February 24, 2012

RPK board chairman Raimonds Misa said in an interview with Latvian daily on Thursday (Feb 23) that the merger of Rigas Piena Kombinats (RPK) and Valmieras Piens will not influence the milk purchase and sale prices.

"The merger of RPK and Valmieras Piens will not significantly influence the milk purchase of sale price as the merged company will not have even a theoretical possibility to set the price level in the Latvian or Baltic market," said Misa.

He underscored that there are more than 30 dairy companies operated in Latvia. It is good from the point of view of consumers - the competition pushes the dairy product prices down. However, it is hard to compete with the Lithuanian dairies who process larger quantities of milk and can operate more efficiently, he said.

Misa said that after the merger the company will process about 500 tonnes of milk daily. "A total of 1,700 tonnes of milk are processed in Latvia every day. It means that we will not have even one third of the country's milk. In comparison, Lithuania's Rokiskio dairy company processes 1,700 tonnes of milk every day, Pieno Zvaigzdes processes 1,800 tonnes, and Zemaitijos Pienas processes 1,500 tonnes. Thus, a merger is absolutely necessary. Alos to make farmers safe," said Misa.

He said that at present about 30 dairy companies are making a similar assortment of dairy products. "It means large costs per product unit. Besides, Valmieras Piens and RPK have the same routes for collecting milk, and the merger will help us to save on transportation costs. Consolidation will strengthen the Latvian dairy sector. It is hard for us to sell our products in Lithuanian and Estonian stores because these countries have set up artificial obstacles for foreign dairy producers. The Latvian market is small and can be walked through -- it is a reproach to our government for not protecting interests of local producers," he said.

The financial investor attracted to Latvia's largest dairy Rigas Piena Kombinats (RPK), Russian businessman Andrey Bezkhmelnitsky has reached an agreement in principle with the new owner of Valmieras Piens dairy on a merger. The Latvian Competition Council is still assessing the planned merger.