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Salutaguse Yeast Factory in Estonia shows how foreign investments can transform the business

Salutaguse Yeast Factory was on the brink of bankruptcy after Estonia regained its independence in the early 90's and was sold for only one Estonian kroon (0.06 euros) to Canadian owners; however, the company has emerged as an innovative leader, improving its economic performance throughout the coronavirus pandemic as well as contributing to Estonian export, last year for €48M.

Revenue increased by 13% to 49 million euros, net profit soared to 46.5% and the number of jobs reached 155 last year during the height of the coronavirus pandemic.

The local company, owned by Canadian parent company Lallemand, is known for fermenting traditional baker’s yeast and specific vitamin, mineral and high-protein dry yeast and excels as an innovative entity as well as a large exporter – 99% of their products are sold in other countries.

“Our products are for human consumption as well as animal fodder,” CEO of Salutaguse Yeast Factory Tiina Valk describes the added value created. “Additionally, we cultivate moulds and bacteria originating in nature, from which we manufacture biological pesticides.”

The ability to be flexible helped the company to succeed during the coronavirus pandemic. “Lallemand has always been keen on a long-term business relationship and during the coronavirus pandemic they began to emphasise the common good as well as the benefits of natural, sustainable and nutritious food and supplements,” Valk describes the adjustments. “We achieved success by maintaining the trend and focusing on it.”

Salutaguse Yeast Factory is also known for being an innovative and focused exporter that uses the best available technology to clean wastewater and fulfil environmental standards. Regarding high technology and innovation, Valk believes the greatest invention in recent times is membrane technology for concentrating yeast wastewater and the introduction of capture devices used for the ozonisation of evaporative emissions from driers.

Transformation through foreign investment

Current achievements extend back to the period following Estonia’s restoration of independence. Back then, Salutaguse Yeast Factory was on the brink of bankruptcy and was sold for only one Estonian kroon (6 euro cents) to Canadian parent company Lallemand. “The yeast factory was on the verge of bankruptcy and was looking for an investor who had the capabilities to develop the company and maintain a certain number of jobs,” Valk describes those perilous times.

This deal has been worthwhile when looking at it from Estonia’s point of view. “In the last five years alone, these foreign owners have invested 15 million euros into Salutaguse Yeast Factory,” says Valk. The cleaning process was substantially improved as a result of this, which was the foundation of the company’s survival. “Experts at Lallemand collaborated with TalTech researchers and developed a new way of cleaning wastewater from yeast factories; nowadays, it is still considered the best available technology (BAT) in the yeast industry,” observes Valk. In her opinion, those investments were made incrementally to ensure that they went to the right places.

The ambitions of the company do not end here. They hope to bring the company’s odour threshold to a minimum in five years, i.e. many times lower than required by law. “We have compiled a five-year odour reduction plan under the Environmental Board’s leadership that is scheduled to conclude in 2023,” explains Valk. “We’re on schedule, but there have been disruptions regarding the supply of equipment due to the coronavirus pandemic.”

Additionally, Valk believes that great collaboration has been achieved with world-class development centres due to foreign owners. “Thirteen centres around the world are involved, including the Centre of Food and Fermentation Technologies in Tallinn, but we can be certain of scientific application as well as engineering and technical support,” Valk rejoices. Additionally, she commends the fact that Lallemand is a family-operated business. “The decisions are made rapidly at both the investment and operating level.”

Estonia’s advantageous tax system allows profits to be reinvested an a 0% corporate income tax rate

This factory was the first business absorbed in Europe for the Canadian group. “They also looked at Poland; however, the Canadian owners commended Estonia’s privatisation policy as well as its speed, simplicity and rationality,” Valk explains why the deal was concluded at the time.

Valk assures that Lallemand is extremely satisfied with the essence of Estonians. “Hardworking, conscientious and trustworthy – the trust achieved regarding the factory and the business environment has been the basis for consistent investments,” she says.

Lallemand has also positively noted the changes in recent years regarding the taxation of dividends and the excise duty benefits in the energy field. “They are certainly interested in future endeavours – regarding decisions in both energy and labour policy,” notes Valk. She adds that since Estonians don’t want to work in production, she along with the foreign owner are looking forward to the relaxation of rules regarding foreign labour.

Should positive circumstances transpire, will foreign owners invest more in the future? Valk states that the parent company is guided by the principle that the business must be self-financing. “The group primarily finances the increase in production volume,” she says. Meanwhile, Valk doesn’t believe that Salutaguse Yeast Factory will ever reach a point where the company will receive its money from capital markets, for example, from the stock market. “Going public on the stock market is not appealing to the family-oriented business because they are not looking at foreign investors,” believes Valk.

The green turn is the new impetus

Valk emphasises that Salutaguse Yeast Factory’s product is starting to become more significant among local clients. “Our products have so far been niche, but now that sustainability and environmental consciousness are becoming the objective, we are finding more clients in Estonia,” she refers to the high potential for development.

According to Valk, the green turn is generally beneficial to Salutaguse Yeast Factory. “Yeast is a sustainable and green product and it has a low carbon footprint,” she explains. “Our clients are invested in the yeast factory being resource-efficient in production; therefore, we have applied the energy management system ISO 50001,” she states another example of innovation. “Additionally, we are working on programmes regarding the reduction of odour and air emissions and are collaborating with TalTech in assessing lifecycles,” she concludes.

Estonia has a sizeable food industry which benefits from ecological raw materials, skilled workers and modern production facilities. With an established export capability and growing application of food science and technology, Estonia is the ideal location for export and R&D oriented investment.

Interested in investing in Estonian food industry? Read more about the food sector here and send us an e-Consulting request to get more detailed information.

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