Why is the injection of millions from Saudi Arabia into the Estonian dairy sector good news for Lithuanian dairy farmers?

A bid of 135.25 million euros was made at the auction for the Paide and Põltsamaa plants of the bankrupt Estonian dairy processing company “E-Piim Tootmine”. Although the finalisation of the deal is still subject to procedural requirements, the market links this bid to the Saudi Arabian retail group “BinDawood Holding”. Even more significant for the Lithuanian dairy sector is the fact that, at the same time, “BinDawood” executives were in Vilnius discussing potential investments in our country’s dairy processing sector – ranging from a new factory to the acquisition of existing facilities.

This could be more than just another foreign investor entering the Baltic states. If “BinDawood’s” plans in Lithuania were to materialise, capital would enter the dairy market that not only has the funds to acquire or build a factory, but also has its own retail network in Saudi Arabia. In other words, the investor could control a significantly larger part of the supply chain – from production in Europe to the sale of the product in the Middle East.

The story of “E-Piim” is particularly telling in this respect. The process of selling off the bankrupt company’s assets, which began in June, was divided into two main lots: an initial price of 80 million euros was set for the Paide and Põltsamaa factories, whilst the Järva-Jaani plant – €8 million. On 14 August, it emerged that a bid of €135.25 million had been made for the assets in Paide and Põltsamaa. This is €55.25 million, or 69 per cent, more than the starting price. However, it is important to emphasise that this is the winning bid submitted at the auction, not the value of a transaction that has yet to be finalised.

This sum is impressive not only because of its size. „E-Piim“ was declared bankrupt in March 2026, but the creditors decided to continue production, as operating factories better preserve the value of the assets. During the bankruptcy period, the production units operated at up to 30 per cent capacity, whilst the Põltsamaa packaging unit operated at full capacity. The company also settled its accounts with milk producers and other partners on time. This means that a potential buyer acquires not only the buildings and technological equipment, but also the remaining production team, operational processes and the milk supply chain.

It is precisely the scale of production that is one of the most important aspects of this transaction. The new Paidė cheese factory can process up to 1,200 tonnes of raw milk per day. Theoretically, if it were to operate at maximum capacity all year round, this would amount to around 438,000 tonnes of milk per year. However, this figure should not be confused with actual processing volumes – the plant’s real capacity utilisation during the bankruptcy period was significantly lower.

Nevertheless, even the theoretical figure of 438,000 tonnes helps to explain why such a plant might be of strategic interest to an international investor. In 2025, more than 90 per cent of ‘E-Piim’s’ output was exported, and the company employed around 180 people. This is not merely a dairy plant intended for the Estonian domestic market – it is a production base designed for international trade.

Another key figure reveals the scale of “E-Piim”’s supply operations. The auction documents state that in 2025, the average daily milk intake was around 700 tonnes, with the raw milk being sourced from farmers in Estonia and Latvia. This means that even a volume significantly lower than the plant’s maximum capacity represented substantial demand in the Baltic dairy market.

However, the most important question for Lithuanian farmers is not how much the Estonian factory was bought for. The most important thing is what the new investor intends to do in Lithuania.

And this is where a potentially very interesting scenario emerges. On 13 August, the head of “BinDawood Holding” , Ahmad BinDawood, said in Lithuania that the company is considering several options: building its own factory, utilising existing Lithuanian infrastructure, or purchasing food products from Lithuanian companies. The Minister for Agriculture, Kęstutis Mažeika, confirmed that the investor is particularly interested in the dairy sector and that the possibility of acquiring all or part of the existing milk processing capacity is being considered.

These are essentially three different scenarios, the impact of which on Lithuanian dairy farms would vary.

If “BinDawood” were to build a new large-scale dairy plant in Lithuania, there would be additional demand for raw milk. Given the limited supply, a new buyer would potentially intensify competition amongst processors for milk and strengthen farmers’ bargaining position.

If existing processing capacity were to be purchased, the situation would be different. In that case, the mere arrival of a new owner would not in itself create additional demand for milk – what would change fundamentally in the market is the control over capital and business strategy.

The third scenario – the export of products manufactured by Lithuanian companies to Saudi Arabia. In this case, the impact on farmers would be even more indirect, as the investor would be purchasing a processed product rather than necessarily increasing its procurement of raw milk.

It would therefore be too bold to say that “BinDawood’s” arrival in Lithuania automatically means higher milk purchase prices. However, it would be just as wrong to underestimate the potential of such an investment. If the Saudi Arabian group were indeed to build a new factory and required a significant volume of Lithuanian milk, this could become a new competitive factor in the market.

This raises a practical question for Lithuanian farmers. If a new major buyer were to enter the market, the long-term milk supply contracts that currently provide stability for farms could become less attractive tomorrow if the new market entrant were to offer more competitive terms. Farmers should therefore keep an eye not only on the publicly announced investment figure, but also on the size of the raw material base the new investor is planning, the location of the factory, when it might start operating, and what products the milk would be used to produce.

In the case of “BinDawood”, another aspect is particularly important – this is not a financial investor who simply buys a factory and then looks for someone to sell the produce to. The company is one of the largest retail groups in Saudi Arabia. At the end of 2025, it operated 103 shops and employed more than 13,000 people. The Lithuanian Government has stated that a potential investment in dairy processing could be linked to supplying the Saudi Arabian market.

This could be a key part of the investment rationale. Cheese or other dairy products manufactured in Lithuania would not necessarily have to be sold on the Lithuanian market. They could be exported to Saudi Arabia via the investor’s existing retail channels. In that case, Lithuanian milk would not be the end product for the local consumer, but rather a raw material for the international supply chain.

The “E-Piim” deal in Estonia makes this strategy even more interesting. If “BinDawood” does indeed become the owner of the factories, the company will gain an operational EU production base capable of processing up to 1,200 tonnes of milk per day, as well as access to raw materials in the Baltic region. This potentially allows the Saudi Arabian retail group not only to import European dairy products, but also to control part of their production itself.

However, the story of “E-Piim” also holds an important lesson for the Lithuanian dairy sector. A modern factory alone is not enough. The Paidė factory was built with high investment expectations, but the company ultimately faced financial difficulties and went into administration. Even before the bankruptcy, there was public talk of liabilities to banks amounting to more than 100 million euros.

Therefore, the success of the new investor will depend not only on how much they paid for the factory. Three factors will be crucial: how much milk can actually be collected, what the production costs will be, and at what price the products can be sold on international markets.

For Lithuania, this situation is both an opportunity and a test. The opportunity is to attract new capital to a sector in need of investment, modernisation and higher export value. A test – whether Lithuania will be able to offer investors not only a site for a factory, but also a sufficient supply of raw milk, competitive energy, logistics, a workforce and a stable business environment.

For Lithuanian dairy farmers, however, the most important question remains unanswered: will the arrival of “BinDawood” will create a new buyer of raw milk, or merely a new owner of the capital behind an existing processing business?

The answer to this question will also determine whether the Saudi Arabian investment will provide a real competitive impetus at the gates of Lithuanian farms. If a new factory is built and it requires hundreds of thousands of tonnes of milk, competition amongst processors for raw milk may intensify. If an existing business is acquired, the impact will be quite different. If “BinDawood” limits itself to purchasing products from Lithuanian producers, the greatest benefit may not lie in the milk purchase price, but in the expansion of export markets.

It is therefore still too early to claim that Saudi Arabian capital is already driving up the price of milk in Lithuania. However, it is already possible to say something more significant: the Baltic dairy market has become attractive enough to international capital that an offer of 135.25 million euros has been made for one of the region’s most modern dairy production complexes, whilst the buyer would simultaneously be looking for other investment opportunities in Lithuania. If this happens, a new player may emerge in the Lithuanian dairy sector, one that will have not only capital but also its own sales channel in one of the wealthiest markets in the Middle East. And then the real competition will begin – not between factories, but over who owns the milk.