sector against the 25 per cent and 23 per cent grip that Finnish giants Vasaan and Karl Fazer have respectively.
“It will be somewhat of a challenge for the Estonia and Latvia firms to take some of the ground from their Finnish rivals and become larger regional players but perhaps with the product expansion push planned by Eesti Pagar, Dinella can grow penetration in Latvia,” said the Euromonitor analyst.
Bread, particularly the rye market, dominates in the Baltics. In value terms, in Latvia the cakes and pastries segment has an 8 per cent and 2 per cent share of the baked goods sector, with Naujokaityte adding that the cake category in particular is in decline as consumers become more health and weight conscious.
The pastry segment though in Latvia, she continued, is recording a slight growth as the local retailers introduce greater product variety, with berry and other fruit inclusions increasing. With more supply of these fresh unpackaged pastries, demand follows, said the Baltic market specialist.
She said that Latvian bakery manfacturers are bringing out more packaged pastry line to complete but consumers are not responding in kind, as they are favouring freshness and products with a shorter shelf life.
And bread consumption is also waning in Latvia as well as in the Baltics generally on both health and economic concerns, said Naujokaityte.
“During the height of the recession, bread became somewhat of a premium style product, with manufacturers increasing prices, despite the lack of a significant raw material cost spikes. Consumers sought out bread substitutes such as crisp bread to compensate and have also cut out bread from their regular meal patterns.
Women, in particular, have moved away from the staple product, believing it to contribute to weight gain,” she commented.
According to Naujokaityte, the Western European trend for gluten-free, wholegrain and other more health orientated breads is also taking hold in Latvia and the Baltics, as is consumer demand for products with clean labels.