A number of new brands are about to appear on the coffee shelves of Bulgarian food stores, jostling for a share of the local market which is growing by 2-3% annually. Coffee makers estimate domestic consumption at 13,000-14,000 tons annually, excluding the instant coffee brands of companies like Nestle and Kraft Foods. Kraft brands Nova Brasilia and Jacobs dominate retail sales, followed by Elite, Douwe Egberts, Tchibo and Lavazza. Lavazza controls 70% of sales at restaurants and cafes, followed by Spetema and Elite. New competition will come from Kraft brand Mastro Lorenzo which started selling in Bulgaria recently. The Turkish coffee brand Meltem will appear on the Bulgarian market soon. The blend, which will be packaged in Turkey, was created especially for the Bulgarian market and will be medium-priced.
Source: Dnevnik (14.02.2006)

Food industry is a traditionally strong branch of the Bulgarian economy. It depends to a great extent on the development of the agriculture as it is the source of raw materials for the industry but is also dependent on the machine building and the chemical industries as well as on the transport sector. There are several basic factors that influence the food industry, the most important of which are • the seasonal nature of the production activities • the climate • the facilities • the workforce • the infrastructure When assessing all the segments of the industry, one should bear in mind the substantial growth of the food retail trade over the past few years. In the period 1990-2001 alone, the number of grocery stores tripled and after 2001 many large supermarkets and retail chains set foot in Bulgaria. The increasing number of supe rmarkets allowed food industry companies to take advantage of a large distribution channel. Thus, little by little, marketing channels (advertising, promotions, packaging, prices) have become of vital importance for the choice of consumers. Food retail sales per capita are still lower in eastern Europe compared to central Europe. (see table 1) In 2005, the average number of fast moving goods purchased upon a sigle visit to the store grew by 10.3% compared to 2004. As consumption is growing (up 3.3% in terms of quantity), the frequency of shopping, in turn, is getting lower (-6.3%). This means that in the long run Bulgarians will get used to shopping once a week from the large hypermarkets. In 2004, hypermarkets accounted for 14% of the spending on fast moving consumer goods and in 2005 their share is expected to rise to over 16%. (see diagram 1) Bulgaria's future EU accession will result in a restructuring of the food retail sector - the number of small shops will decrease rapidly at the expense of the growing number of hypermarkets. Statistics • Production, processing and canning of meat and meat products Meat production and processing is one of the major sectors of the food industry and it accounts for approximately 20% of the output of the industry. In Bulgaria the total average annual meat consumption stands at a mere 37.6 kg. The meat processing sector is in fact 100% privately owned at present. Many small and medium-sized companies are operating in it. (see table 2) • Processing and production of milk, dairy products and ice cream According to data from the National Veterinary Service, there are 148 dairy farms with an industrial capacity in Bulgaria at present and 30 small ones. Data from the Agriculture Ministry shows that there are 28 companies producing dairy products (ice cream excluded) which are licensed to export to the EU. These 28 companies process almost 36% of the collected and processed milk. The companies licensed to export to the EU accounted for 27.4% of the cheese and 27.5% of the yellow cheese production in 2004. (see table 3) Over the past few years, there has been a growth in the production of buffalo and goat milk, which are high in fat content and are much in demand on the European market. These milk varieties are produced above all by individual farmers and therefore it is hard to control the veterinary norms. That is why a mere 2,000 tonnes of goat milk were processed in dairy farms in 2004 against a total output of over 125,000 tonnes. Farmers prefer not to sell their milk to processing companies because of the low buyout prices, which are the same as those of cow milk - up to 0.40-0.45 levs per litre. A total 7,000 tonnes of buffalo milk were produced in 2005 against 4,400 tonnes in the previous year. (see diagram 2) • Production of bread and bakery products The number of bread and bakery companies stands at about 4,000. There is also a certain number of illegal producers but their influence on the competition is insignificant, especially in large and medium-sized cities. Data of the National Statistics Institute shows that the daily consumption of bread and bakery products per capita dropped to 330 gr in 2005 compared to 413 gr ten years ago. Wheat bread accounts for the bulk of this consumption. There is high demand for fresh and cheap bread varieties. The share of packaged bread are on the rise. At present about 12% of all breads come in a package. Flour prices predetermine over 50% of the cost price of bread. Bulgaria's wheat harvest reached 3.0 million tonnes in 2005 but most of it does not have good enough baking quality. This is due to a great extent to the poor quality of the wheat caused by this year's floods. The grain producing sector as a whole is undergoing certain problems. Industrial bread producers are among the first to start covering EU production criteria. Most of the production facilities built in the past 30 years meet all of the construction requirements. Bread making does not require significant investments as an enterprise of this kind only has 3-4 critical points at the most. Bread production does not involve many health risks, which is an advantage to meat or milk production. By the end of 2006 almost all industrial Bulgarian bread producers are expected to have introduced HACCP. The sales of cereals in Bulgaria increased significantly between 2000 and 2005, especially those of muesli, cornflakes, etc. According to the latest report of the Euromonitor marketing agency, the consumption of this type of cereal had almost doubled in terms of value over the past few years. In 2005 alone, the turnover of this market grew by 14%. This, however, only proves that Bulgarians doe not realise the advantages of (or cannot afford) wholesome foods. The muesli sales underwent the sharpest increase (+194%) over the past five years but it still remains the least popular cereal in Bulgaria. Despite the increase, the market is still underdeveloped given the consumption of wholesome cereals per capita, which stands at an average 110 gr a year, while in the UK it exceeds 3 kg. • Canning industry The majority of the raw materials for the canned foods industry are difficult to transport and that is why most canning factories are located in the regions where vegetables are produced. There is a definite upbeat trend in Bulgaria's fruit and vegetable processing and canning industry,whose 2004 output was over 194,000 tonnes, up 43% compared to the previous year. Fruit accounted for 67,000 tonnes and vegetables stood at 127,000 tonnes. Canning accounts for 51% of the entire output of the fruit processing industry, juices and concentrates were 13% and frozen fruit were 21%. As regards vegetables, canned vegetables were 58%, followed by vegetable juices and concentrates. The market of convenience foods in Bulgaria was one of the first to attract foreign investors. Bulgarians turned out to be quite conservative and at first did not embrace the idea of convenience foods. Gradually, however, attitudes started to change and in 2004 Nestle Bulgaria reported selling 37 million Maggi boullion cubes, which accounted for twothird of the overall consumption of such products. The sales of Maggi fix products in 2004 exceeded by 550% preliminary expectation. Local marketing tuned to the typical preferences of the Bulgarian consumer turned out to be a winning strategy. • Production of sugar, chocolate and confectionery products According to a research of ER Consult & Management, in September 2005 there were 1,097 local sugar, chocolate and confectionery producers in Bulgaria. NSI data shows that confectionery export are on the rise marking a 44% year-on-year increase in June 2005. The increase in chocolate exports was 14% and the rise in the sugar products exports was 54%. The prices of confectionery products is currently expected to rise by an average 10% as a result of the almost twofold increase in sugar prices and the increase in the prices of EU-imported powdered milk. Bulgarians spend an average annual 250 million levs on chocolate, chocolate candies, chocolate desserts and chocolate wafer bars. The market share of imports ranges between 2% as regards chocolate wafer bars and 80% as regards chocolate spreads. Some 30% of the chocolates are imported as well as 50% of the candy bars. The chocolate products market can roughly be divided into three segments - chocolates, chocolate candies and chocolate wafer bars. The chocolates segment is the smallest, which is typical for Bulgaria but not for the rest of Europe. The price of chocolate per kg in Bulgaria is 5.28 euro, the highest in the region, excluding Croatia, where it is 8.52 euro. Kraft Foods was the leader on the Bulgarian market with its brands Svoge (36.6%), Milka (24.6%) and Mlechen Shokolad (10%) according to GfK Bulgaria. The chocolate candies segment is also marking a growth. The average price of a kg of chocolate candies is less than the price of a kg of chocolate. Data from Kraft Foods Bulgaria shows that the average spending on chocolate candies is about 80 million levs. The share of upscale chocolate candies is expected to rise in the future. The third segment, that of chocolate wafer bars, is the largest one but it is highly specific for the local market. There was a drop in this segment in 2005 despite the fact that there are more than 180 brands of wafer bars on the market.
Source: Dnevnik (27.03.2006)

Over 30 world famous companies have sent their top managers to the American University in Bulgaria (AUBG), based in the town of Blagoevgrad, southern Bulgaria, to recruit students. Among the leading world companies are M-Tel, KPMG, Deloitte&Touche, Kraft Foods, Danone Serdika JSC, Kempinski, Metro. The AUBG organizes such initiative for 12th time and its purpose is to improve the professional development and level of its students.
Source: Standart (05.04.2006)

The Bulgarian chocolate market expanded by 10% with domestic production reaching 35,000 tons in 2005, shows data of Kraft Foods Bulgaria. The main competition for the Kraft Foods flagship chocolate brands in Bulgaria - Milka and Svoge, comes from Nestle Bulgaria which controls 12% of chocolate sales. Milka sales outstripped Svoge in 2005 and now it holds 40% of the market versus 35% for Svoge, said Doroteya Aleksieva, the Milka brand manager at Kraft Foods Bulgaria. The Milka range, some of which is manufactured locally, is benefiting from a consumer shift towards mid-priced and premium chocolates. While Kraft Foods dominates the chocolate segment, Nestle leads the sales of chocolate bars and wafer snacks with a 45% market share.
Source: Dnevnik (08.05.2006)

Plovdiv Yuri Gagarin-BT was established in 1964. The company specialises in the production of filters, packaging and non-standard equipment for the cigarette industry, as well as in the imports and exports of spare parts and the repair of cigarette manufacturing equipment. Yuri Gagarin-BT was restructured in 1993 with the establishment of Bulgartabac Holding. The state transferred its stake in Yuri Gagarin-BT to Bulgartabac Holding in 1997. The holding currently owns 80.57% of the capital of the Plovdiv-based company. Other companies own 16.23% of the capital of Yuri Gagarin-BT, while the remaining 3.2% is held by individuals. Filter and packaging production accounts for 94.8% of the operating income of the company. The companies within Bulgartabac Holding's structure account for 87% of the income of Yuri Gagarin-BT. Kraft Jacobs Suchard Bulgaria, Nestle and Solvex are among the other key clients of the company. Exports accounted for a mere 7.25% of the general income of the company in 2005. Nevertheless, foreign clients from Russia, Moldova, Ukraine, Poland, Turkey, Germany and Greece are placing orders with the company for the production of packaging, filters, spare parts and non-standard equipment. Yuri Gagarin-BT implemented a large-scale investment programme in 2005. A modern printing machine was installed, adding a competitive edge to the company in the production of packaging not only for the tobacco industry. Yuri Gagarin-BT also installed a new filter manufacturing machine and supplied its premises with gas. The stock price of the company has been influenced over the last two years mainly by news on the privatisation of Bulgartabac Holding and information on the development of the tobacco industry. The high return provided by Yuri Gagarin-BT's stock can be put down mainly to the specific operations of the company, as well as to the fact that it can develop independently from its owner. The stock of the company has outperformed significantly the SOFIX blue-chip index of the Bulgarian Stock Exchange (BSE) over the last two years. Despite the considerable growth achieved over the last year, judging from public information on Yuri Gagarin-BT and own forecasts on the financial performance of the company, we consider the price of the stock to be undervalued. Our forecasts are that the price of the stock will reach a level of BGN 66.05 per share over the next 12 months.
Source: Pari (06.07.2006)

A new company has been selected to import and distribute in Bulgaria upmarket coffee brand Illy. B.V.link, which replaces Simek as the coffee brand's local distributor, plans to build a logistics and distribution center near Sofia. The company, which is Greek-owned, has already bought a 0.8 ha lot for the center in Bozhurishte, a residential district in the west of the Bulgarian capital. The facility, which will handle only Illy shipments, should be operational by mid-2007. Some 80% of Illy's local consumption comes from on-trade sales. B.V.link will keep under control the way the beverage is made and served at the establishments offering Illy coffee. B.V.link estimates domestic coffee sales at 13,000-14,000 tons annually, ex instant coffee. Off-trade coffee sales are dominated by Nova Brasilia, a Kraft Foods brand, Jacobs, Elit, Douwe Egberts, a Sara Lee brand, Tchibo and Lavazza. Lavazza owns a 70% share of the on-trade segment, followed by Spetema and Elit.
Source: Dnevnik (11.07.2006)

Over 250 residents of Plovdiv, Southern Bulgaria, and Svoge, Northern Bulgaria, have been diagnosed with hepatitis A, said the Bulgarian health ministry. The World Health Organisation is expected to announce the cause of the Svoge cases on Mon or Tue after a team from the organisation visited the city last Fri. The potable water sources in Svoge have tested negative for the virus. A substantial number of the infected people in Svoge work at the local Kraft Foods Bulgaria chocolate factory. The company has not made on official statement so far.
Source: Dnevnik (31.07.2006)

Kraft Foods, the international food and beverage company, said it has invested BGN 1 mln in the launch of a new production line for the Milka chocolate boxes at its Svoge factory in Bulgaria. This type of Milka chocolates was previously manufactured only in France. The bulk of the output, seen at 700 tons in 2007, will be shipped to Romania, Turkey and the former Yugoslavia states. The launch of the local production will entail some modifications to the package colouring, shape and weight, said the company. In a recent interview for news agency SeeNews, Bulgarian managing director Christoph Wenisch said chocolate in Bulgaria is a market of more than BGN 300 mln consisting of three segments: tablets, pralines and personal snacks. 'The personal snacks market is somewhat larger than the other two segments and all three are growing between 5.0 per cent and 10 per cent,' Wenisch said. 'We expect to have about 40 per cent in pralines and in personal snacks around 20 per cent market share by the end of 2006. 'Kraft Foods Bulgaria will lead the personal snacks market for the first time in 2006 after gaining around four percent additional share with our Moreni wafers and Svoge Republica bars.' Wenisch said. He added the company's main international competitor in wafers was Nestle's Mura, but also domestic Borovets by Day and Night and Prestige's Troy, Spoko and Hyper. In bars, Kraft competes against U.S. Mars and Turkish Ulker. Kraft claims to lead the chocolate tablets market with its international Milka, Toblerone and luxury Suchard Sensations brands but also with its local brands Svoge and Mlechen. Milka is the clear market leader, it continues to grow with share in excess of 40 per cent, Wenisch told SeeNews.
Source: Dnevnik (08.11.2006)

The price of wafers in Bulgaria has risen 4 per cent year-on-year in the first half of 2006 to reflect higher sugar prices while packaging is getting slightly smaller, shows data of market research outfit GfK. Chocolates and cereals posted the fastest sales growth in Q3 on the confectionery market, gaining 23 per cent year-on-year, said GfK. They are followed by croissants with 17 per cent increase. Wafer sales fell 2 per cent in Q3 after notching up 13 per cent and 8 per cent gains in the previous two quarters.
Source: Dnevnik (08.12.2006)