Estonia, Foodstuff, Industry, Labour-market, Markets and Companies

"We haven't extended a couple of major contracts with the old prices for spirit and presumably our output will drop by approximately 30-50%. We have decided to invest in automatization on the fermentation side to reduce labor and resource costs. In addition we are reorganizing production, which will result in a reduction in employee numbers. We have made quite many people redundant already," Sven Ivanov, manager of Estonian Spirit and the producer of strong alcoholic beverages Moe Peenviinavabrik, told.

Ivanov said that in the forthcoming season, until next fall, Estonian Spirit will not be sending 800,000 liters of organically produced spirit to the Swiss alcohol monopoly Alcosuisse. The company is keeping its stocks for Moe Peenviinavabrik, and in the worst case the stocks must suffice until the harvest of 2019.

"There simply isn't enough organically grown grain, and what we can get is too expensive for us," Ivanov said. He added that even though the price of spirit rose 30% last year, that was of no help as the price of grain has also increased by approximately 25-30% and, at 300-350 euros a ton, remains completely beyond their reach. In addition, wood chips and electricity, important inputs for the Rakvere plant, have become more expensive.

Ivanov said that the price of spirit is kept low in Europe by spirit produced from molasses, a leftover of the sugar industry which doesn't make for good vodka.

"But the lower end producers will have to go for a compromise," he said.

"The price rise is done for us by the Republic of Estonia with its short-sighted excise policy. In any case, production volumes in Estonia have decreased by about 30%, the rate of loss is the same in retail on the average," the manager added.

"Moe, for instance, has lost 50% in sales volumes compared with last year. Cross-border trade has given back 25% of that. Fortunately, export has grown and volumes continue to display an upward trend. In 2018 we expect to sell about 40% more than in 2017, both in volume and money terms," he said.

Estonian Spirit OU has yet to file its accounts for 2017. The company finished 2016 with a net loss of 1.3 mln euros on sales of 2.4 mln euros. The company made 34 people redundant in the second quarter of 2018.

The European Commission in October 2017 satisfied an application of the companies Estonian Spirit OU and Remedia AS to register Estonian Vodka as a protected geographical indication. The Commission assigned Estonian Vodka as a protected geographical indication to vodka in the production of which ethyl alcohol made from raw materials grown in Estonia and Estonian water were used.