Bulgaria. Viticulture Sector Update. Dec 2013 Jan. 2, 2014
In 2012 Bulgaria’s vine and wine sectors began to show signs of resurrection after years of decline. Vineyards area, grapes and wine production all registered notable growth. Dynamic investment in new wineries and vineyards, focus on commercialization and concentration in the sector deepened while home-made wines took a back seat. Optimism is high for increased wine production in 2013 as a good crop of high quality was harvested. Local wine-makers placed an emphasis on low to medium-priced wines which grew in output by 44 percent, accounting for the bulk of local consumption. Imports continued its stable upward trend in 2013 with attention focused on quality and value. The average price for import wines increased by 26 percent over 2012, year-to-date. Wine sales remain stable at 49 million liters valued at 210 million Euros, representing a five percent increase in value year-to-date.
Crop Year 2013
In 2013 total production of grapes is projected to be around 250,000 MT-260,000 MT or slightly higher than in 2012 due to favorable weather accentuated by a mild winter and moderate summer seasons. As of late November, authorities reported having harvested 230,000 MT already. The quality of this year harvest is reported as very good. Wine production may reach 200 million liters, compared to 127 million liters in 2012, according to optimistic expectations of local officials.
In 2013 vineyards area investments are likely to stabilize after recording significant increase in new investments in 2012. Demand for white grape varieties has continued to be extremely good. Price of wine-making grapes varieties fell after the harvest due to abundant supply. Only those few producers (mainly in South West region) which were the first to start “green harvest” contracting were able to achieve a price of 0.41 Euro/kilogram while most prices were around 0.30 Euro/kilo and below.
The Executive Vine and Wine Agency estimated that around 180,000 MT-190,000 MT of grapes are already purchased by commercial wineries and will be processed into wine in 2013 compared to 192,000 MT in 2012. The general trend has been for growth at commercial wine manufacturing versus home wine making. In 2013 four new wineries opened with eight more in the process of construction.
Area under vineyards
The trend of reduction in total viniculture area, which started since year 2000, bottomed in 2011 with the first signs of recovery emerging in 2012. The recovery trend has been observed for the cultivated vineyards while those that were abandoned have further declined with no renovation efforts observed.
In 2012, the latest full year data, total area under grapes declined slightly by less than two percent, due to continued and sharp reduction in vineyards abandoned (by 44 percent). However, cultivated vineyards area increased by 19 percent, to 62,701 HA, of which 96 percent was harvested.
In 2012, 429 HA were added in newly planted vineyards. Age structure remains a challenge with about half of vineyards under wine making varieties older than 30 years. About two percent of vineyards at farms are classified as young, non-yielding vines.
About 96 percent of vineyards are wine making (viniculture) grapes and about four percent under table grapes. The wine-making grape area totaled 58,192 HA (according to the local data or 56,133 HA according to Eurostat) which reflects a 32 percent increase in 2012 over 2011 (43,772 HA).
In 2012, the concentration of vineyards continued to be the highest in South East region, 12 percent, and South Central, 31 percent. Red varieties dominated with 56 percent of all harvested area (33,597 HA) versus 41 percent (24,595 HA) of white varieties. However, due to strong demand for wine made from white varieties, their area has increased substantially, by 62 percent, thus their relative share grew from 33 percent to 41 percent in 2013. According to the Vine and Wine Executive Agency, the proportion of red to white wine varieties will be 50:50 in the next 2 to 3 years. The authorities state that 70 percent of all newly planted vineyards are under white varieties.
In 2012, grape production increased seven percent over 2011. However, yields were much lower, by 18 percent for wine grapes and by 25 percent for table grapes.
The fragmentation in production and the high number of small vineyards and farms leads to substantial problems with investment and marketing. Despite appeals for establishing producer organizations or marketing cooperatives in order to have a more efficient contractual system with wineries, this has not occurred often leading to losses, non-harvested vineyards, lower grapes’ utilization, and fully abandoned vineyards. The EU system for “transfer of rights” among regions and producers is still underutilized.
In 2012, several positive trends emerged in the wine manufacturing industry. In addition to higher output of grapes, including wine-making grapes, consumption of grapes showed a greater orientation towards commercial processing.
Of total grapes, 93 percent was used for wine-making; the same share as over the last three years, although this represented nearly seven percent growth in absolute volume due to higher supply. More importantly, 79 percent of all grapes processed into wine, were managed by commercial wineries versus 70 percent in 2011 which underlines the expanding commercialization of the sector. In other terms, commercial wine-makers captured nearly 22 percent more of the grape supply for wine production. At the same time, the home-made wine making trend had declined for all processed grapes to 10 percent, or 28 percent less than calculated in 2011.
As a result, in 2012 total wine production totaled 138 million liters, including commercial wine output of 127 million liters. This reflects considerable growth in both production of wine in totality (16 percent) and wine for commercial use (21 percent) as compared to 2011. Another positive sign was the growing relative share of commercial wine output in total - from 88 percent in 2011 to 92 percent in 2012 (source: MinAg bulletin#239/July 2013). Eurostat data differs, showing wine production at 123 million liters in 2012 or only one percent higher than in 2011.
Official per capita data for 2009-2012, shows wine consumption dropping from 6.7 liters/capita in 2009 to 5.5 liters/capita in 2010 to 5.2 liters/capita in 2011, but bouncing back to 5.5 liters/capita in 2012. At the same time, commercial sales increased both in volume and in value over this period.
Nationally total wine consumption estimates vary widely from 50-60 million liters to as high as 100+ million liters. Trade data shows commercial wine sales in 2012 at 48.8 million liters compared to 2011 at 48.9 million liters. In value terms, sales were reported for 2012 at 404.4 million Bleva (207 million Euros) compared to 2011 at 384.3 million Bleva (197 million Euros) or reflecting a growth of five percent. Higher annual growth rates in value have been registered since 2005.
For 2013 and 2014, the forecast is for wine sales of 49.8 million liters and 51.5 million liters, respectively, in response to annual growth of volume of two to nearly four percent. The forecast for growth in value is for two to less than three percent respectively. (Source: Euro monitor).
Accurate and reliable official or industry information about wine stocks is not publicly available.
Bulgaria remains a net wine exporter but with declining local stocks, exports have been declining in absolute terms.
World Trade Atlas (WTA) data reports 2013 exports (January-August) at 34 million liters, six percent less than in 2012, (but 0.4 percent higher in value), led by exports to Russia at 9.3 million liters (27 percent of total), followed by Poland (20 percent). A positive sign is the growth in average export price for the period with 6.5 percent. It is interesting to note that the export price to China is the highest at 4.31 USD/liter with an annual growth in export price to this market of 27 percent.
In 2012, exports totaled 55.9 million liters (62.7 million USD), or 3.5 percent higher in volume but 6 percent lower in value than in 2011. Russia has been the main market for Bulgarian wines, typically lower-end wines, which bring usually small margins. In 2012, Russia accounted for 30 percent of total value exports and 29 percent of volume exports. Poland followed with 23 percent and 22 percent shares, respectively. In 2012 exports to Russia declined by 11 percent both in terms of volume and value compared to the previous year.
In 2012, select wine makers had good starting shipments to Asian markets (China, Japan, Korea, and Hong Kong). However, after initial growth in exports to China in 2012, in 2013 sales dropped by 35 percent/volume (January-August 2013).
Imports show since 2009 a decline due to the economic slowdown then a rebound beginning in 2012 into 2013.
In 2013 (January-August), wine imports were negative in volume (-13 percent) but positive in value (9.4 percent). This anomaly can be explained by the substantial increase in the average import price of wines (26 percent). French and Italian wines lead this category overall. Higher end Italian wines with their higher prices recorded the largest increase, 46 percent, in this import category.
WTA data show that in 2012 imports increased by 1.2 percent in volume and by 7 percent in value. Italy, the traditional market leader, captured 51 percent share in volume and 34 percent share in value.
Bulgarian wine producers will be the first to start accessing funds from the new EU CAP budget. Brussels has already approved a program to assist winemakers and growers that will operate in the country for the period 2014-2018. This means that from January 1, 2014 wineries will be able to access their share of the EUR 133.8 million allotted by the EU for the sector (26.762 million Euros/year). Besides the current measures (uprooting, insurance and replacement of old vine stock with new plantings), winemakers will have two more opportunities for grants. They will be eligible for investment in vineyards and wineries, as well as green harvesting. Bio-wine and sparkling wine production in the country will be among the priorities. The ambition is two percent of total wine for sales on the local market to be organic.
The National Program calls for 10 percent annual growth in wine production in the next 6 years. This would be achieved through investments in wineries of 45 million Euro allocated under the program where the subsidies can reach 75 percent of investment projects. Another 7.5 million Euros will be allocated for promotion to third markets such as Brazil, China, Singapore, Switzerland, and USA. Authorities put special efforts to promote Bulgarian wine at the Asian markets, especially in China and Vietnam