Bulgaria-Wine Market Update

An Expert's View about Sales in Bulgaria

Posted on: 8 Mar 2013

The 2012 grape production is estimated lower due to harsh winter and related losses; however, quality is reported as very good.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 2/21/2013 GAIN Report Number: BU1311 Bulgaria Post: Sofia Wine Market Update Report Categories: Wine Approved By: Michael Henney, Agricultural Attaché Prepared By: Mila Boshnakova, Agricultural Specialist Report Highlights: The 2012 grape production is estimated lower due to harsh winter and related losses; however, quality is reported as very good. Wine production is estimated down modestly but still exceeding 2011 output. Exports are expected to be stable at 54 million liters, roughly 40 percent of total production, with one third destined for the Russian market. Although domestic consumption appears to have stagnated due in part to economic challenges, markets report steady growth in wine sales, both in volume and in value. The 2012 wine imports continued to expand with 21 percent growth in volume, to 6.04 million liters, and 14 percent growth in value, to 12.7 million USD (January-October). Market leaders remain Italian, French and Spanish wines. For the full year, 2012 wine imports are expected to exceed 2011 levels. General Information: PRODUCTION In 2012 farmers and authorities estimate grapes production much lower (10-30 percent) than in the previous year, with good to very good quality. This is due to the harsh winter (heavy snow and record low temperatures) in 2011/2012 which led to significant losses. Heavy winter was followed by a record summer drought and heat which was not favorable for yields but led to better quality of grapes in some regions. In general, 2012 crop in South Bulgaria was reported as better in terms of quality. The sugar content has been sampled at 26 percent in Northern Bulgaria to 28 percent in Southern Bulgaria. Vineyards area continued to shrink in 2012, although moderately, despite new investments. Due to smaller crop, and stock shortage, on-farm price increased to 0.40-0.50 Euro/kg, and in some exceptional cases to 0.60 Euro/kg. Demand for white grape varieties has been extremely strong. The Executive Vine and Wine Agency estimated that around 150,000 MT of grapes are purchased by commercial wineries and processed into wine in 2012, compared to 158,000 MT in 2011 due to shortage in stocks. Despite this reduction, the general trend has been for growth at commercial wine manufacturing vs. home wine making. In 2012 Italian, Czech and Slovak companies were interested to purchase white grapes and export to those countries for wine making purposes. Bulgaria Wine Production, Supply, and Distribution (1,000 liters) 2008 2009 2010 2011 2012* 2013* Production 179,600 161,700 142,600 122,400 125,000 120,000 (Eurostat) Imports Intra EU 4,911 4,324 6,949 6,163 6,280 6,400 Imports non-EU 2,028 1,049 1,315 817 820 900 Total imports 6,939 5,373 8,264 6,980 7,100 7,300 Total Supply 186,539 167,073 150,864 131,400 132,100 127,300 Exports Intra EU 30,507 25,596 25,096 33,551 34,000 30,000 Exports non-EU 57,499 27,874 25,152 20,514 20,000 20,000 Total Exports 88,006 53,470 50,248 54,065 54,000 50,000 Total consumption 98,533 113,603 100,616 78,400 78,100 77,300 Total Distribution 186,539 167,073 150,864 131,400 132,100 122,200 Note: 2012 annual trade data is estimated based on WTA January-October data; Wine production are based on Eurostat; 2013 data is FAS Sofia estimates Source: EUROSTAT, FAS Sofia Office Grapes production Since year 2000 the trend of reduction in total viniculture area has continued in 2011/2012. The same trend was observed for the cultivated vineyards while those that are abandoned have grown. The trend has not bottomed yet. In 2011, vineyard area, including uncultivated land, totaled 78,468 HA or 5 percent lower than in 2010. The area under wine grapes was 43,772 HA. This was lower than in the previous year by 7 percent. See Table 1. The share of cultivated/maintained vineyards to total has continued to decline in absolute and relative terms, from 79 percent in 2008 to 66 percent in 2011. In 2011, cultivated vineyard areas were 52,567 HA or 8 percent less than in 2010. Out of it, 46,145 HA (88 percent) were harvested, representing a reduction of 8 percent in harvested areas vs. 2010. See Table 2. Out of total area under wine grapes, the highest share belongs to “other” wines (47 percent) compared to area under grapes for wine with protected designation of origin (23 percent) and for wines of geographic identification (30 percent). (Classification is made based on EU Regulation 543/2009). See Table below. Area Production of Grapes Wines 2011 (Hectares) (Metric Tons) (Hectoliters) Wines with protected designation of 10,247 53,388 23,911 origin (PDO) Wines with protected geographic 12,993 67,693 422,655 indication (GI) Other 20,532 107,370 603,231 Total 43,772 228,451 1,049,797 Source: FAS Sofia Office In 2011, concentration of vineyards continued to be highest in South East region, 35 percent, and South Central, 33 percent. About 95 percent of vineyards are under wine grapes and 5 percent under tables grapes. Red varieties dominate with 62 percent of all harvested area (28,641 HA) vs. 33 percent (15,131 HA) of white varieties. Red varieties dominate in all regions with the exception of Northeast and Southeast. See Table 3. Grapes production in 2011 was 6 percent more than in 2010 of which 95 percent wine grapes and 5 percent table grapes. Yields grew substantially by 16 percent for wine grapes, by 67 percent for table grapes. See Table 4. The fragmentation in production and the high number of small vineyards and farms leads to problems with investment and marketing. Despite appeals for establishing producer organizations or marketing coops in order to have a more efficient contractual system with wineries, this does not occur and often leads to losses, non-harvested vineyards, lower grapes’ utilization, and fully abandoned vineyards. The EU system for “transfer of rights” among regions and producers is underutilized. Wine production The 2011 total wine production was reported at 119 million liters including commercial wine output of 105 million liters, compared to the same total wine production in 2010 (119 mln l) including 99 million liters commercial wine in 2010 (source: MinAg statistical bulletins). Eurostat data differs showing wine production at 122 million liters in 2011 and 143 million liters in 2010. In 2011, grapes processed into wine at commercial wineries was 6 percent more while grapes used for homemade wine declined by 35 percent compared to 2010. See Table 5. There is still no official data about 2012 wine production. In early February senior officials made statements that 2012 commercial wine output was 130.6 million liters or 25 million liters more than in 2011, as per the MinAg data. CONSUMPTION Wine consumption estimates vary widely from 46 million liters to 50-60 million liters, and some estimates go as high as 100+ million liters. The official statistics report wine per capita consumption at 5.2 -7.0 liters over the last ten years, or total about 45-54 million liters (population of 7.5 million). This data usually causes strong skepticism among wine experts. The differences come from home-made production, officially about 15 percent but often estimated up to 25 percent of total wine production, and not accurately counted by the official data. This is followed by underreported commercial production and sales. In addition, official data has difficulties counting the food service sector actual sales and consumption. The official data for per capita consumption for 2009-2011, shows a decline in wine consumption from 6.7 liters/ capita in 2009 to 5.5 liters/capita in 2010 and 5.2 liters/capita in 2011. At the same time, local production and commercial sales increase both in volume and in value. Trade data about commercial wine sales in 2011 was for 48.9 million liters compared to 48.3 million liters in 2010; in value the sales were reported at 382.3 million Bleva (196 million Euro) in 2011 compared to 361.1 million Bleva (185 million Euro) in 2010 (source: Euromonitor). The annual growth was 1.2 percent in volume but 5.8 percent in value. Higher annual growth rates in value have been typical since 2005. In early February senior government officials reported 10 percent growth in 2012 wine sales on the domestic market and total wine consumption at 102.6 million liters or 10 percent more than in 2011. The officials announced the opening of 11 new wineries with vineyards which will start operations in 2013. The trade forecast for 2012 and 2013 is for wine sales of 50.6 million liters and 51.5 million liters, restively. The difference between these sales and the consumption in the PSD estimates comes from the home made wines as well as from underreported sales. Over the last 2 years, trade sources indicate that the shares of underreported output and sales as well as home- made wine have been shrinking. On one hand, this is due to attractive grapes prices which stimulate sales rather than keeping the grapes to produce wine at home and sell it afterwards; on the other hand, home-made production is usually practiced by older generation in rural areas and this tradition is slowly but steadily fading away. Another trend is increasing demand for bulk wine sold by smaller wineries. These wineries make efforts to save on cost of aging wine in barrels, and on distribution, so they make bulk sales by costumer orders or sell directly in bulk from the winery. This allows them to keep prices competitive at 1.50-2.50 Euro/liter for low-medium quality wines. Accurate and reliable official or industry information about wine stocks is not publicly available. Industry estimates that wine stocks throughout the years 2006-2011 could have reached up to 25 million liters at certain years. Imported wines enjoy growing popularity on the market. They usually are targeted at the medium-high- end market segment. The competition between local wines and imports is especially tough at the medium market (price) segment where imported wines often are preferred due to consistency in quality, price-to-quality ratio, diversity, and better marketing. Trade reports that while imported red wines still account for less than half of consumption in this category, imported white wines account for 65 percent of sales. Traditionally local red wine is better in quality and this corresponds to consumer preferences. In general, white wine share to total wine has been steadily growing from 15 percent years ago to estimated 35 percent now and promising prospects for further growth. Since local production of white wine is limited, demand has been quickly met by imports. MARKETING Currently, there are several promotional programs with EU funds as follows: The promotional program targeting the U.S. market for Bulgarian and Greek wines (GI wine and PDO wine) which are also being promoted in China and Switzerland. The program was approved on June 28, 2012 by the EC, and is still at a very early stage. This project is managed by the Bulgarian Vine and Wine Chamber in cooperation with the Greek organization ENQABE SA (Wine roads of Northern Greece). The total budget is 4.633 million Euros including the Bulgarian part of 2.043 million Euros, and will last 3 years from September 2012 to September 2015. Wine (GI wine and PDO wine) to Russia and China (March 2012- March 2015), Regional Vine and Wine Chamber Trakia in partnership with Romanian Dobrudga Wine Makers Union, budget 1.6 million Euros. No absorption of funds yet. Wine GI origin of PDO wine from Southern Europe/Mediterranean region (Bulgarian, Romanian and Greek) to UK, Germany and Italy (2013-2016, approved in 2012); managed by Regional Vine and Wine Chamber Trakia in partnership with Greek Wine Makers Consortium and Italian Regional Enoteca Emilya Romania; budget 5.2 million Euro for 3 years. In February 2013, the Ministry of Agriculture approved a total 2.5 million Euro (30 percent from the state budget, 20 percent from the beneficiary, and 50 percent from EU) funding of 2 years promotional program for Regional Vine and Wine Chamber Trakia to promote wine in Singapore, Thailand, and Vietnam. The Ministry of Agriculture and the National Vine and Wine Chamber make efforts to promote also wine tourism among foreign guests, relying on stable annual growth in tourists. Promotional funds are targeted in this direction as well as through encouraging of regular tourist businesses to expand adding wine tasting tours. TRADE Exports Bulgaria is a net wine exporter but exports have been declining in absolute terms due to plummeting local supply. In 2011 exports totaled 54 million liters (67 million USD), or 8 percent higher in volume and 6 percent higher in value than in 2010. Russia has been the main market for the Bulgarian wines, typically bottom-end wines, which usually earn low margins. In 2011, it accounted for 30 percent of total value exports and 35 percent of volume exports, followed by Poland with 25 percent and 26 percent shares, respectively. Exports to Russia in 2011 declined by 17-18 percent both in terms of volume and value compared to the previous year. Trade data shows that 2012 exports (January-October) totaled 46 million liters (51.4 million USD) or 6 percent more than in 2011 but 6 percent less in value. Exports to Russia were at 15 million liters (30-31 percent of total in value and in volume), followed by Poland (21 percent) and Czech Republic (9 percent). In 2012, select wine makers had good first/second shipments to Asian markets (China, Japan, Hong Kong, Korea). Thus, exports to China grew by 25 percent/volume (Jan-Oct 2012). In early 2013, government official reported growth in 2012 annual exports of 2 percent, with 45 percent delivered to the Russian market. China, Vietnam, and other Asian markets are increasingly in the focus of the local wine exporters and government officials. Imports Imports have seen a decline due to the economic slowdown in 2009 and 2010 but rebounded in late 2011 and 2012. WTA data shows that in 2011 imports dropped by 15 percent in volume to 6.98 million liters but grew 23 percent in value to 15.1 million USD. Italy traditionally was a supply leader with 57 percent market share in volume and 35 percent of value imports. France followed with 21 percent share in value imports but only 7 percent in volume due to high average price. Spain, in opposite, had 12 percent in volume imports but 5 percent in value imports. In 2012 (January-October), wine imports growth continued with positive 21 percent in volume to 6.04 million liters and 14 percent in value to 12.7 million USD. French and Italian wines were leaders. Most likely 2012 wine imports will exceed 2011 levels. Table #1. Area under grape cultivation in Bulgaria, 2000-2011, HA Areas under grapes in Bulgaria, 2000-2011, HA Year Cultivated area at Not cultivated Total area under grapes farms area 2000 153,200 7,271 160,471 2001 146, 995 4,190 151,185 2002 129,998 15,200 145,198 2003 103,019 28,050 131,069 2004 95,551 34,029 129,580 2005 94,724 32,118 126,842 2006 85,320 43,537 128,857 120,341 (including 113,700 HA wine grapes, 2007 97,387 22,954 Eurostat) 110,816 ( incl. 107,400 HA wine grapes, 2008 88,570 22,246 Eurostat) 101,434 (incl. 97,900 HA wine grapes, 2009 74,018 27,416 Eurostat) 82,675 (incl. 46,800 HA wine grapes area, 2010 56,968 25,707 Eurostat) 78,468 (incl. 43,772 HA wine grapes area, 2011 52,567 25,901 Eurostat) Source: MinAg Bulletins Table #2. Vineyards distribution in the country, 2011 Vineyards locations in the country, 2011 Regions Total area, HA Harvested area, HA Harvested area, percent North West 4,950 4,150 84.0 North Central 3,302 2,243 68.0 North East 4,949 4,211 85.0 South East 18,249 15,687 86.0 South Central 17,442 16,511 95.0 South West 3,675 3,343 91.0 Total 52,567 46,145 88.0 Source: MinAg Bulletin, #185, March 2012 Table #3. Variety structure of vineyards in 2011 (based on harvested area) Variety structure of vineyards in 2011 (based on harvested area) Area, HA Share, percent Red vine varieties 28,641 62.0 White vine varieties 15,131 33.0 Table grapes 2,373 5.0 Total 46,145 100 Source: MinAg Bulletin, #185, March 2012 Table #4. Grapes production and average yields in Bulgaria, 2006-2011, HA Grapes production and average yields in Bulgaria, 2006-2011, HA and MT Year Grape Wine grapes Table Average yields for Average yields for production (MT) grapes vine grapes table grapes total, MT (MT) (Kg/Ha) (Kg/Ha) 2006 336,128 293,610 13,563 4,494 4,383 2007 376,663 341,818 13,641 4,855 5,460 (324,100 Eurostat) 2008 369,430 345,650 17,889 4,390 7,305 (307,600 Eurostat) 2009 281,302 255,257 17,344 4,944 5,315 (245,400 Eurostat) 2010 230,198 210,398 7,989 4,495 3,039 (210,400 Eurostat) 2011 243,839 228,451 12,080 5,219 5,091 (228,500 Eurostat) Source: MinAg Bulletins Note: Total grapes production includes grapes for self-standing vines (in 2011 this class totaled 3,308 MT) Table #5. Wine production, 2007-2011, liters Wine production, 2007-2011, liters 2007 2008 2009 2010 2011 Change (,000) (,000) (,000) (,000) (,000) 2011/ 2010 Wines with protected -22 percent 7,212 6,559 4,225 3,048 2,391 designation of origin - Red and rose 5,700 5,075 3,857 2,709 1,995 - White 1,512 1,483 669 340 396 Wines with protected +10 percent 125,302 130,124 42,472 38,396 42,266 geographic indication - Red and rose 64,542 67,573 28,541 21,589 26,683 - White 60,759 62,551 13,932 16,807 15,582 Other 1,440 1,211 74,583 57,838 60,323 +4 percent - Red and rose 1,041 839 37,816 29,923 32,570 - White 399 373 36,767 27,915 27,753 Total commercial +0.3 w 133,954 137,894 121,580 99,282 104,980 ine percent - Red and rose 71,284 73,487 70,214 54,221 61,248 - White 62,670 64,407 51,367 45,061 43,732 - Grapes must 4,138 1,086 2,981 3,691 4,844 Homemade wine 41,541 22,744 18,159 19,447 13,867 Total wine 179,633 160,624 +0.09 139,740 118,729 118,847 percent Total wine Eurostat 175,700 179,600 161,700 142,600 122,400 Source: Ag Statistics Bulletins Note: In 2009, the MinAg changed its methodology and began to report wine production in different categories, therefore data after and before 2009 about regional and table wines, and sparkling and specialty wines is not comparable. Table #6. 2012 Wine Exports (January - October) Trade Data Bulgaria Export Statistics Commodity: 2204, Wine Of Fresh Grapes, Including Fortified Wines; Grape Must (Having An Alcoholic Strength By Volume Exceeding 0.5% Vol.) Nesoi Year To Date: January – October Partner 011 2012 Coun Uni 2010 2 t try USD Quantity USD Quantity USD Quantity World L 51378991 41441077 54914786 43851016 51400926 46419465 Russia L 21067081 20467415 17240462 16008796 15818851 14654199 Poland L 13081712 10335796 13910338 10714636 10929847 10297203 Czech Republic L 2627027 2030345 3894201 3100644 4758418 4452884 Romania L 448565 651613 2988525 5306335 3705247 6541062 Sweden L 2623039 1430834 2752693 1389512 2278382 1326953 Italy L 32643 8530 297825 411007 2013330 2425034 Germany L 1450616 780462 2025344 814042 1904207 867562 United Kingdom L 3542156 2175972 3170194 1778941 1586306 958963 Belgium L 1261997 755308 1561510 769925 1397776 711957 China L 370584 117096 878657 303895 1237766 378386 Lithuania L 874431 663195 601310 410684 723368 489964 Japan L 253819 138740 652547 282582 687478 230307 Greece L 46768 35748 308445 243755 486701 939561 Iraq L 49285 26294 295931 150830 343466 158420 Mongolia L 317668 195960 489891 321988 328549 226277 Netherlands L 158335 72832 290609 116293 308083 126287 United States L 334830 163526 306617 96391 289275 122799 Source: World Trade Atlas Table #7. 2012 Wine Imports (January-October) Trade Data Bulgaria Import Statistics Commodity: 2204, Wine Of Fresh Grapes, Including Fortified Wines; Grape Must (Having An Alcoholic Strength By Volume Exceeding 0.5% Vol.) Nesoi Year To Date: January – October Partner 2011 2012 Coun Uni 2010 t try USD Quantity USD Quantity USD Quantity World L 7771238 4450816 11153543 5003529 12695849 6045777 Italy L 2431298 1831129 3790910 2720208 4810896 3292423 France L 1495980 183895 2284783 364271 2707370 445624 Germany L 489503 207589 940063 256549 1102695 431449 Chile L 644718 179251 903562 231812 902617 221182 New Zealand L 12863 2484 332327 78177 467904 96567 United Kingdom L 139817 18470 267471 33038 437059 75329 Netherlands L 432765 44268 603939 65235 433859 50373 Spain L 382432 287320 652095 719942 432276 197919 Macedonia L 302864 846302 83513 131186 222890 419156 South Africa L 206771 54649 194549 93250 201572 50976 Argentina L 158859 45000 205105 51325 163348 40322 Moldova L 25238 46235 24362 25125 161779 362433 Czech Republic L 304637 297862 106452 35549 134797 82957 Source: World Trade Atlas Table #8. 2011 Wine Imports (Annual) Trade Data Bulgaria Import Statistics Commodity: 2204, Wine Of Fresh Grapes, Including Fortified Wines; Grape Must (Having An Alcoholic Strength By Volume Exceeding 0.5% Vol.) Nesoi Calendar Year: 2009 – 2011 Partner Coun Uni 2009 2010 2011 t try USD Quantity USD Quantity USD Quantity World L 11563697 5372899 12237514 8264886 15118310 6980515 Italy L 3890263 2261973 4608601 4789170 5335156 4015979 France L 2018268 450879 2520708 354112 3278565 538583 Germany L 498955 159531 570092 238193 1330319 417861 Chile L 1120341 715810 783932 215595 1209455 311446 Spain L 804928 604878 560113 539577 861950 841156 Netherlands L 522571 69886 517213 53158 719171 76989 New Zealand L 222928 28417 12863 2484 332327 78177 United Kingdom L 59588 7354 184751 23841 323924 45631 Argentina L 446811 126198 216016 62188 252233 63476 Greece L 84683 18206 74743 18484 203204 66608 South Africa L 289598 73906 301098 77302 199634 94605 Slovakia L 28288 12600 0 0 183367 45068 Czech Republic L 152350 65330 417564 332680 123590 44157 Austria L 400635 159130 155688 114899 122434 30375 Macedonia L 80212 13629 348463 870131 116826 148844 United States L 0 0 71640 6311 102627 10342 Source: World Trade Atlas Table #9. 2011 Wine Exports (Annual) Trade Data Bulgaria Export Statistics Commodity: 2204, Wine Of Fresh Grapes, Including Fortified Wines; Grape M ust (Having An Alcoholic Strength By Volume Exceeding 0.5% Vol.) Nesoi Calendar Year: 2009 – 2011 Partne 2009 2010 2011 r Un Count it USD Quant t USD Quantity USD Quanti ity y ry Worl 69586 53470 6312267 5406519 d L 766 747 7 50248688 66709173 9 Russi 26711 25678 2430782 1876324 a L 419 046 8 23397673 20366299 3 Polan 18781 13874 1669839 1389686 d L 616 079 4 13065663 17148938 4 Czech Repub 27261 20542 lic L 59 87 3582262 2882939 5130736 4173807 Unite d King d 28544 19915 om L 89 44 4185017 2562439 4288352 2377112 Roma 24260 10963 nia L 28 72 756455 946271 3584551 6445164 Swed 39837 20087 en L 73 16 3115874 1693709 3190153 1633543 Germ 21868 14604 any L 34 31 1834247 1077088 2392100 1061256 Belgi 16233 91429 um L 43 3 1731736 963579 1796435 903341 China L 43215 13411 560349 151379 984078 334480 8 0 Lithua 11189 79609 nia L 04 9 1151970 863565 897377 573029 32438 20823 Japan L 1 0 330044 154347 751006 300241 Source: World Trade Atlas
Posted: 08 March 2013

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