Key sectors

Estonian membership in EU has had positive effects also to food industry. The main aspects are bigger motivation and possibility to sell products to other EU countries and now there are also more options to buy in raw materials.

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The number of people employed by the food industry has gradually decreased over the past five years. Food industry employed 16 730 people on average in 2007.

Share of food industry in manufacturing industry, 2000 - 2007

The biggest branches in Estonian food industry are dairy, beverages and meat industry. The dairy industry formed 28,4% of the total production of food industry in 2007, followed by the beverage industry with 20,7% and meat industry with 18% (Statistics Estonia).

According to Statistics Estonia, there were 387 enterprises in the food industry in 2006.

Industry Associations

The Association of the Estonian Food Industry is an umbrella organisation uniting professional associations and companies involved in food industry. The Association, besides representing its members, manages the standardisation of food products and technologies, prepares its members for integration into the EU and coordinates the communication with the relevant bodies of the EU. The Food Association also organizes the annual competition for the best Estonian food product. The major sub-sectors of the food industry also have their own industry associations.

Foreign Investments

The food industry has benefited from relatively large foreign investments. Experts of the Ministry of Agriculture have assessed the percentage of the net sales of undertakings involving foreign capital in the total net sales of the sector. Brewery industry continues to be on the first place - the net sales of enterprises that involve foreign capital account for nearly 80% of the total sales of the sector.

A number of companies have invested in the Estonian food industry. These are a few examples:

Source: Enterprise Estonia

Investment opportunities

Western European companies have through takeovers already entered into most of the sectors of the Estonian food-processing industry. However there is still room for new actors who will be able to benefit both from the increasing export markets and from the increasing quality demand of the domestic customers. There are also a number of quality companies with very professional management but with insufficient resources to rapidly invest and modernize.

Main reasons to invest in the food-processing industry in Estonia:

• Low production costs
• A stable and developing economy
• Liberal trade
• Low taxes, zero-tax on reinvested profits
• Local raw materials
• Geographical hub Scandinavia-Russia-Continental Europe

Dairy Industry

Milk production and processing and trade in milk are an important part of the Estonian economy. Dairy industry accounted for 28.4% of the food industry in 2007.

The development of diary industry is strongly influenced by EU milk production quota but despite to that the sector has a strong potential. Companies have made big investments and have experience in export.

The sale of milk processing companies in 2007 was 303.2 Mio EUR. The milk production volume was 690,000 tons compared to 692,000 tons in 2006.

The biggest increase was in production of cheese and ice cream, some decrease occurred in production of butter and whey powder.

The export of milk products was in 2007 131.8 Mio EUR which is 35% more than in 2006. The export to EU countries accounted for ca 111 Mio EUR. The main export partners were Germany (27,6%), Latvia (14,2%) and Finland (10,3%). Export to Russia grew in 2007 6,2% compared to 2006.

Percentage of dairy industry in processing industry and food industry

Source: Statistics Estonia

Dairy industry employed 2373 people on average in 2007. The average monthly gross wages were EUR 520 in 2005, which is higher than the processing industry's average by 10.9%.

Raw material

The raw milk market is not particularly concentrated and most of the market is divided between eight enterprises that buy in nearly 70% of the raw milk sold to the industry. The percentage of other enterprises has constantly decreased, particularly due to the decreasing number of small enterprises.

Buying-in of raw milk in 2007

Meat Industry

The output of the meat industry accounted for 18% of the food industry's output in 2007. The percentage of meat industry in the output of the processing industry is increasing compared to the previous years. This is caused by the increased output of the meat industry as well as the decrease in the outputs of other branches of the food industry (fish, milk).

According to the data of the Veterinary and Food Board, there were 119 meat-processing enterprises in Estonia as of 31 December 2007.

Structural development of meat industry

Source: Statistics Estonia

The average gross wages paid by the meat industry have fluctuated greatly over calendar quarters, a certain seasonal nature is noticeable and wages are smaller at the beginning of the year compared to the end of the year. In 2007, the monthly average gross wages in the meat industry amounted to EUR 583, which was below the national average gross wages by 23,5%.

Raw material

In 2007 meat handling companies bought 105,000 tons animals and birds. The average purchasing price of pork was 1,49 EUR/kg and of beef 1,47 EUR/kg. Compared to 2006 the price of pork has grown 0,3% and the price of beef has decreased 3,8%.

In order to be supplied with quality meat and utilize their slaughter capacities, larger meat processing enterprises have started to engage in pig and cattle farming by buying or establishing production farms.

Source:  Ministry of Agriculture: www.agri.ee/?lang=en
Enterprise Estonia: www.investinestonia.com