World Intellectual Property Organization

Traditional Knowledge as a Guide to Success

Vilniaus Duona, Lithuania

Over 130 years ago in Vilnius, the capital city of the Republic of Lithuania (Lithuania), a bakery made of brick, fueled by wood and powered by steam was opened. Established in 1882, within three years the small business – later known as Vilniaus Duona UAB – was the most productive bakery in the city.

Rye bread-making in Lithuania has a long and illustrious history (Photo: Flickr/John Loo)

By the turn of the 20th century, the bakery was supplying most of the local population’s demand for bread. This early success propelled the company’s growth to 15 bakeries by mid-century. With the introduction of new facilities four years later, production doubled. A decade later, what would become the company’s flagship brand – vilniaus – was created.

By the time Lithuania liberalized its economy in the 1990s, the now small and medium sized enterprise (SME) had established a number of brands and adopted a new corporate name – Vilniaus Duona. Soon thereafter, the SME expanded in the Baltic Region, ultimately leading to its incorporation in 2002 into the Vaasan Group; based in the Republic of Finland, this company is one of the largest bakeries in Northern Europe.

As of 2013, Vilniaus Duona had created a number of award winning brands – supported by a vast intellectual property (IP) portfolio – and ensured a market leading position within the baking industry of Nordic and Baltic states.

Traditional knowledge

Bread-making in Lithuania has a long and illustrious history. The skill was passed down as traditional knowledge via a special ceremony in which a mother would give her bread-making tools to her eldest daughter. The daughter, proud to have inherited an honorable skill, would bake bread, as part of the ceremony, that would be enjoyed by family and friends.

Traditionally in Lithuania, rye bread (ruginė duona in the local dialect; a type of bread made from the flour of rye grain), has been baked in two varieties: light, scalded flour bread; and, dark, naturally fermented bread.

Scalded flour rye bread, which was devised in the early 20th century, is made when part of the dough is cooked or scalded in hot water. The heated portion of dough is then allowed to cool, before being added to the rest of the dough. Following this, the bread is kneaded and fermented for up to three days and then baked in an oven.

Made of several ingredients including fermentation starter (or, simply, starter: a preparation to aid fermentation), caraway fruit (commonly called caraway seeds, a product of Carum carvi, a biennial plant) and dried cabbage, the bread has a texture that is comparatively soft and chewy; it is also light colored.

A traditional festival in Vilnius, pictured (Photo: Flickr/Chad Kainz)

By contrast, dark rye bread – which dates to before the 20th century – is made via a long kneading process, followed by leavening (the process of adding yeast to dough) and fermentation – the latter, typically, lasts between 10 and 12 hours. This process produces sourdough – dough made of naturally occurring bacteria and yeast.

Normally, no preservatives or additives are added to the production process for dark rye bread; only natural leavens are used – including coarsely ground rye flour, starter and water. As a result, this bread is darker in color and stronger in flavor than scalded rye bread.

Both scalded rye bread (called Plikyta rugine duona in Lithuanian) and dark rye bread (known as Juoda ruginė duona in the local dialect) have been utilized in Lithuania during traditional agrarian festivals and for mythological purposes. The bread, for instance, is often placed within the foundations of a new building because, it is believed, this act protects the structure against natural and supernatural calamity.

Rich in health qualities (including proteins, vitamins and carbohydrates) and deeply ingrained in the country’s culture and rituals, rye bread – eaten during breakfast, lunch and dinner in Lithuania – is one of the country’s staple foods.

Inspired both by the bread’s rich tradition and health-providing qualities, Vilniaus Duona has developed a strong reputation for baking the product. As of 2013, the company produced a wide variety of bread and other products (such as confectionaries) via modernized production processes and traditional recipes.

Research and development

To maintain its competitive edge, Vilniaus Duona has invested in new research and development (R&D) initiatives and on enhancing the technical knowledge base of its staff, including upgrading their awareness of industry and consumer trends. At the same time, the SME has modernized its production processes and logistics strategies in order to meet increasing demand for its products.

Historically, the company’s bakeries relied on wood-stoked baking ovens. This all changed when a major restructuring was implemented (between 2004 and 2008), ushering in modernized production processes and equipment including machines for cooling, slicing and packaging bread.

The SME relies on R&D work and industry trends (Photo: Flickr/Rebecca Siegel)

Indeed, during part of this process (between 2002 and 2003) the company invested 10 million Lithuanian litas (LTL, approximately US$3 million) in production facilities, logistics and information technology. A similar amount was invested over the 2004 to 2005 fiscal year. As part of this investment, the company established a new bakery in Vilnius (2002) and modernized another production facility located in Panevėžys, one of the largest cities in Lithuania. Concurrently, three old and inefficient bakeries situated in Vilnius were closed.

Unproductive product lines – such as pasta, sweet rolls, cakes, and muffins – were also discontinued in this period, leading (in 2003) to a reduction by one fifth of the company’s products. Another strand of the restructuring was to implement modern quality assurance standards and logistics strategies, including introduction of up-to-date logistics software to manage the company’s delivery systems.

Further to enhancing its production capacity, the SME has made it a priority to support its R&D staff (including food technologists) via refresher courses that regularly updates their knowledge and skills base. As a company spokesperson said, “We value and respect our team members. Their knowledge, skills and experience are the most significant capital of the company, which is being continuously invested into.” To this end, the SME has organized both internal and external training programs for its staff.

An extensive business library, expert consumer surveys and other company literature, including Vilniaus Duona News (an in-house publication), is relied on to keep employees abreast of the latest developments both within the company and in the industry. A survey of consumers carried out in 2011, for example, showed that both classic and new products produced by the company occupy the top nine places among bread items in Lithuania.

This information has been relied on by the company as a guide for staff training, ensuring that employees are aware of – and proud of – the SME’s strongest brands.

Vilniaus Duona has also relied on expert technologists who carry out R&D work into trends in the industry, including investigations in collaboration with the University of Eastern Finland, an institution with research expertise in health and wellbeing and new technologies and materials. The SME has also been the beneficiary of the Vaasan Group’s R&D budget, which was 2.6 million Euros (US$3.4 million) in 2011 and encompassed 35 R&D staff.

As of 2012, Vilniaus Duona was set to build a new plant in Vilnius estimated to cost 35 million LTL (approximately US$13.5 million). In the same year, the company had 400 employees and managed three major (consolidated) bakeries.

Branding and commercialization

Seeking to thrive in a competitive and international market place, Vilniaus Duona has developed a wide range of quality products that have been strategically distributed via modern logistics systems. These goods, moreover, have been supported by a vast portfolio of brands and commercialized successfully in collaboration with a number of vendors and partners. As a result, the SME’s share of the market in Europe and North America has expanded while its products and brands have gained a growing reputation for excellence across Europe and other parts of the world.

Vilniaus Duona has over 90 products including a variety of bread (Photo: Flickr/Aurimas Raciukaitis)

Vilniaus Duona produces over 90 products, the majority of which are various kinds of bread: dark rye bread (8 kinds); light rye bread (6 types); grainy rye bread (8 types); plain wheat bread (9 varieties); wheat breads with additives (2 types); sandwich breads (5 varieties); and buns (3 kinds). Some of the SME’s other products include groceries; pastries – such as wafers (6 kinds); bread crumbs (5 types); and confectionary. The bakery also produces lavash – a thin, flat kind of traditional bread that is used to make a wrap for a kebab.

These products, furthermore, are supported by a number of brands. Indeed, there are over 30 bread brands alone – including: vilniaus duona (the SME’s flagship brand); palangos duona (rye bread made of natural ingredients); mociutes duona (sliced, rye tin loaves); agostos (dark rye bread loaves); goja (wheat breads); urte (a bread with corn and butter added); and toste (a popular bread brand).

Commensurate with its many products and brands, the company ensures its reputation in the market by developing quality products based on healthy ingredients. To this end, Vilniaus Duona relies on traditional Lithuanian recipes for baking bread. The SME’s vilniaus duona brand, for instance, is a product made of a combination of various grains, seeds and a bun.

Not only are the bakery’s quality products inspired by tradition; they are also underscored by modern quality assurance standards. For its production and distribution facilities, Vilniaus Duona has implemented ISO22000 (which deals with food safety), a standard established by the International Organization for Standardization (ISO) – an international standard-setting body for businesses.

The SME, in addition, keeps a keen eye on market trends in order to remain at the cutting edge of its customers’ desires. Via market surveys, for instance, the company was able to invest in creating cut, as opposed to uncut, bread and attractively packaged, as compared to open or uncovered, bread products.

Aligning its branding strategy to meet consumer demands, the SME invested in technologies for slicing bread and for creating colorful product packaging that could be easily distinguished in a competitive bread products market.

Modernized logistics strategies helps the SME meet increasing demand (Photo: Flickr/Ian Britton)

To bring its vast array of freshly baked products quickly to market (the SME can produce over a quarter of a million products in a 24 hour period), Vilniaus Duona relies on state of the art logistics systems and distribution networks. In this way, the company can reduce costs (delays, which lead to higher fuel costs, can be expensive), save time, streamline delivery routes, and supply a large network of distributors – which comprise more than 1900 clients and stores in several countries around the world.

With over 100 delivery routes to navigate each day, the company’s sophisticated logistics systems (including cross-dock stations – where inbound deliveries can be transferred quickly onto outbound services; delivery trucks; and distribution centers) ensures that its products reach the consumer while still fresh. Most of the SME’s logistics is managed via a specialized center, which was purpose-built via an investment of 10 million Euros (approximately US$13 million), in the Lithuanian capital.

As a company spokesperson said, “We are proud of our new Bakery and Logistics centre in Vilnius. As a clear market leader in Lithuania we want to supply our customers with the best performing products and brands.”

Trademarks, industrial designs and trade secrets

Having developed many valuable products and brands and gained a strong position in the market, Vilniaus Duona is keen to ensure its hard-earned reputation for quality by relying on the IP system. The company has developed a vast IP assets portfolio which includes over 61 registered trademarks and designs.

The SME’s corporate identity – Vilniaus Duona – was secured in Lithuania via a trademark registration at the State Patent Office of the Republic of Lithuania (SPOL). A number of Vilniaus Duona’s brands have been secured at SPOL including Urtes, Agota, Klasika Vilniaus Duona, Viniaus Duona Visos Lietuvos Duona. Nuo 1882 M., VAIKIŠKAS Keksas VILNIAUS DUONA, and, LEGENDINĖS DUONOS IŠSAUGOTOS.

One of Vilniaus Duona's registered trademarks
(Image: SPOL)

In addition to securing its brands and corporate identity nationally, the SME has developed IP assets in one of its most lucrative markets – the European Union (EU). Vilniaus Duona registered trademarks for Agota (#52867), Legendines Duonos Issaugotos (#62694), and Urtes (#64191) via the Office for Harmonization in the Internal Market (OHIM). The SME has registered at least 22 trademarks with variations on the words Vilniaus Duona via OHIM.

Moreover, the company has registered a number of product designs via SPOL – including an image of a half-broken piece of bread that is intersected by a flowing red line, which divides the graphic into an upper blue and lower grey section. Such designs have been utilized on the company’s product sleeves in order to make the items attractive and distinctive; the upshot has been increased brand recognition for the SME.

In addition to utilizing trademarks and product designs, the company has relied on trade secrets to ensure the security of its traditional recipes and gain a competitive advantage on industry rivals.

IP management

With close to a hundred products and brands and a number of IP assets to support them, Vilniaus Duona has had to develop a robust IP management strategy. Following the conclusion of an annual audit of all of the company’s IP (including taking decisions as to the relative value of each asset for the SME while also monitoring the IP assets of competitors), some of the SME’s trademarks are registered in one market, say nationally, while others are registered in a different market, such as the EU.

To protect the company’s trade secrets, moreover, Vilniaus Duona relies on a combination of strategies, apart from confidentiality and non-disclosure agreements for staff, including using technology – such as document management systems. In this way, the company is able to restrict access to its knowledge capital to a need-to-know basis.

In charge of the company’s IP management system, a team of lawyers and a separate IP manager ensure that the SME’s intangible assets are kept up-to-date and protected.

Business results

With a long and illustrious history stretching back generations, Vilniaus Duona has emerged as a modern enterprise reaping impressive growth and business results in a competitive international market. In addition, the SME’s products and brands have become award-winners.

Vilnius, where the SME opened a bakery over 130 years ago (Photo: Flickr/FromTheNorth)

The SME’s bociu product (sweet and sour bread) won the gold medal in a competition managed by AgroBalt (1996) – an international agricultural foods exhibition based in Lithuania. Two years later, the same product placed first in the dark rye bread category of the Best Lithuanian Bread competition.

Vilniaus Duona’s agostos bread, meanwhile, received the Lithuanian Product of the Year award (2005 and 2009) and the most popular bread award (2009) by the Association of Trade Enterprises of Lithuania. The SME’s urtes 7 grudu product (a loaf of bread), moreover, won the gold medal for the Lithuanian Product of the Year (2011), an award by the Lithuanian Confederation of Industrialists.

As well as winning awards, the company continues to expand and deliver impressive business results. Not only did Vilniaus Duona have revenues of 34.5 million Euros (approximately US$46 million) in 2008; in 2012 the company launched a new product – called Kepamama, a pre-baked bun that customers can easily reheat before consuming – and celebrated its 130th anniversary.

More Than a Slice of History

Relying on Lithuania’s traditional knowledge of bread making, Vilniaus Duona developed award winning brands that have expanded into new products with a distinct presence in the market. With a well-managed branding and commercialization strategy supported by an impressive IP assets portfolio, the company shows how a remarkable return on investment, inspired by tradition, can be achieved.

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