Economic Update
Bulgaria’s brewing industry, predominately controlled by international players, celebrated a remarkable year in 2006. The coming year will see the launch of a new brewery in the country and stabilising growth.

Beer consumption in Bulgaria rose by 31% year-on-year to 207,628 hectolitres in January, according to the Union of Brewers in Bulgaria (UBB). Consumption was in fact even higher, as not all brewers in Bulgaria are counted. Currently, only around 1.5% of the beer consumed in the country is imported. Overall annual sales in 2006 were boosted by good weather and breweries using a 2.5 litre polyethylene terephthalate (PET) bottle format. PET bottles provide value as they enable brewers to sell beer at a higher volume and they have become a big phenomenon in Eastern Europe. There is also a cultural tradition of sharing beers, which obviously a large PET bottle helps. Last year, 37% of all the beer sold in the country was in PET bottles.

“The brewing industry in Bulgaria is growing at an incredible speed,” Kamenitza general manager Johan De Smet-Van Damme told OBG. “The fact that you have three of the top brewing companies in the world here brings added value to the sector; it pushes participants to optimise the industry. Bulgaria is also one of the leading countries in developing PET – other countries in the region are copying the initiatives here.”

The market leader is Heineken subsidiary Zagorka, which reported a profit of almost $8m for 2006, 26% up from the previous year. The company sold 74,000 hectolitres of beer in January while Carlsberg Bulgaria, which doubled its year-on-year numbers, with 63,000 hectolitres of beer sold in the first month of 2007.

Kamenitza, owned by the world’s biggest brewing company, Belgium-based InBev, sold 42,000 hectolitres while Bulgarian-owned Boliarka VT came in fourth, selling just 23,000 hectolitres of beer. However, Boliarka had the biggest individual sales growth, of 35%.

The three top sellers – Zagorka, Kamenitza and Carlsberg Bulgaria – lead the market with 79% of the market share in the country.

The UBB expects beer sales to grow by 4 to 5% in 2007, which is standard for the industry in a maturing market. Per capita beer consumption in Bulgaria is higher than that of neighbouring Romania and other traditionally high Italy and France but lower than the leading beer-drinking countries of Germany, the Czech Republic and Ireland, although Bulgaria is the highest per capita consumer of Becks, which is brewed under licence by Kamenitza. Currently, 67% of sales are through retail outlets, but the Hotel, Restaurant and Catering (HORECA) sector is growing, boosted by tourism and rising incomes.

Brewers in Bulgaria have invested over $270m in the industry since 1994, with $35.6 million invested in 2005 alone.

Last week Zagorka, which brews the Zagorka, Amstel, Heineken, Murphy’s, Kaiser, Ariana and Stolichno brands, reported a 26% increase in pre-tax earnings to almost $7.85m, with a sales volume increase of 9%. The rise was attributed to reductions in fixed costs and a strong marketing campaign. The company has relocated the brewing of its Ariana beer from Sofia to its home city of Stara Zagora, significantly reducing costs.

Bulgarian brewer Pleven Brewery announced in late February that it would open its brewery in the northern city of Pleven this month. The brewery will produce an estimated 150,000 hectolitres of beer a year. InBev previously produced beer in the city, but relocated to Haskovo and Plovdiv in 2005. Pleven Brewery CEO Asparuh Lalev told local press that the brewery would distribute regionally at first, before possibly moving onto a national level. Bulgaria has a strong tradition of regional brewing, with several of its 27 brands taking the name of a city or region.

There is a growing call for Bulgarian beer to be exported, as industry observers say it is regarded as among the best in the region. However, according to the local media, brewers are reluctant to export as Bulgarian beer lacks a strong image abroad and international brewers fear that it would undercut their brands in neighbouring markets.