Trust in Finnish quality is increasing the exports of foodstuffs to Russia
The fish processing plant of entrepreneur Veli Tilli does not look like a fish factory from the outside.
The processing plant, owned by the entrepreneur from Virolahti, is located on the ground floor of a meat combine (constructed in 1911), below a workshop which manufactures coffins, in a shabby region on the northern edge of the city of Vyborg.
Inside, the place is conventional enough. Rainbow trout is carried into the facility from Medvezhyegorsk (Karhumäki in Finnish) and vendace from Lake Onega (Ääninen).
The name of the enterprise is Finskaja Ryba (Suomalainen Kala - Finnish Fish), but for the time being, the only Finnish elements of the business are the ownership and the process.
The image of Finnish fish means the whole world to Russian customers, who consider Finnish food almost a luxury.
”It is enormously appreciated”, Tilli says. ”Food has to be be Finnish, and it can cost more”, he adds.
According to the findings of surveys, Russian consumers have a strong confidence in Finnish food.
The brisk demand has made even small-scale producers interested in the growing eastern markets.
”The small and medium-sized enterprises are interested in the surrounding areas, and not only Russia but even the Baltic Sea region”, reports Heikki Juutinen, Managing Director of the Finnish Food and Drink Industries’ Federation (ETL).
Russia is the most important export destination for the Finnish food and drink sector.
At the end of 2011, the growth rate of the food exports to Russia was 17 per cent, and ultimately the value of food exports seemed certain to break the long-standing record of EUR 350 million set in the peak year of 1997.
A new export channel to Russia came into being at the end of last year, when the Trade House Lend from St. Petersburg established an export centre in Kouvola.
Through the centre, Finnish food products end up not only in Lend’s own stores in St. Petersburg but also on the shelves of the company's customers across the country.
Director Anna Shljanina of Trade House Lend said during her visit to Finland in October that as far away as the Ural Mountains, consumers recognise that Finnish food is clean and its quality is good.
”Every Russian knows that Finland is a very clean country”, Shljanina said in October. ”If the product is organic, it will sell even better”, she added.
”Gaining a foothold in the Russian market was an incredibly great move”, says Managing Director Atte Rekola of the Hämeenlinna-based food processing company Herkkumaa, describing their cooperation with Lend.
Herkkumaa supplies Lend with preserved vegetables and jams, among other items. The company has noticed the appreciation of Finnish quality. Rekola says that their customers hope that the products are delivered with the Finnish-language labels.
The cooperation with Lend involves a dozen or so enterprises. Without the export centre, small enterprises’ access to the markets could be difficult.
”It is difficult if one does not find partners when starting from scratch”, Rekola notes.
Veli Tilli opened his facility in Vyborg in the autumn of 2010.
He tried to start a fishery in Russia already in the 1990s, but the idea was turned down then because of financial problems.
The investment of almost EUR 1 million would not have succeeded without local contacts.
”If you do not know anyone, nothing can move forward”, Tilli confirms.
Nevertheless, the enterprise keeps facing problems which need to be resolved.
Last year, a power cut threatened to thaw out a stock of almost 10,000 kilos of frozen roe. Today, a large standby diesel generator is waiting in the yard.
The large food companies have paved the way to the east for small producers.
Many large Finnish food companies have been expanding their operations in Russia in the past few years.
For example the Finnish coffee processing company Paulig opened a new EUR 23 million coffee roasting plant in Tver in September.
Myllyn Paras, a manufacturer of flour, flakes, grits, and pastas, announced in the summer that they plan to build a new production plant south of Moscow.
The investment will cost EUR 33 million.
The companies' own production facilities will help them to get closer to the Russian markets, while another reason for investments is the import restrictions easily issued by Russia.
If the production of foodstuffs is transferred to Russia, the companies will not have to pay much attention to issues related to taking goods across the border.
Of the Finnish food and drink companies, for example Fazer and Valio have gained a permanent position in the Russian kitchens.
Fazer is the market leader in Northwestern Russia. Hlebny Dom is Fazer’s biggest bakery brand in Russia.
In 2010, the company’s sales in Russia were almost EUR 230 million.
The sales of Finland’s largest meat processing company Atria on the eastern side of the border are about EUR 120 million.
However, the opening of a new sausage factory in the Leningrad Oblast just before the recession has kept the company’s Russian operations deeply in the red.
Finnish food is seen as a luxury item in Russia, Baltic Sea region