According to Andrius Pranckevičius, the Chairman of the Board of Putnu Fabrika Kekava, the HORECA market, which has already regained 30 per cent of its former volumes in a short time, gives cautious optimism, but the tense situation in the poultry sector is expected to last for at least another six months.
Worst case scenario hasn’t occurred yet
“During the first weeks of lockdown, when the HORECA market closed down in all of Europe excluding Scandinavia, we were preparing for the worst- overproduction scenario, even seeking extra frozen storage service suppliers,” A. Pranckevičius says. “However, this proved unnecessary. Throughout the ten weeks of lockdown, we were able to sell all the products made in our companies.”
According to Pranckevičius, during the first weeks of lockdown food product sales were increased by people’s caution – consumers rushed to purchase food reserves. Meanwhile, in recent weeks, the opposite process has been observed in the Baltic States – sales of fresh produce are declining because people are using up the food reserves they have accumulated. However, the café and restaurant sector has begun to gradually recover, with its sales having fallen to zero in many countries.
“In April, we had to terminate our HORECA production line for three weeks, however, we relaunched it in May. In recent weeks, the goods produced for the HORECA market by our companies increased to approximately 30 per cent of previous levels,” Pranckevičius continues. “We are already observing signals that soon, purchases from some of the German regions that are loosening lockdown conditions on cafes and restaurants are due to be renewed. It is likely that this process will move forward and production levels for HORECA will stabilise.”
Long price wars predicted
According to A. Pranckevičius, in recent months Europe has faced overproduction of many food product categories, primarily dairy, meat, flour and cereals. This is due to reduced export levels and closed local public catering markets.
“As long as the stocks in the producers' warehouses do not "run out", the market tension will not subside and a price war will take place. Currently, the largest European market players – the Polish poultry producers – have accumulated a vast surplus of production and offer unprecedentedly low prices,” Putnu Fabrika Kekava’s Chairman of the Board explains.
He points out that the Baltic States’ producers are already feeling this pressure from their trade partners. “What helps us is that we can maintain our competitive advantage – high-quality poultry grown without the use of antibiotics. The fifteen-times-larger Polish poultry companies cannot achieve this. We are aiming at the higher-income consumer segment, and furthermore, we have a strong line of processed products – marinades, steaks, sausages and smoked products which we export much of, thus we are currently resisting market pressures,” A. Pranckevičius maintains.
State assistance in Lithuania – among the most generous in the region
According to the CEO of Putnu Fabrika Kekava, managed by Linas Agro Group, state support should also help Lithuanian poultry companies to withstand competition from producers in neighboring countries.
The support provided by the Lithuanian Government to all lockdown affected agricultural producers and processors is one of the largest in the region. In addition, these days the government increased the total support package for agricultural producers to 174 million euros.
“For comparison, I can say that in Latvia, agricultural producers will be offered a combined 45 million euros in support and companies will only be able to obtain this aid when their stored goods have reached 25 per cent, or if sales have fallen 20 per cent due to the lockdown. Allocations are issued to all companies in Lithuania, which have lost ten per cent of their turnover,” A. Pranckevičius compares.
Targeted allocations for the poultry sector are not foreseen in Latvia , whilst in Lithuania, they are planned to reach 11 million euros. “This will help Lithuanian producers cushion the consequences of the price wars,” the Chairman of the Board of Putnu Fabrika Kekava notes.
About Linas Agro Group’s poultry business
AB Linas Agro Group owns four poultry companies in Latvia: AS Putnu Fabrika Kekava, SIA Lielzeltini, SIA Broileks, and SIA Cerova. The activities cover the full poultry production cycle: hatching of chickens, rearing of broilers, production of poultry meat and its products, production of feed for own needs, and retail trade in poultry meat and its products. The products are sold under the Kekava, Bauska, and Top Choice Poultry brands and have the ‘Raised without Antibiotics’ label. The consolidated revenue of the group of the poultry companies during the 2018/2019 financial year that ended in June, totalled EUR 77 million with over 32.6 thousand tons of poultry meat and its products sold.
