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Competition Builds in Lithuania's Dairy Sector

Klaipeda, Lithuania, June 10 (RFE/RL) -- In a formerly-communist country, famed like Lithuania for its agricultural produce, the response of the dairy industry to free market competition can be instructive.

Competiton in the last four years has forced some smaller dairies out of business. Top survivors have re-thought their marketing and sales strategies.

About 40 dairies exist today in Lithuania. A Ministry of Agricuture official says two dozen dairies are privately owned and that perhaps ten are losing money.

The Birzai joint-stock milk company, in 1992 the first dairy privatized in Lithuania, is one of the most successful. Dairy director Vladas Songaila says that when the dairy replaced glass bottles with plastic containers and packaging, the management was ridiculed by other dairy bosses. He says that when the dairy, in northern Lithuania, expanded its market area, it created a furor.

Songaila phrases it in an understatement: "We risked a lot." Actually, somebody, perhaps desperate competitors, bombed his home and the factory, apparenty seeking to stop the the invasion of new markets. Four years ago, Lithuanian dairies just did not send their produce far afield. Today a buyer in most major cities can choose dairy goods from half a dozen dairies.

Birzai director Songaila tells an RFE/RL correspondent in Klaipeda that his firm's variety attracts shoppers, and that its quality keeps them coming back. Birzai was the first dairy to introduce cottage cheese with fruit, using high-quality jam imported from Germany.

About 50 percent of the Birzai dairy's production is exported to Germany and such distant countries as Japan and Venezuela. The dairy expects to begin exports soon to neighboring Latvia and Estonia, if tariff barriers are mitigated.

The all-Lithuanian, internationally-minded management also is considering selling a minority stake to foreign investors

While Vilnius and Klaipeda dairies are well known and well established, the Birzai dairy evidently sets the pace. Klaipeda dairy director Jonas Vilionis says pressure from more distant producers is making the competition keen in Klaipeda, Lithuania's third-largest city. When sour cream and cottage cheese from Birzai appeared in Klaipeda stores, Klaipeda dairy officials began seeked markets in other cities, principally Vilnius and Kaunas.

Today in Klaipeda, shoppers can choose milk and dairy products from half a dozen dairies. The well-known cow logo of the Birzai enterprise attracts most buyers. Now, 1,600 stores sell Birzai dairy products.