The structure of milk processing and marketing in Estonia

The dairy sector is the most important sector of agricultural production in Estonia. The structure of the milk processing industry is expected to undergo restructuring and rationalisation in response to the challenges arising from the forthcoming accession to the EU, deepening economic integration, changing consumer preferences and terms of trade. Concentration of the sector is the most likely outcome. Accession to the EU and the accompanying harmonisation of legislation is the strongest factor influencing this development. In addition, the limited supply of raw milk is creating competition among enterprises and will probably increase vertical integration as well as processor consolidation. Changes in consumer preferences are driving processors to produce higher quality and value added products. Improving export opportunities is crucial to ensure the viability of the dairy sector as Estonia is a net exporter of milk products. Attracting foreign direct investment to the milk sector helps to increase competitiveness by providing additional capital and know-how. However, increasing integration is going to affect the traditional, location-related attractions for foreign investors which poses additional challenges.