CEZ AS has become the sole electricity supplier to four central and eastern European units of Kraft Foods Inc. (KFT), as the Czech power company banks on its regional expansion into distribution and generation, reports news agency Dow Jones. CEZ from January 1 began supplying electricity to Kraft Foods' units in the Czech Republic, Slovakia, Bulgaria and Romania, CEZ spokeswoman Eva Novakova said in a statement quoted by Dow Jones. CEZ expects to add the Polish unit of Kraft Foods to the same contract in the second quarter, Novakova said. Since 2004, CEZ has taken over several power plants and distribution grids in Bulgaria, Romania and Poland. It also opened trading offices in those countries along with others in the region. Last year, the company started pitching its one-stop-shop contract for power supplies to corporate clients with operations scattered across central and eastern Europe. CEZ remains the largest power generator in its home Czech market where it enjoys rising electricity prices. However, its other regional operations have become key revenue drivers, analysts have said. Kraft Foods, a leading international food maker, produces and sells various food items including packaged coffee and snacks, in central and eastern Europe.
Source: Dnevnik (23.01.2007)

Nestle Bulgaria, the local unit of Swiss food giant Nestle, said it will invest BGN 25 mln in its Sofia factory in 2007 as part of a company-wide push for the adoption of new production technologies. Nestle Bulgaria posted a 34 per cent jump in sales to BGN 180 mln in 2006 with gross profit at BGN 11.6 mln. In 2005, the company's operating profit stood at BGN 5 mln with sales at BGN 135 mln, a 30 per cent increase over 2004. Nestle Bulgaria exports rose 40 per cent to BGN 52 mln last year, continuing a run of solid yearly increments. Exports rose 56 per cent in 2004 and 38 per cent in 2005. The Sofia factory ships to Canada, UK, Finland, Germany, the Netherlands, Italy, Central and Eastern Europe, among other destinations. The company, which will try to deflect the rising cost of input materials like coffee, sugar and flour, sees a 15 per cent increase in sales and a 20 per cent profit gain in 2007. Chocolate products and beverages, including the Nescafe brand, each make up 30 per cent of local Nestle sales. The company controls 75 per cent of the local instant coffee segment, 12.7 per cent of the chocolate bar segment, 18.4 per cent of the chocolates segment, 56 per cent of the breakfast cereals segment, 48 per cent of the ice cream segment and 68 per cent of the prepared foods segment.
Source: Dnevnik (20.03.2007)

Kraft Foods Bulgaria has suspended a EUR 800,000 investment in a new production line in its coffee factory in the town of Kostinbrod, due to impossibility to have its excise duty on exports to the EU refunded, the company's corporate affairs manager, Ivanka Djoleva-Minioti, told the Pari daily. If the problem fails to be settled, Kraft may even move its production facilities for the European markets from Kostinbrod to another neighbouring country, where no excise duty is levied on coffee. The problem arose at the beginning of 2007, when Bulgaria joined the EU. While drafting the Excise Duty and Bonded Warehouse Act, the Customs Agency forgot to provide for a mechanism for reimbursing the excise duty paid on raw coffee. The state administration copied the European directive word by word, without taking into account the fact that the directive does not envisage such a mechanism, simply because coffee is not mandatorily taxable in the EU. When importing raw coffee in Bulgaria, importers pay duty on it. A part of the coffee is processed and sold in Bulgaria, another part is exported to Romania and Austria. The excise paid on the exported amounts was refunded until the end of 2006, Djoleva explained. But the new law does not envisage a mechanism for recovery of the tax after January 1, 2007, when exports to the EU became intracommunity supplies. We have proposed legal amendments to solve the problem. The revision will be made as part of the changes to the VAT Act, the deputy director of the Customs Agency, Georgi Grigorov, said.
Source: Pari (02.07.2007)

Bulgaria's finance ministry plans to revoke the excise duty on coffee from next year, the Pari daily learned. Bulgaria is one of the few EU countries levying excise on coffee. According to the EU directive, the duty is not mandatory and each country can decide by itself whether to impose it or not. Currently the duty on roast coffee stands at BGN 1 per kilogram. Raw coffee is levied BGN 1.50 per kilo. According to the industry, coffee should be exempt from excise duty, which will encourage the development of the market. Nestle, Kraft Foods and Balkam say that the duty is not justified, because coffee is not a luxury commodity, nor hazardous to consumers and the environment. As much as BGN 22 million is planned as budget revenue from the excise on coffee in 2007. Businesses, however, say that the revocation of the duty will be offset by the increase in sales and the profit tax companies pay.
Source: Pari (03.07.2007)

Coffee producers are urging the Bulgarian government to legislate the reimbursement of the excise on EU-bound coffee exports. The absence of this option makes their products uncompetitive and could divert future investment to countries with more favorable production and export rules, said the coffee makers. The finance ministry has taken the issue to heart and has shown readiness to initiate the necessary changes to the Excises and Tax Warehouses Act. Any change to the current excise rules will not take effect before the beginning of 2008. The on-reimbursement of coffee export excise has cost Kraft Foods Bulgaria, which owns the Nova Brasilia and Jacobs coffee brands, some EUR 0.5 mln so far in 2007 and has prompted the company to put on hold a EUR 1 mln investment in new equipment. Kraft Foods Bulgaria packages coffee for export to Romania and Austria. Bulgaria levies an excise of 0.70 levs/kg on raw coffee and 1 levs/kg on instant coffee.
Source: Dnevnik (09.07.2007)

Sales of hot drinks in Bulgaria continued to grow in 2006, says a country report released by global market research outfit Euromonitor International. While volume sales of tea and 'other' hot drinks suffered a mild decline in 2006, coffee supported good volume and current value growth. Coffee is the most traditional hot drink in Bulgaria. Both the on- and off-trade channels contributed to the volume development of coffee. Despite a favorable tax policy for tea and coffee, the current value increase was quite significant and in percentage terms, exceeded volume growth. The healthy value increase came as a result of consumer demand for expensive instant coffee and imported tea, the launch of high quality products such as espresso and mocha coffee blends and added value offers, said Euromonitor. The low purchasing power of the population is to the advantage of economy brands in coffee and tea. Generally, economy brands are also tailored to suit local tastes, with strong distribution and/or media exposure. In 2006, leading domestic brands included Kraft’s Nova Brasilia and Fort Koffiebranderij’s Elite. However, both suffered a slight decline in shares, while mid- and high-priced brands such as Kraft’s Jacobs, Nestle’s Nescafe and Lavazza gained share. Expected improvements in disposable incomes, good product quality and the growing sophistication of consumers’ tastes should aid their further growth in the forecast period. The on-trade will retain an important role in encouraging the consumption of more expensive brands and inducing consumers to trade up. Multinational coffee companies largely dominate hot drinks. The top three coffee companies together dominate while the largest tea player ranked eight in 2006. Since 'other' hot drinks is purchased less frequently, the largest companies have much lower shares in overall sales. Multinationals in coffee benefited from strong marketing know-how, with an emphasis on brand building in different price bands. They also possess full on-trade distribution and invest heavily in consumer research, advertising and promotion, said Euromonitor. During the forecast period, Euromonitor expects coffee to see continued good growth, while tea and 'other' hot drinks are expected to perform better in comparison to the decline seen during the review period. Consumers will benefit from the entry of new players and brands, with many new entrants expected in the first years of Bulgaria’s accession to the EU. The largest companies in coffee, tea and 'other' hot drinks are expected to place a strong emphasis on brand building and pricing in order to remain competitive.
Source: Dnevnik (22.08.2007)

Billboard will raise its capital from BGN 6 million to BGN 7.5 million through the initial public offering of shares on the Bulgarian Stock Exchange (BSE) between December 5 and 7, 2007. The company is offering a total 1.5 million shares with BGN 1 par value each. The shares are offered through a book-building method. The price of the stock is expected to range between BGN 5.5 and BGN 7.5 per share. The free float of the company will stand at 20% after the stock is registered for trade on BSE. First Financial Brokerage House is the lead manager of the issue. Billboard, which specialises mainly in the wide format printing of advertising materials, booked BGN 940,000 profit for the first eight months of 2007. The net sales revenue of the company went up by BGN 3.8 million to BGN 12.8 million. Billboard's business costs are estimated at BGN 10.5 million in 2007, compared at BGN 7.2 million in 2006. Billboard's annual profit is expected to total BGN 6.8 million in 2010, which would represent a three-fold increase compared to the BGN 2.2 million forecast for 2007.
Source: Pari (07.12.2007)