Bulgaria looks to the West

Wines & Vines, May, 1995 by Larry Luxner

It has no choice. Ivan Petrov, executive director of Vinimpex, an independent trading company which controls half of Bulgaria's wine export to Western Europe, says his country's wine industry was headed for trouble even before the collapse of communism in Eastern Europe.

"Bulgaria used to be the fifth-biggest exporter of bottled wines in the world, and that was due mainly to our supplies to the former Soviet Union," says Petrov, who has worked at Vinimpex for the past eight years. "In 1985, we reached 350 million bottles. After that, it decreased because of the anti-alcohol campaign initiated by Mikhail Gorbachev."

That campaign limited Soviet citizens to three bottles of liquor per month. As a result, said Petrov, from 1985 to 1987, Bulgarian wine exports dropped by 50%. By the end of 1990, when the centralized trading system had broken down completely, there were no exports, period. "All our traditional ties disappeared, and we almost lost our entire market," he says. In 1990, Vinimpex, which had been the marketing arm of Vinprom, the state wine monopoly, experienced some major changes. As a result of pressure to decentralize industry, the Bulgarian government dismantled Vinprom and allowed Vinimpex to remain an independent trading company. Meanwhile, the country's 40 wineries became free and independent producers, though still state-owned.

Today, Petrov's enterprise exports 50 million bottles of still and sparkling wine, and 10-15 million bottles of brandy. This translates into $30 million a year, an important source of revenue for a country of 9 million people where little else works.

"Although every other industry is operating at 50% of capacity, the wine industry is doing well," observes an expert on the subject, Simeon Apostolov. "Most of the equipment is modern, and Bulgarian wine is selling (in Western Europe). I haven't seen any wineries on the list for privatization, so it's a sign that they are doing well."

Apostolov is country director for the Pragma Consortium, which administers the U.S. government-funded Restructuring Agriculture & Agribusiness Private Sector program in Bulgaria. The agency, known by the acronym RAAPS, also has similar programs in Poland, Hungary, the Czech Republic and Slovakia.

Recently, RAAPS sponsored a visit by Soren Axelsen, president of Cabernet Corp. of Tiburon, Calif., to negotiate a preliminary joint-venture agreement for production and marketing of Bulgarian red and white wines. The talks fell through, although Axelsen says he was generally impressed by what he saw.

"We had been offered some support from Pragma, and for reasons I really don't know, they withdrew their support in midstream," says Axelsen, who visited 14 wineries during his two weeks in Bulgaria. "We would have liked to keep looking. The problem is not who owns the facilities, but how to bring the product to the marketplace. They certainly have enormous quantities of product for sale, some of which can be adapted to the markets in which we are active, namely the United States and Northern Europe. Other wine is surplus from their exports to Russia, and the quality simply does not meet our standards."

Bulgaria, which measures 42,823 square miles, is divided into five geographic regions. The northeast is famous for white wines, while the southern and southwest regions are better known for red wines. The chief varieties are Cabernet Sauvignon and Merlot, both introduced in the 1960s.

Axelsen's company, which imports Chilean wine to the United States and exports both Chilean and California wines to Western Europe, says that what Bulgaria needs most is investment in packaging, equipment and quality control. "What they have done in the U.K. probably can be repeated in other countries such as the United States," he says.

In 1993, Bulgaria signed an agreement with the European Free Trade Association (EFTA), which opened the doors for duty-free export of Bulgarian wines until 1997. The country was expected to ship 16,200 hectoliters (one hl = 26.4 U.S. gallons) of new wines and 1,100 hectoliters of matured wines during 1994. By 1997, those numbers should rise to 58,000 and 1,400 hectoliters respectively.

At the moment, Bulgaria is one of Great Britain's largest suppliers of wine, with retail prices averaging [pounds]2.45-4 (U.S $3.55-6) per bottle. According to Petrov, 46% of Bulgarian wine exports in 1993 went to England, where Vinimpex subsidiary Bulgarian Vintners Ltd. Co. maintains a London office. Another 11% went to Belgium, Holland and Luxembourg, 10% to Poland, 9% to Sweden, 4.5% to Japan, 4% to Canada, 3.5% to Finland, 30% to Germany, and 2% each to the United States and Denmark.

In Germany, Vinimpex has a successful Stuttgart-based subsidiary, Orient Export-Import GmbH, which sells both bulk and bottled wine. Vinimpex also owns a subsidiary in Poland, a traditional market for Bulgarian wine.

In the former Soviet Union, however, conditions are much more difficult. That's because under communism, Bulgaria signed contracts only with the Sojuzplodoimport company, which in turn distributed the product through another company, Sojuzprodintorg. The end of communism, followed by the breakup of the Soviet Union itself and economic chaos, made things even worse. Today, Petrov says, Vinimpex wine sales to the Russian market are "insignificant and sporadic," though trade has increased somewhat recently due to barter deals made by producers.