The market for alcoholic drinks in Bulgaria remains in the grip of the economic downturn, and is far away from the growth rates prior to 2009. The total volume sales of alcoholic drinks are expected to grow by less than one per cent in 2011, and the main driver for this growth will be the imported spirits, whiskey in particular, and the wine sector. In the same time beers and domestic Rakia will continue to stagnate.

Viewed in a regional perspective, the Bulgarian market is in much better condition than the neighboring markets. For example, the total volume sales of alcoholic drinks in Romania will decline by -2% in 2011, and the volume sales achieved will be 19% lower than the pre-crisis levels in 2008. The volume sales are also expected to drop in other neighboring country – Serbia, where the decline in 2011 is expected to be -3%. In the most troubled country in the region – Greece, the overall sales of alcoholic drinks will dip by -9%.

However, there are several South-East European countries, which are already recovering from the crisis. For example sales in Croatia are expected to grow by 4.8%, the sales in Bosnia-Herzegovina by 2% and the sales in Macedonia by 1.6%.

One of the main factors that affect negatively the sales of alcoholic drinks in Bulgaria is the continuous decline of domestic consumer expenditure. Bulgarians have lower disposable income than prior the crisis, and are increasingly oriented towards saving. As a result their shopping habits changed towards the economy segment, searching for larger packs with discounted prices. A notable exception from this trend was the increased interest towards imported whiskeys, Irish whiskey and blended scotch whiskey in particular.

At the same time, there is high level of illegal/illicit sales of alcohol, especially in the spirits sector. Despite the efforts of the government to increase the level of control over the market the illegal sales of spirits in Bulgaria remains as high as 60%, according to some manufacturers.

One of the factors that had a positive effect on the sales of alcoholic drinks in Bulgaria was tourism. As the touristic season in the summer of 2011 was very successful – for example only in August the country was visited by more than one million foreign tourists. However the effect of this on the sales of alcoholic drinks was limited, as most foreign visitors to the country are using the all-inclusive offers of the hotels and are rarely ordering alcoholic drinks separately.

The overall market remains dominated by local brands, especially in the sectors of beer, white spirits and other spirits (where the sales of Rakia are counted). The large multinationals, which are marketing imported brands are oriented towards the more premium sectors, and are also investing a lot in developing more niche categories, such as RTD’s/High-Strength Premixes.  For example there was couple of new launches on the market in this category in 2011 by Diageo Bulgaria. Cider/Perry category is also developing, with the notable launch of Somersby cider.

In the same time companies marketing established brands on the market are also trying to get out of the grip of the crisis by launching new brand extensions or changing the image of their products. Thus for example Kamnitza is successfully chipping on their newly launched brands of Kamenitza Pshenichno and Kamenitza Fresh Lemon. Carlsberg is being sold in new bottle with innovative design. The popular vodka Flirt is also having a new bottle.

The forecast performance of the alcoholic drinks market might be negative, if the European economic dives into a second recession period fueled by the debt crisis in the Eurozone and in Greece in particular. A potential second wave of the crisis will result in further decrease in the domestic consumer spending and a second decline of the overall retail sales. In such negative scenario the sales of alcoholic drinks might decline by further 5-10% during the next five years.

However, if the economic recovery continues and the W-shaped crisis is avoided, it is likely that the sales of alcoholic drinks in Bulgaria will increase by a CAGR of 3% over the next five year period, with the sales in the on-trade channel being slightly higher, as this channel was worse affected by the crisis and will recover faster to its pre-crisis level.  The main drivers for growth in the future will be the sales of Cider/Perry, Irish whiskey and Domestic Premium Lagers. Overall Bulgarian consumers are expected to reorient form economy to mid-priced products, and to increase their interest towards innovative and niche products.

Ivan Uzunov, Senior Research Analyst,

Euromonitor International