Case 8.1: Aloja Starkelsen - organic starch and plant-based products for home and industrial application - Latvia
Name of the company: Aloja Starkelsen Ltd.
Country: Latvia
Size of the business: 87 employees
Website: www.alojas.lv
Background
The enterprise was established on the basis of a partnership. Aloja Starkelsen was founded in 1991 in cooperation between the employee cooperative “ALOJA” and the farm cooperative “LYCKEBY” from Sweden. It was the first food company with foreign capital in Latvia. The company’s largest shareholder is Swedish group “Sveriges Stärkelseproducenter”.
Production is based on a plant operating in Latvia since 1937 and producing spirits until 1974 and since 1974 producing starch. Organic potato starch production started in 2004 with the first 20 tons, however, only small quantity of it was marketed as organic, while rest was sold as conventional product because at the time the product was not accepted in the market. Organic potato starch production on regular basis was started in 2008, when demand for organic food increased in the world market significantly.
Idea of organic potato starch production comes from Andrejs Hansons, former CEO of the company, who searched for new business niche. Since 2008, volumes of organic potato starch have grown steadily. Since 2013, the company is the second world’s largest organic potato starch producer.
While starting organic potato starch production, the driving force was necessity to sustain the product (potato starch) in the market, to keep and increase competitiveness of the company. Finding new business niche was one of ways to be in front of other business players, instead of lagging behind.
In a later phase, when increase of demand for organic potato starch was realised, the company decided to focus on organic food and food ingredients production. The new business strategy was developed, and it included measures to build production chain, where starch processor and producers of raw material – potato – are linked by cross-cutting interests. The company strives to satisfy world market demand and, to do it, must have access to the raw material – organic potato, meeting certain quality requirements and in volumes, satisfying the company’s production targets. In order to ensure all of the abovementioned, the company has created a network by joining organic potato growers, breeders and researchers in one chain, and has established an organic potato starch competence centre, whose main objective is to promote knowledge on organic potato breeding and growth in the Baltic states. More than 100 Latvian and Estonian farmers are growing and delivering organic potato annually to the enterprise, and due to the world market’s growing demand, volumes purchased from the farmers are still increasing.
New direction for the company is the products made from organic brown pea and fava bean. Those have been developed due to two strategic considerations: business interests in developing organic products portfolio and interest in using legumes, because according to the most effective growing technologies, legumes are excellent pre-crops for potato, thus letting to achieve good yields.
Main activities
The company is producing organic and conventional potato starch. Potato starch demonstrates many valuable characteristics: a superior water binding capacity, the ability to build excellent viscosity, low temperature swelling, lack of taste, transparency, GMO and gluten-free qualities, as well as lack of allergens. Production residues are delivered to farmers – potato juice for fertilizing fields and potato pulp for animal feed.
Besides starch, the company is producing packed products: jellies, deserts, spice mixtures, baking powder, and vanilla sugar. The most of them contain starch as one of ingredients. In 2017, the company started development of new business direction – production of flour and protein concentrate from organic legumes – brown pea and fava bean.
The company holds a small laboratory, where it, on demand of customers, develops recipes for different dairy, confectionary, drinks, snacks, meat produce and other products. Each recipe is custom made and unique.
The company is maintaining internationally recognised quality standards and is certified organic producer. It maintains certificates such as: EU organic (LV-BIO-02), Krav (Sweden), USDA Organic (BCS), China Organic (COFCC), JAS Organic, BRC, GMP+. It is certified also to supply ingredients for Kosher and Halal production systems. It is worth to mention that the company is also certified as gluten free production site.
Market
The main customers are food industries, supply chains, supermarkets (RIMI, Maxima, LIDL, ALDI COOP, etc.). The main destinations are the Eastern Europe, Scandinavia, Italy, Taiwan, Japan and the USA.
Each year, the company participates in thematic exhibitions such as the Food Ingredients, BIOFACH, Snack Expo, Riga Food and other, and takes part in business missions to Asian countries. Here customers are found in many cases. Informative leaflets about the produce are distributed. The company’s website, social media (Facebook, YouTube) and organic products and recipes advertising websites (www.organicpeaprotein.eu, www.organicpotatostarch.com, www.culinar.se/english/) are used.
Challenges and solutions
There are several channels for potential customers who are looking for organic potato starch or pea protein, but still a challenge to reach customers who are not aware of those unique organic ingredients exists. In the future, the enterprise’s interest is to expand its customer base. The challenge is that it can take a rather long time before market is familiarised with new products and ready to use them (for example, organic pea).
Company plans to continue with organic product production and sales, to follow worldwide organic product growth. Major investments are planned, including development of pea peeling production unit, dry products mixing and packaging unit and development of pea melting and classification production unit. General target is the development of diverse organic products.
Funding
Owners of the company are shareholders and they make decisions on the use of the profit. Funding used for the development measures, especially for the investment in infrastructure is coming from: the company’s revenues; bank loans, the EU funding acquired via open calls for proposals.
Starting production of organic potato starch did not require investments in infrastructure, however, it required a lot of management and development measures related to introduction of quality management system, increase of knowledge level of employees, thus enabling them to execute, supervise and monitor production process.
The public sector and the EU funding have been used for the development of production facilities and increase of energy efficiency, and for participation in international exhibitions and fairs. For this, the EU financing managed by national Rural Support Service (LAD), Investment and Development Agency of Latvia (LIAA), and state-owned development finance institution “ALTUM”, was used. Public funding, such as the Estonia – Latvia Cross Border Programme supported by the European Regional Development Fund (ERDF), was used for strengthening the network of Latvia’s and Estonia’s organic potato growers, breeders, researchers, and processors, and for the development of the organic potato food production chain. The organic pea and bean production require development of new infrastructure and for this purpose the EU funding (40% of total amount) was acquired via open calls for proposals, while 60% of financing came from bank loan.
What makes this case innovative?
The enterprise is working on product and processing innovation and offering in the market organic plant-based products for industrial application and developing new protein products for customers. Important aspect is development of unique recipes for different dairy, confectionary, drinks, snacks, meat produce and other products with each recipe custom made. The company is certified as gluten free enterprise helping to develop and cater to this fast-growing market niche.
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