BRESTOVITSA, Bulgaria (Reuters) - Bulgaria’s economy is fast losing steam, exports are shrinking and corruption is threatening the European Union aid that has underpinned growth. But the Todoroff winery has a strategy.
“We expect a collapse which we will try to overcome with high-quality wine,” says its manager Kiril Izmirov.
Wines from the Balkan country have been known more for quantity than quality, and Bulgaria now accounts for only 0.6 percent of world production.
Boutique wineries such as Todoroff, which have made use of European Union funds in the past five years to recast Bulgaria’s reputation, hope a mix of Thracian mystery and top-quality grapes from one of the world’s oldest winemaking regions will help.
Perched on the hillsides of what was once the heart of ancient Thrace, Todoroff includes a chic hotel that offers body therapy based on grape products. Its bet is that consumers will keep drinking wines and, even if overall prices come down, good quality at a reasonable price can survive.
Financial problems and an economic slump in Bulgaria’s main export markets -- Russia, Britain, Poland and Germany -- are likely to reduce sales abroad by about 30 percent this year, says Radoslav Radev, managing director at Vinimpex, Bulgaria’s biggest wine exporter, controlled by Belvedere of France.
Tighter credit has cramped the wine industry’s investment plans globally and consumption of expensive drinks has suffered. Analysts say demand generally will remain high, however, and financial turmoil opens the way to consolidation and efficiency.
“The view is that consumers would not walk away from wine because it is considered by many as a luxury for the masses,” said Arend Heijbroek, a wine analyst at Dutch Rabobank.
”The overall demand will remain roughly the same. We will not see an enormous drop in volumes that consumers are buying
but they may cut down the prices,” he added.
Bulgarian industry officials say mass producers, mainly former state-owned wineries now in private hands, will suffer most from the slowdown because of a drastic drop in demand from Russia, which takes 80 percent of total exports.
“The exports for Russia have almost halted,” said Yordan Vutchkov, a member of the supervisory board of the national vine and wine chamber. “Buyers are not placing new orders as they cannot get credits.”
The chamber expects a further 20 percent drop in total exports for 2009.
Todoroff -- created in 1945 in the southern hamlet of Brestovitsa and then nationalized during the communist era -- said its sales had been unchanged for the first nine months at 1.45 million levs ($948,000).
The winery, which is listed on the Sofia bourse, said surging credit and labor costs are starting to have an effect.
But the nearly 300 boutique wineries that have sprung up in the small Black Sea nation, competing in wine with neighboring Greece and Romania, have made good use of EU farm aid and foreign investment to replant weed-choked vineyards.
“The boutique wineries are the future,” said Alexander Kanev, executive director of Bessa Valley, funded by German Count Stephan von Neipperg, who also owns six wine cellars in Bordeaux.
“There will always be people ready to pay for exclusive wine,” said Kanev, adding his company had increased sales so far this year.
Analyst Heijbroek agreed: “The road forward for Bulgaria is to search for authentic varieties and increase the quality of these wines. Because there is always a demand for something really unique.”
Bulgaria’s winemaking roots date back to the Thracians who inhabited the territory as early as 2000 BC. Their thick, sweet, red wines were praised by Greek poet Homer and cherished throughout the ancient world.
Under communism Bulgaria became the world’s sixth-largest producer in the 1970s, shipping more than one million bottles a day to the Soviet bloc and smaller quantities to Western Europe and the United States.
Cheap, low-quality wine still dominates -- bottles are widely sold for less than two or three euros at home and wholesale exports to Russia fetch less than one euro per liter.
The transition to a market economy and farming neglect in the 1990s have caused total annual exports to shrink to about 1.2 million hectoliters from more than 4.0 million in the 1980s.
Now, producers can tap a 3.2 billion euro EU-backed farm program through to 2013.
Officials and winemakers hope the corruption that prompted Brussels to freeze more than half a billion euros in farm and road aid to Bulgaria this year will not affect future projects, as Sofia steps up the fight against fraud and graft.
“These funds will almost completely protect them,” said Deputy Agriculture Minister Dimitar Peichev.
Todoroff is among boutique wineries that have used EU money to achieve recognition for their efforts to promote labels made of native grapes at world wine fairs.
The winery, which this autumn picked its first crop of the Mavrud variety from 30 newly planted hectares, has won a place in the Top 100 of respected U.S. magazine Wine&Spirits with its Mavrud 2003 Galeria.
Mavrud dates back to the Thracians and has a deep ruby color, an aroma of berries and soft tannins.
Another winery in the region shares the same approach, and has planted about 150 hectares with Mavrud and native Rubin vines.
“There is cabernet and cabernet sauvignon all over the world,” said Yordan Stefanov, executive director of Vinzavod Asenovgrad. “We have to find a way to promote our varieties on the global market. That will certainly increase our chances.”
Additional reporting by Anna Mudeva; Editing by Anna Mudeva and Sara Ledwith