Voluntary Report - public distribution

**Date:** 5/8/2007

**GAIN Report Number:** BU7012

BU7012

**Bulgaria**

**Wine**

**EU accession impact on the wine market**

**2007**

**Approved by:**

![](media/image1.wmf)Susan Reid

U.S. Embassy

**Prepared by:**

Mila Boshnakova

**Report Highlights:**

Bulgarian wine industry is progressing well with increased exports and
new investments in vine production and wine manufacturing. Wine imports
in 2006 were record high at about USD 10.0 million with a growing share
of bottled wines.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Sofia \[BU1\]

\[BU\]

#  

[Summary 3](#summary)

[Grapes production 3](#grapes-production)

[Wine manufacturing 3](#wine-manufacturing)

[Trade 3](#trade)

[Exports 3](#exports)

[Imports 4](#imports)

[Trends and prospects 4](#trends-and-prospects)

[Table 1. Wine trade in 2005 and 2006, MT
5](#table-1.-wine-trade-in-2005-and-2006-mt)

[Table 2. Wine trade by categories in 2004-2006, thousand liters
5](#table-2.-wine-trade-by-categories-in-2004-2006-thousand-liters)

#   {#section-1 .unnumbered}

# Summary

At end March, the Bulgarian wine industry celebrated its success with
its largest regional wine exhibition, Vinaria. This year, the exhibition
had 556 exhibitors from 35 countries or 39 more than in 2006. The
highest award, Golden Rython, was presented to the winery Sakar
Luibimetz for its Cabernet Sauvignon Merlot. Total 22 red and 3 white
wines received golden medals. Most awards were presented to small
wineries with newly planted own vineyards.

# Grapes production

Similar to other agricultural and food industries, the wine sector
enjoys a good growth in supply and exports but suffers from a lack of
consistent quantity and quality of raw materials.

As of today, Bulgaria has 73,000 registered farms with vineyards. The
country managed to get an approval from the EC for a vineyard ceiling of
153,000 HA. In 2006, the Ministry of Agriculture estimated the vineyard
areas at 135,600 HA. Although this area is considered sufficient for the
country, the newly planted vineyards over the last 2 years were still
not considerable: 3,422 HA planted under EU-SAPARD investment program
and 3,800 HA under national support programs or total 7,200 HA. Most
local vineyards are older than 20 years.

The active investment under pre-accession investment program SAPARD
resulted in 55 projects at an investment subsidy value of 34 million
Euro, of which 33 are completed as of today. National pre-2007 support
programs funded 165 projects for 42 million Euro. Most of these projects
targeted wine manufacturing, followed by new vineyard plantings.

In 2006, grapes production was 302,076 MT or 82,076 MT more than in
2005, and of better quality. Red varieties accounted for 62 percent of
total grapes. Merlot production reached 70,000 MT or 23 percent of total
grapes supply. Cabernet accounted for 49,000 MT or 16 percent. Among
white varieties, the largest was production of Misket, 33,000 MT,
followed by Rkatziteli, 32,000 MT and Muscat Otonel, 20,000 MT. Since
2004, the quantity of grapes purchased and processed by wine
manufacturers has been increasing, from 208,000 MT in 2004 to 256,000 MT
in 2006. The trend is expected to continue in 2007 and 2008.

# Wine manufacturing

The number of registered wine manufacturers in 2006 was 255 of which 174
were in operation in 2006. These wineries produced 171 million liters of
wine in 2006 (a growth of 11 percent over 2005) of which 11.2 million
liters of quality wines (20 percent growth compared to 2005).

# Trade

## Exports

Total wine exports in 2006 were 113.3 million liters (\$97 million) vs.
114.5 million liters in 2005 (\$94 million). The top export destination
in 2006 was Russia with 73 million liters, followed by the EU with 33.5
million liters. Other export markets were Poland (19 million liters),
Germany (4 million liters), UK (3 million liters), Czech Republic and
Sweden.

In 2006, Bulgaria was able to fill 27.2 percent of its export quotas to
the EU for bottled wines, 49.4 percent of its quota for bulk wines, and
98.1 percent of the quota for sparkling wines.

In response to industry appeal for government support, the Ministry of
Agriculture announced that there were 11.9 million Euro government funds
allocated for promotion of unique Bulgarian products, including wines,
to the world markets, from 2008.

## Imports

Wine imports in 2006 were record high with 230 percent growth in volume
and 102 percent in value: 5.4 million liters (\$4.2 million) in 2005 and
12.5 million (\$9.9 million) in 2006.

Imports of bottled wines in 2006 were 955 MT compared to 426 MT in 2005.
Major suppliers of bottled wine in 2006 were Chile, France, Italy and
Spain; and of bulk wine Macedonia and Moldova (see the tables below).
According to trade sources, Italian wines currently account for 50
percent of imported wines sales in quantity: they cover a wide price
range from 1.5 -- 2.5 Euro/bottle, and 5.0-7.5 Euro/bottle to much
higher prices. An advantage of Italian wines vs. French is their average
lower price and the fact that consumer easily memorize trade marks
compared to wine regions as is the case with French wines. Traders,
however, see the highest potential with New World wines from Chile,
Argentina and USA.

# Trends and prospects

During Vinaria, several trends in the wine sector were identified:

-   Wine market is growing: the size of the market was estimated at 47
    million liters and 111 million Euro in 2005 (source: Euromonitor),
    and between 5 and 8 percent (estimates) higher in 2006.

-   Wine distribution has improved and diversified: currently local and
    imported wines are offered at hypermarkets, discount stores,
    supermarkets, specialized wine stores and chains, and specialized
    wine bars and wine restaurants. In 2007, some retail chains
    introduced customs bottling at certain EU cellars to reduce final
    cost.

-   Wine imports from traditional wine supplies in the EU and the new
    world increased in 2006 and the competition with local wines will
    become tougher in the future.

-   Wine producers who produce larger volume of medium quality/price
    wine, mainly for the retail market (average price between 1.5 to 5
    Euro/bottle) face tough competition and some switch to production of
    high quality wine in smaller quantities. This trend is related to
    the fact that the growth is considerable in the most dynamic market
    segment, the one of premium quality wines. This segment, however, is
    still limited in size, less than 10 percent.

-   There is an increasing effort by the industry to find its own new
    unique market niche on the global and EU market. For this reason,
    new wineries prefer to invest in local vine varieties which are not
    grown in other countries. Such varieties include red Rubin, Mavrud,
    Melnik vine (shiroka melnishka loza), Gumza and Shevka.

> \- Small private wine operations which are flexible and can produce
> high quality wines for certain market niches prove to be a more
> appropriate model for the development of the industry in the near
> term.

## Table 1. Wine trade in 2005 and 2006, MT 

  ----------------- ----------------- ----------------- -----------------
  **Wine imports                      **Wine imports    
  (HS#2204) in                        (HS#2204) 2006,   
  2005, MT**                          MT**              

  Macedonia         3,633             Macedonia         5,849

  Serbia            719               Serbia            11

  Moldova           0                 Moldova           2,875

  Italy             236               Italy             602

  Hungary           222               Hungary           NA

  France            158               France            672

  Australia         75                Australia         NA

  Spain             62                Spain             575

  Chile             59                Chile             716

  Romania           0                 Romania           518

  Russia            51                Russia            380

  Austria           5                 Austria           89

  Ukraine           0                 Ukraine           69

  Germany           25                Germany           55

  Argentina         0.4               Argentina         28

  Holland           16.4              Holland           27

  USA               0.1               USA               0.7

  Total             5,400 (\$4.2      Total             12,539 (\$9.9
                    million)                            million)

  **Wine exports                      **Wine exports    
  (#2204) in 2005,                    (HS#2204) in      
  MT**                                2006, MT**        

  Russia            69,199            Russia            73,356

  Poland            20,163            Poland            18,896

  Germany           4, 963            Germany           4,014

  UK                3,934             UK                2,952

  Czech Republic    2,439             Czech Republic    2,298

  Sweden            2,232             Sweden            2,235

  Lithuania         1,752             Lithuania         1,269

  Japan             1,520             Japan             1,233

  Latvia            1,203             Latvia            884

  Estonia           746               Belarus           1,045

  Total             114,502 (\$93.8   Total             113,328 (\$96.9
                    million)                            million)

  Source: Bulgarian                                     
  Customs                                               
  ----------------- ----------------- ----------------- -----------------

## Table 2. Wine trade by categories in 2004-2006, thousand liters

+-----------------+-----------------+-----------------+-----------------+
| ######          |                 |                 |                 |
|  Imports of win |                 |                 |                 |
| es, 2004-2006,  |                 |                 |                 |
| thousand liters |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
|                 | 2004            | 2005            | 2006            |
+-----------------+-----------------+-----------------+-----------------+
| Bulk            | 278             | 4,186           | 11,337          |
+-----------------+-----------------+-----------------+-----------------+
| Bottled         | 348             | 426             | 955             |
+-----------------+-----------------+-----------------+-----------------+
| Sparking        | 129             | 53              | 77              |
+-----------------+-----------------+-----------------+-----------------+
| Total           | 756             | 4,665           | 12,369          |
+-----------------+-----------------+-----------------+-----------------+
| ######          |                 |                 |                 |
|  Exports of win |                 |                 |                 |
| es, 2004-2006,  |                 |                 |                 |
| thousand liters |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Bulk            | 19,228          | 24,211          | 20,621          |
+-----------------+-----------------+-----------------+-----------------+
| Bottled         | 70,555          | 88,964          | 90,958          |
+-----------------+-----------------+-----------------+-----------------+
| Sparking        | 495             | 999             | 663             |
+-----------------+-----------------+-----------------+-----------------+
| Total           | 90,279          | 114,555         | 113,343         |
+-----------------+-----------------+-----------------+-----------------+
| Source:         |                 |                 |                 |
| Ministry of     |                 |                 |                 |
| Agriculture     |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+