Case 8.2: Lilli Agro - organic straw pellets for animal bedding - Estonia

Detailed Information

Name of the company: Lilli Agro OÜ

Country: Estonia

Size of the business: 3 employees



The idea to create Lilli Agro arose more than ten years ago, when the owner of the company was engaged in the distribution of straw pellets produced in Lithuania to the Estonian and Finnish markets. As the owner of the business is also a farmer, he started using imported straw pellets as bedding for his animals.

The straw pellets were novel at that time and, according to the company, there were actually the best animal litter on the market so far. The straw pellet has good moisture and urine absorption properties. In addition, the use of straw pellets has a fast and efficient circular economy effect, thus saving the working time and space of the straw pellet user. The straw pellet decomposes quickly compared to other litter (sawdust, planer chips, etc.) and this allows the used straw pellet to be brought to the field immediately after a few months as an organic fertilizer.

Encouraged by the ease of use and good properties of straw pellets, in 2013, the company decided to start producing straw pellets itself. This activity was profitable and the company already had a market for their production from previous distribution and sales activities.

Main activities

The company’s main activity is mixed farming. Horses, cattle and grain are raised and feed is produced for own consumption. There is a total of 1 350 hectares of arable land. Thus, most of the raw material or straw is obtained from their own fields. The additional raw material is bought from local farmers. Years ago, the company provided agricultural services, but with the rapid growth of production of straw pellets, over time it no longer possible to provide agricultural ancillary services.

Straw pellets are mainly produced for bedding for horses. In the past, straw pellets have also been offered for bedding for birds, mulch, heating and pets, etc., which have been praised by customers, but the company decided in favour of the horse breeders’ market segment. Thus, the company has found a niche for its production. While in other countries most straw pellets are produced for biofuels, Lilli Agro produces straw pellets primarily for animal litter.


The main and largest segment for Lilli Agro’s straw pellets is horse breeders. Prior to the creation of Lilli Agro, the company was an intermediary for straw pellets produced in Lithuania. The pellets were bought in and resold mainly to the Nordic countries (Finland and Sweden). In this way, the company created a market for itself and had previous experience in the horse breeding field.

The sales of self-produced straw pellets are based on the direct contacts that have developed over the years. In order to find new customers, the company attends trade fairs, but recently the main emphasis has been on web marketing and direct contacts, i.e. the advertisement is sent directly to the customer’s e-mail address or by calling the customer. Customers’ own recommendations contribute a lot to sales.

The retail sale of straw pellets is organized by the company itself and the sale takes place directly to the final consumer. The company uses a logistics company through which direct deliveries are made to the end customer. Intermediate warehouses and intermediaries are not used, because the use of intermediate warehouses makes the product more expensive, which in turn has a detrimental effect on product sales.

Challenges and solutions

Although the use of straw pellets is widespread, the company remains in the equine market segment. One of the biggest challenges is Estonian climate and weather-related risks. The unpredictability of weather affects straw collection from the fields and the ability to fulfil the orders. Excessive moisture causes quality problems and, due to the droughty summer, the crop remains low, and it is not possible to collect enough straw from the field, creating new risks for the enterprise.

There is fierce competition in the straw pellet market, and those whose production costs are low remain competitive. This, in turn, requires a sufficient amount of arable land to produce enough straw and a sufficiently long and suitable harvesting time to obtain straw of sufficient quality. Lilli Agro has a sufficient amount of agricultural land, which gives it an advantage over some other farmers, such as Finnish farmers, for example, who have very small farmland. Farmers in neighbouring countries south of Estonia (Latvia, Lithuania, Poland, Ukraine, etc.) who have better preconditions for straw pellet production (larger production areas and longer harvesting time) have a competitive advantage, which makes the cost of straw pellet production lower. Therefore, in order for production to be competitive, the availability of raw materials and the location of final customers must be carefully considered. It is not worth transporting raw material very far, and since the production weighs a lot, it is also not worth selling pellets very far. All raw materials should be available close to the production and also customers could be located no further than in a neighbouring country. In addition, straw processing is energy intensive. It is not possible to make a pellet from wet straw, because in this case the granule will mould and product quality problems will occur.


The company has been financed by creditors’ investment loans for the purchase of a production line and, to some extent, support has been received from the ‘LEADER’ measure of European Agricultural Fund for Rural Development for the improvement of buildings. For the enterprise, the minimum investment for the optimal production quantity in Estonian conditions and for the acquisition of a new production line for straw pellet, was around 0.5 million EUR.

What makes this case innovative?

Case represents use of agricultural residues for circular production and sustainable products. Straw pellets are a pure, unadulterated natural product for animal bedding. The straw pellet has an excellent absorption capacity and is hygienic. Straw pellets are also supported by their ease of use and easy disposal.

Other related Business Cases

Case 8.1: Aloja Starkelsen – organic starch and plant-based products for home and industrial application – Latvia

Case 10.1: Est-Agar – sustainable enhancement of the red algae Furcellaria lumbricalis – Estonia

Case 10.2: SatiMed – wellness and health products from the hemp plant – Lithuania

Case 10.3: oceanBASIS – natural cosmetics and food from seaweed – Germany

Case 11.1: Borregaard – production of sustainable and environmentally friendly alternatives to petrochemicals – Norway

Case 11.2: Emsland Group – sustainability through ‘using nature to create’ – Germany 

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