In Ieriķi, – 22 km from Sigulda, 17 km from Cēsis, 53 km from Smiltene and 46 km from Valmiera – there works a team of skilled craftsmen who love both nature and craftsmanship, using high-quality materials to create long-lasting products. The company's name (brand) is known in France, Germany, Austria, and Scandinavia. Our entrepreneur can! If anyone doubts this, I would ask them to read this interview.
Māris Danieks in conversation with Māris Liopa, Chairman of the Forest Certification Council of Latvia, and Pauls Rēvelis, editor of zemeunvalsts.lv
How has the company's work been affected by the situation observed over the last year in international markets, where timber prices first rise sharply, then seem to fall and...
International markets affect us in terms of the price of sawn timber. Currently, we process about 29,000 m3 of sawn timber (boards) per year, and we are increasing the volume of sales of produced goods every year; we have reached a turnover of €13 million per year. When I started working at the company five years ago, its turnover was €8 million. If one can say so: overall, we have done well so far, but January 2021 arrived, when we encountered serious difficulties. High demand for sawn timber in the UK, China, America, and other markets has reduced its availability and sharply increased the price. If in December we bought a cubic metre for €180, then in the first weeks of June, for example, materials were being offered “very favourably” at €460 and €550 per cubic metre. Currently, timber prices in the USA have decreased, but in Europe, they still remain too high.
In my opinion, local timber and sawn timber producers (in Latvia), especially LVM and large sawmills, must have and demonstrate a responsible attitude towards the local market. Given the small volumes of the Latvian market, the local entrepreneur needs to be “fed”, not traumatised. That would be reasonable and state-minded thinking and approach. The consequences of an unprofessional attitude can be very cruel; producer bankruptcies are possible, and many people could lose their jobs. The national economy would suffer significantly from this.
The price of a log may have increased by 20–30%, but the final price of sawn timber – is up by 200%. That is a very substantial rise! As I already mentioned, this cannot be considered long-term thinking because sawmills rely on the assumption that customers will not find other suppliers and will buy materials at a high price. In May of this year, I expanded the company’s sawn timber procurement team; we now have a specialist who will work exclusively with the Scandinavians. The Scandinavian region is famous in the industry for long-term cooperation and its stability; of course, prices are rising there too, but not as radically – the Scandinavian market is more conservative. In Latvia, Uldis Misiņš at the company “SWF Avoti” has good, long-standing experience working with the Scandinavians. Purchasing timber is an important issue this year, and often about 1/5–1/4 of the day is spent just resolving these matters. Another crucial thing – suppliers no longer sign contracts for three months as is customary, but for one, and even that is a stroke of luck. A large portion of timber suppliers prepare contracts for every single load; for the same volume of timber, the workload has increased tenfold. A lot of time is also taken up by developing future strategies because, for example, for clients in the French market, prices have to be given a year in advance... It is... yes, I would even say – horrible! The French do not agree to dynamic pricing, and that is that. Solutions must be found here, which require taking risks. In a stable economic situation, these can be well calculated, but in an unstable one – not.
Large European trading companies – our cooperation partners – are difficult to convince that the raw material is becoming so rapidly expensive and that prices must be raised. Clients want to sell products at the pre-determined price, so they actively insist on the terms of their contracts.
The French market. France as a trading partner is not typical for a Latvian company
Yes, 1/3 of our produced products are sold in France; our brand is visible in French supermarkets! That is a very great success.
The fact that we are both manufacturers and sellers is a great stroke of luck. Conversations with supermarket chains in France are not simple: at the negotiating table, there are us and companies with a turnover of a billion(s) of euros, for example, a company that owns a chain of 800 or 1,400 supermarkets. Such large companies have their own style of “thinking” and action; talking with them is not easy. The cooperation agreement is thick enough, as it should be, but... in fact, you only need to read a few pages in it – deliver on time, in a certain volume, to a certain address – when, how much, where. We have successfully passed the “exams” provided for in the contracts; we work in the French market: with quality, on time, in the required place and volume.
In France, we cooperate with our company’s representative (agent), who introduces us to future clients. The French do not speak English, often as a matter of principle. The agent speaks French, and step by step, year after year, we get to the big clients; the first big client was a food store chain similar to Maxima. Now we have more than 15 clients in France.
As I mentioned, the French are very inflexible regarding price increases: if you want to sell, sell, but prices will not change (in comparison, clients in the UK and Germany are more understanding). The next season will be “interesting” in this regard due to the aforementioned circumstances.
A strong company that has found its home in a rural region: to Sigulda – 22 km, to Cēsis – 17 km, to Valmiera – 46 km
The company is in its 30th year. Its founders in the 90s were: Egons (technical side), Klauss, Juris (sales), and Uldis (finance), which is why the name was formed from the first letters of their names – EKJU. “The beginning of everything” was selling wooden slats in Germany. Slowly, the conclusion emerged that they could do the sawing themselves; then followed the log house period, which “stopped”. Then a client in Denmark ordered parts for garden furniture, and while preparing them, the owners of EKJU realised that they could assemble the furniture themselves. Step by step, the company started producing furniture; the factory in Ieriķi, on Dārdu Street, developed, which over time became too small, so they purchased a production facility on Cecīļu Street. Around 2012, the situation in the company began to change, and the venture capital company BaltCap entered as an investor, which helped not only with funding but also with knowledge and bold decisions on how the company should develop. Currently, there are three owners: myself, the Sales and Marketing Director, and the Financial Director; we bought out the company a short time ago. If one can say so, the work and experience have been completely taken over by the new generation.
The company’s strategy is to grow. Hopefully, sawn timber prices will stabilise, and the consumer will get used to the final product prices. Furniture is a fundamental long-term item; these are not garden accessories, for which large price increases might perhaps not be “understood” by customers. I predict that wooden fences and posts will not be affected by price changes.
I assume there will be a small drop in turnover this year; of course, we will work so that there isn't. We do not intend to slow down development. We like to work and want to work; everything is in our own hands.
The recently held regional reform...
...does not affect us significantly. In the Amata municipality, where we were counted until now, we have had good and friendly relations with the municipal leadership. In Ieriķi, the infrastructure is in order, and the streets leading to both of the company’s factories are paved. Meanwhile, the local government has received great benefits through its residents (jobs) and taxes. I think the change of region from Amata to Cēsis will not bring significant changes to our work. We have built cooperation on friendly and honest foundations, because one must cooperate and live with everyone.
How many people work in the company?
Around 240. We regularly receive recognition from the Ministry of Finance for tax payments, both in the region and in the respective class of entrepreneurs. In 8 years, we have paid about 7 million euros in taxes, effectively one million per year, which is a significant sum. The volume of money that enters the region through our mediation is large; we produce a product with high added value, the product is sustainable, certified, and long-lasting. If a leg of a table we produced, for example, breaks, the tabletop can be used to make a shelf; in principle, furniture can be used for 30 years and more (therefore: until a new tree grows). The term “circular economy” is entering our daily life because our product is suitable for it. We plan to be a CO2-neutral company by 2050: for every bit of carbon we create, we “freeze” that much in our products. The market is there, demand is high, we must work.
People commute to work within a ~50 km radius – Ieriķi, Līgatne, Cēsis, Taurene, Sigulda. Administrative staff (about 30 in total) are from Riga, Valmiera, Smiltene, Sigulda, Cēsis. EKJU has a strong sales department; we have invested a lot in it, and now that investment is yielding results: our sales representatives work in the Baltic market, the UK, Germany, and Scandinavia; there are customer service specialists and sales assistants, because the volume of required documents is large, and working with them is time-consuming. For customer service, we have our own photo studio and sample workshop. One of the company’s goals is to pamper clients so that they feel happy. We are interesting to clients because we can provide all segments of garden furniture: furniture, accessories, garden houses, fences, garden stakes, etc... A representative of a supermarket chain comes, takes a look, and becomes happy because they have obtained the whole necessary product portfolio. There is no need to look elsewhere; we produce and supply the entire spectrum of products they need! EKJU offers 600 different products. The more complex the product, the more a client will want to cooperate with you and will also pay more.
Mostly, we work in one shift; certain machines operate in two shifts. Over time, as production volume increased, in some places we work three shifts and have significantly increased the volume of the second shift, where 25 people are already working. To avoid additional investments, we use the time when a machine is idle. I will add, however, that reaching an agreement with locals about evening shifts is not simple; people do not really want them. Employees come from abroad; we have even had 27 migrant workers from Ukraine and Moldova. Our cooperation partners prepare and organise the documents and other issues. Communication takes place in Russian; younger workers in the production sector have some difficulties with it, but they are learning and mastering it. I am very satisfied with the migrant workers; they have come here to earn money to support their families. Knowing the situation in Ukraine, it is clear that many are looking for earning opportunities outside their native land; many Ukrainians work in the neighbouring country – Poland. It has been heard that the Ukrainian economy is “held up” quite seriously by Ukrainian migrant workers. In Latvia, the population is decreasing, and the number of people willing to do simple jobs is also shrinking. A manufacturer must look for a solution. As I already mentioned, I am satisfied; there are no discipline problems, everything is happening. By the way, at first, I observed that locals treated migrant workers with a certain distance, fearing that the newcomers might somehow threaten them, but seeing that there are no such problems, the situation is already very normal. The good thing is that the locals, seeing what is happening, are starting to work better because they feel and see that they are not “lords and kings” and that it is possible to invite someone else in their place.
We are proud if one of our employees goes to work elsewhere, for example, a good salesperson changed jobs recently. Why be happy? They have been so well raised and trained that they can safely be considered our ambassador, because they only tell good things about us. I would call this the shark tooth principle – when teeth change, the newer ones are sharper. It is the same in the company – we are becoming even stronger. We benefit from it – we get new blood and new ideas. We become stronger: if one perceives and assesses the situation this way, there is no need to regret the departure of a specialist.
If we talk about potential “carrying” of information elsewhere, we have correct and strict employment contracts. But! I know that representatives of companies with a similar profile or even competitors have “borrowed” a thing or two from us. Our website has been imitated, and products have been copied. That forces us to think and create something new and even better! In tenders, we have noticed that competitors participate using our photographs... If they copy from us, there is indeed something to copy!
From the company’s first owners, a sense of goodwill has been preserved in the team – everything can be solved in a friendly manner: in case of complicated issues, loud scolding or shouting is not necessary. I call “problems” “opportunities”, so there are only opportunities, not problems, in the company (wide smile).
Of course, people tend to judge themselves or others: who has what education, who has what knowledge, what experience. We are happy to promote existing employees to higher positions. From the employee survey about the company, we concluded: our people highly value the company’s internal culture. For example, if someone decides to act foolishly or crookedly, colleagues say: “Stop! We don’t do that here; it’s not accepted!” The team is developing. Last year, three workers became heads of production sectors; recently, one worker was promoted to Deputy Technical Director. Employees see that they are valued and that we don’t look for people from the outside. In this regard, the SKILLED UP production manager training programme, organised by “Latvijas Finieris” together with the Latvian Woodworking Federation, as well as KIC training programmes in effective production management, are very useful. People really appreciate it when they are invested in.
The company’s salary system includes an annual assessment of employees: the possibility of increasing one’s salary is available to absolutely everyone. There are two employee assessment blocks, which are further divided into sub-criteria: productivity, efficiency, initiative, and work culture, and new competencies. Speaking of the latter, they are very important, especially at this time, for example: Kārlis gets sick, Iveta is ready to take his place. For a newly acquired competence, we increase the hourly rate. The salary level with us is determined by professionalism.
The Covid-19 time...
...has brought changes; last October, the factory did not work for three days because there was an outbreak of the virus (24 people fell ill). We introduced safety measures, and we worked. Every day, the HR department reports on the situation, because the sooner you find out, the sooner, if necessary, you can react. As far as I know, in an aircraft manufacturing plant, there is a small production meeting every hour; we have them every day. Of course, remote work has brought certain changes.
What has been the biggest obstacle for the entrepreneur during the Covid-19 time?
Small things of a local nature do not bother us and do not affect us much, if one can say so. I do not blame the Latvian government for anything; global events have bothered or affected us much more. For example, the increase in sawn timber prices in the markets mentioned at the beginning of our conversation. A change in people’s habits is visible; millions of people are now working remotely. They are starting to use accumulated funds for renovations; out-of-town and rural properties are being renovated, something is being rebuilt or built anew: all this “raises” the price of raw material and complicates my business. In the USA, young people are given interest-free loans for home construction; in England, huge tax breaks are granted to heat up the economy for the construction of new buildings. Why not buy expensive materials if the money “comes” for free?
Covid-19 “expanded” internet trade. Pilot projects started: clients were found who are ready to immediately purchase several loads of our products in internet packaging (goods dried and packed in a cardboard box); we had to set up a special climate-controlled warehouse, we created packing workshops, we adapted to the situation quickly. Since significant production and infrastructure improvements are needed, we submitted a new project application to LIAA to attract funding for the development of new products. We hope for investments of about one million euros next year; we are trying to use what is offered. Structural funds help to develop; it is a support. Of course, the company itself must have perspective and be financially stable.
You are a good example – a Latvian entrepreneur can!
Of course, they can! We created a new furniture brand “AMATA”: there is an “Ekju” product line and an “AMATA” line. “AMATA” is premium class garden and terrace furniture; it is an investment in the expensive segment. A Danish company developed the brand manual; we announced a tender for product design, which was won by Finns and Danes. The product is available on the web and in brand stores in Germany. Currently, we plan to “invest” in a salesperson who will only sell “AMATA” furniture.
Photographs by EKJU and zemeunvalsts.lv used