The development of the country is also evident in the development of the baking industry. Here, the supermarkets make a good bargain.

Lithuania - The country

With a population of 3m, Lithuania is the biggest of the Baltic countries and borders on Latvia to the north, Belarus and Poland to the south and the Russian exclave of Kaliningrad to the west. The biggest cities are the metropolis of Vilnius with a population of 527,000, Kaunas with 307,000, Klaipėda (formerly Memel) with 159,000, Šiauliai with 106,000 und Panevėžys with 97,000.

The considerable economic fluctuations in Lithuania in recent years have each had a large effect on the labor market. The average gross monthly income in 2008 was EUR 623, dropped in the following years, and rose again from 2011 onwards to EUR 678 last year (2013). All Lithuanian employment contracts are subject to an obligation to pay social insurance contributions. The social tax contribution rate in 2012 was 39.98% of gross wages. Of this the employer must pay 30.98% and the employee 9.0%. Working hours are 40 h per week. The unemployment rate in May 2014 was 11%, and about 10.0% of all jobs are part-time positions. This is why one of the country’s biggest problems is the emigration of skilled workers, and Lithuania has lost 12.5% of its population in the last ten years alone.

Development to date

When the economic crisis broke over Europe in 2007, the country responded in 2009 with a "National Agreement" between the government, trade unions, employers and NGOs with the aim of self-healing. The consequences hit the population hard. Incomes dropped drastically, the unemployment rate grew to double digits, benefits in kind and extra payments vanished into thin air, and the only things that rose were prices and taxes. Average gross earnings have now returned to pre-crisis values and even slightly exceeded them. However, one result will be reversible only with difficulty: one in eight Lithuanians has emigrated from the country in the past ten years, and those who left were mainly the young, well-educated.

Anyone strolling through the capital city of Vilnius today will encounter an urban lifestyle like that in many European capital cities. The city center, with the University founded in 1579, is a baroque jewel and tourist attraction. Cafés, bars, restaurants and accommodation up to a 5-star hotel offer everything tourists need to survive. All around it are the residential suburbs, well supplied with hyper and supermarkets as well as big shopping centers. These also largely ensure the supply of foodstuffs in general and baked products in particular. The four biggest retail chains share almost 80% of the market between them. Opening times extend into the late evening, seven days a week. The shelves are abundantly filled, and on top of that many are equipped with baking stations and self-service shelves for non-packaged goods. They are supplied by a handful of industrial bakeries, almost half of whose turnover is accounted for by subsidiaries of Finnish bakery groups.

Artisan bakers lead a marginal existence in Lithuania, and survive as cafés and confectionery shops in the inner cities and shopping centers, or in seaside resorts along the Baltic coastline. In coastal towns like Palanga, where mainly Russians and Poles seek beauty and relaxation alongside Lithuanians in the clinics and sanatoriums, the beach seethes during the day and the promenade in the evening, while in the cafés and restaurants, depending on their class, troubadours bellow tearjerkers into microphones or jazz bands provide an unobtrusive background to the dining. On the other hand in the countryside and even on the Curonian Spit, where one half hopes for soft tourism and the other half wants to grow and make money fast, life still paddles along at a leisurely pace. Here again supermarkets take care of the basic food supply and set the prices. Because the latter are relatively high compared to income, almost every house has a well-maintained vegetable garden, and every village has at least one fish shop, although their goods long since ceased to come only from the Curonian Lagoon and Baltic. Fish is inexpensive. Village bakers, where they exist, supply traditional varieties such as dark rye bread with a dense crumb that gets a sweetish basic flavor from added malt and keeps for several days, or plain wheat batones and at weekends stuten and braids. Apart from that they are also responsible for the cakes and pastries.

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Lithuania | Crustum

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Lithuania | Maxima

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Lithuanian baked products market in figures

Source: Nielsen

One in eight Lithuanians has emigrated in the past few years – which has not been without consequences for the country’s baked products market, irrespective of all the other changes in consumption and purchasing habits, which have also left their mark on the baked goods market as they have everywhere else in Europe. According to Nielsen, the bread market lost nearly 9% of its volume from 2011 to 2013 alone. In return prices rose by an average of 11.7%, and this was able to compensate for the lost tonnage on the bottom line. The Nielsen figures show a clear shift in demand within the product ranges. The loser with a drop of more than 34% is the brown rye bread that is baked in sticks and sold as sliced bread. Brown and light-colored bread loaves with a high proportion of rye as well as white bread varieties with spices and seeds have also suffered double-digit losses. Only white toastbread was able to record volume gains of just under 5%. Nevertheless, the traditional types of bread such as pale and brown rye loaves and white batones predominate. Together they make up 70% of the market. Incidentally, the loaves are as a rule sold sliced. The great majority of bread is sold through the food retail, which is dominated by four groups: Maxima, IKI, Norfa and Rimi, which together account for around 80% of the country’s retail sales.

With 28% in value terms and 26.9% in volume terms, Vilniaus Duona occupies the unchallenged lead position among Lithuanian bread manufacturers, followed far behind by the Fazer Group and Klaeipedosa Duona, also originatin

An example of a Lithuaninan bakery: Vilniaus Duona

© Vilniaus Duona

© Vilniaus Duona

The company, now owned by the Finnish VAASAN Group, is the market leader in Lithuania. Founded in 1882, the company together with 15 other bakeries became Vilniaus Duona in 1962. It owned 5 production units and 15 bakery shops when it was privatized in 1994 and moved to the proprietor of the present-day Maxima retail group. The VAASAN Group took the business over in 2002 and prescribed it a fundamental restructuring. Two of the five bakeries were closed and the Panevėžys site was comprehensively modernized and expanded by changing all production lines together with the infrastructure. A completely new production unit with one bread line was created on a 4,500 m2 site in Vilnius. In 2015 there is a plan to expand production site with additional lines and after it’s done the last of the old production units in Vilnius will also close its doors.

With a market share of nearly 30%, Vilniaus Duona is No. 1 among Lithuanian bakeries and is the biggest in a comparison of the whole Baltic region. Distribution takes place from the three factories and two logistics centers to more than 2,000 unloading points seven days a week. 80% of the Lithuanian bread market belongs to four big supermarket chains: Maxima, IKI, Norfa and Rimi. Only Norfa has delivered goods to its own distribution centers, all the others go direct to the shops. The logistics service itself is outsourced, and the law does not allow returns, which makes price negotiations and new product launches more complicated.

The number of employees was 1,368 when VAASAN took over Vilniaus Duona, but was only 382 in 2013 although production volume remained the same, and they achieved a turnover of EUR 28.1m in 2013. The product range comprises 70 different types of bread that are sold under various brands. Mainly modern, less acidic bread varieties manufactured using modern recipes and technologies are sold under the Urtés brand. Namiskiu stands for inexpensive offerings, Rugelis and Močiutė for the artisan touch, Agotos for traditional rye bread etc.

Vilniaus Duona still supplies exclusively freshly baked products in Lithuania, but the market is changing and the number of baking stations in the retail is growing and becoming a challenge. The amount of frozen goods that the VAASAN companies in Estonia and Finland can deliver is still sufficient, but it is foreseeable that Vilniaus Duona will also need to enter this market itself.

This Country Report was researched by our baking+biscuit international“ editorial department. A collection of recent market profiles was published in the European Bakery Market Review.