EXECUTIVE SUMMARY
Quality standards needed in the Bulgarian packaged food market
The quality of Bulgarian packaged food products was the subject of some debate over the review period and particularly in 2010. Due to consumer complaints about the quality of many products, the government proposed and introduced several quality standards for the production of meat and products made from meat, cheese, yoghurt and vegetable spread, known in Bulgaria as lyutenitsa. The standards met with only moderate success but they are expected to be enforced much more strictly over the forecast period.
Global financial crisis weakens but does not seriously damage the Bulgarian market
Bulgaria saw unprecedented economic growth over the review period. However, the global economic crisis and the deepening recession have also affected the country. The country entered recession in 2008, a few months after Western European countries, and the effects of the financial crisis became more evident over the 2009-2011 period as disposable incomes fell, unemployment rose and sales declined to some extent in all areas of the economy. As a whole, however, Bulgaria was not as seriously affected by the recession as most other EU countries.
Unit prices still rising slowly
As was expected, over 2008-2011 Bulgaria was affected by the global financial crisis, the impact of which was felt in almost all sectors of the economy, only gradually recovering in 2011. What is interesting, however, is that the expected decline in prices of most products due to the crisis did not happen. Unit prices within the packaged food market did not only remain at pre-crisis levels but even rose slightly in most categories.
Healthy and ‘bio’ foods grow in popularity
Five years ago awareness of ‘bio’ products and healthy and balanced diets was very low. Bio yoghurt was the first product to appear in the local market thanks to the efforts of privately-owned and operated local businesses which sought to popularise environmentally-friendly lifestyles and products.
Infrastructure projects improve distribution
The economic crisis in the 1990s left Bulgaria with an infrastructure in a rather poor condition. Over the past decade, however, much investment has been made in the rehabilitation of the road network, which has attracted further investment in Bulgaria. One of the areas which attracted a great deal of investment was logistics and distribution. Leading manufacturers took advantage of newly established warehouses. Some even built their own, for example the retailer Maxima Bulgaria and the large food producer Bella Bulgaria. In addition, the Bulgarian also government launched an ambitious road network programme to benefit trade.
Quality standards needed in the Bulgarian packaged food market
The quality of Bulgarian packaged food products was the subject of some debate over the review period, and particularly in 2010. Due to consumer complaints about the quality of many products, the government proposed and introduced several quality standards for the production of meat and products made from meat, cheese, yoghurt and vegetable spread, known in Bulgaria as lyutenitsa. The standards met with only moderate success but they are expected to be enforced much more strictly over the forecast period.
Current Impact
The quality of various packaged foods in the Bulgarian market declined over the review period. The main reason for this, as given by the major domestic manufacturers, was the necessity to use cheaper ingredients in order to reduce the prices of products so as to make them affordable to consumers at the lower end of the market. Furthermore, the Bulgarian government did not pay much attention to standards over the review period, therefore not exercising strict control over manufacturers, which, on the other hand, used dramatically different recipes from one other and sometimes deviated from production standards.
Due to the increasing discontent expressed by consumers and organisations for the protection of consumers’ rights, the government started to more strictly control the quality of production of some of the most popular packaged foods in the Bulgarian market, with varied success. The Stara Planina standard for products made from meat was introduced in the last quarter of 2010 and is used on products made from “real” meat, with no soy or artificial additives included. The latest Bulgarian State standard for cheese prescribed various production requirements such as strict production temperatures and times, such as 45 days to allow cow’s milk cheese to ripen and 60 days for cheese made from goat milk. Standards and quality controls imposed by the government on lyutenitsa producers were also discussed. However, all accepted standards were only recommendations and companies which started applying them had difficulties due to the high shelf price of their products which may alienate consumers.
Outlook
Although companies are having some initial difficulty applying the new standards and are unwilling to take up such a commitment in the short term, they will have to conform to certain standards by the end of the forecast period. Although consumers are likely to react negatively to the increased prices of some packaged food products in the short term, they have, on the other hand, expressed significant dissatisfaction with the current situation and are likely to get used to paying more for better quality products. Furthermore, as the effects of the global financial crisis subside, consumers will resume spending more on food of a better quality.
Future Impact
Over the longer term, manufacturers which apply strict quality production standards are likely to be much more successful than those which try to reduce product prices by compromising on quality. Although many of the leading producers of packaged food in Bulgaria are still reluctant to apply the existing standards, it can be expected that they will propose changes to them and some agreement with the government and Bulgarian standardisation bodies will be reached. On the other hand, with more companies producing packaged foods adhering to certain standards, the difference in pricing between their products and those of other manufacturers will start to look normal to consumers who will start to show a clear preference for them, thus driving other companies to also improve the quality of their products.
Global financial crisis starts to subside without having caused as much harm as in other EU countries
Bulgaria saw unprecedented economic growth over the review period. The government’s social policy has had an influence on the packaged food market in Bulgaria – with pensions increasing, some taxes falling and tighter control of manufacturers, the state has managed to create a favourable environment for economic growth. Furthermore, disposable incomes saw significant increases over the review period, with a large number of foreign investors opening offices in Bulgaria. In spite of the relatively high rate of inflation, GDP has maintained strong growth, especially in 2007 and 2008. However, the global economic crisis and the deepening recession have affected Bulgaria as well. The country entered recession in 2008, a few months after Western European countries, and the effects of the financial crisis became more evident over 2009-2011, with disposable incomes shrinking, unemployment rising and sales levels falling to some extent in all sectors of the economy. As a whole, however, Bulgaria was not as seriously affected by the recession as most other EU countries.
Current Impact
The recent growth in disposable incomes made consumers more selective and they tried out more new products, including those that were considered exotic and targeted at the upper end of the market. This trend has changed to some extent due to the economic slowdown but is unlikely to have a drastic effect on the market landscape over the long term.
As Bulgarians tend not to save money on food during times of recession, the packaged food market was not affected dramatically. Although sales dropped in most categories, the declines were not significant.
One of the main reasons for the stable demand for packaged foods is the fact that many people are cutting their spending on dining out and are opting to stay at home instead, for example eating prepared foods from the supermarket, such as microwavable popcorn while watching a film instead of going to the cinema or a prepared meal instead of visiting a restaurant. Another factor which has had a positive influence on sales of packaged food is that due to the recession and companies dismissing some staff, the remaining employees often have to work longer hours, therefore having less time to cook at home and thus purchasing packaged foods in order to replace home-cooked meals, or having packaged products for lunch at the office instead of choosing the more expensive option of eating out at a cafeteria or another foodservice outlet during the lunch break.
Outlook
Although GDP growth slowed due to the global economic recession, analysts argue that the effect of the slowdown will not persist in Bulgaria over a long period and the economy will have more or less recovered by the middle of the forecast period. In addition, income levels have already risen significantly in recent years in an attempt to catch up with the EU average.
The market combines items which are considered essential and those which are perceived as more exotic or luxurious. Therefore, packaged food is not expected to be affected severely by the economic slowdown. However, consumers are still highly likely to spend on items such as rice or beans, for example, as they are traditionally considered essential items in Bulgarian dishes.
Future Impact
Bulgaria is likely to experience some further economic difficulties over the forecast period but the worst of the crisis is already over and the outlook for the packaged food market is more optimistic. Although the weak economy, combined with saturation in many categories, is likely to lead to negative growth in some packaged food categories, as a whole the market is likely to retain its current levels of value and volume sales, and even return to registering some growth by the middle of the forecast period as the economy picks up speed again.
Unit prices still rising slowly
As was expected, over 2008-2010 Bulgaria was affected by the global financial crisis. What is interesting, however, is that the expected decline in prices of most products due to the crisis did not happen. It was expected that consumers would lose much of their purchasing power due to falling wages and rising unemployment, which would result in people spending less on items which are not immediate necessities, and would in turn cause a decline in prices due to lower demand and similar drops in the prices of raw materials. This, however, was not the case. Unit prices in the packaged food market did not only remain at their pre-crisis levels but even rose slightly in most categories.
Current Impact
The packaged food market in Bulgaria experienced only a short period of turbulence with the arrival of the global crisis, and most unit prices remained unchanged. The market achieved a current value CAGR of 5% over the review period, although volume growth was much lower. In general, retailers and producers in Bulgaria were already working with small margins prior to the crisis as a result of the high level of competition in the modern retail channel, and so were not able to significantly lower prices during the crisis period.
Outlook
It is likely that the main reason consumers would still purchase packaged food, even at higher prices during a crisis, is stable demand for such products as a whole. As noted above, with people going out less for financial reasons but still not having enough time to cook regularly at home, they tend to opt for quick-to-prepare meals.
This trend is also favourable for producers and distributors. It allows them to expand without worrying too much about the effects of the crisis on their cash flow. Although volume sales may be down in many categories, this is compensated for by the growth in unit prices.
Future Impact
The effect of the global crisis on the Bulgarian economy is expected to start fading by the middle of the forecast period, and according to some analysts, the first signs of this were noted at the end of 2010. As the economy heads towards recovery, unit prices are likely to rise even higher. Consumers are also more likely to continue experimenting with new premium products as they did before the crisis. Hence, new products and existing ones at higher prices are not likely to drive consumers away. Therefore, the price increase trend is likely to continue over the forecast period.
Healthy and ‘bio’ foods grow in popularity
At the beginning of the review period awareness of ‘bio’ products and healthy and balanced diets was very low. Bio yoghurt was the first product to appear in the local market thanks to the efforts of privately-owned and operated local businesses which sought to popularise environmentally-friendly lifestyles, products, etc.
The biggest advance for this niche was observed just prior to the crisis. A notably large number of products were launched and retailers expanded their activities in terms of offering bio foods. The most interesting event was the launch of Biomag, the first specialist shop for bio packaged foods, offering around 600 certified packaged food products. Moreover, most of the large retailers set up special bio counters in their outlets. Although still a niche, bio foods have huge potential for growth in the future.
Current Impact
Although some consumers tend to perceive the consumption of bio foods as a fad, there are many others who appreciate the nutritional qualities of chemical-free products. Whatever the reason, the consumption of these foods has increased notably in spite of their high prices. The progress of the niche means product diversification will impact mostly dairy products, canned/preserved food, baby food, dried processed food, spreads, chilled processed food, etc. This diversification benefits not only consumers, who will enjoy a wider variety of available items, but producers and retailers, which have greater expansion opportunities.
Unfortunately, the trend brings a problem of its own. The increased consumption and interest in bio foods has attracted the attention of unscrupulous manufacturers and traders. During only a couple of months an extensive industry examination conducted by the Bulgarian National Consumers Association and the local Foundation for Organic Agriculture discovered scores of products labelled as bio foods without having any certificate or even complying with the requirements of bio food content. The discrepancy between label and actual content could be potentially harmful to consumer health, which is why the relevant state bodies have been alarmed.
Outlook
Currently, the majority of consumers perceive healthy eating habits and bio foods as virtually the same thing. It can be expected that end users will become much more educated – presently bio foods are perceived as an unnecessary novelty by a certain number of consumers, but these products are definitely here to stay. The development of this niche is likely to follow global trends – the qualities of bio foods are yet to be fully accepted and appreciated by Bulgarian consumers.
Bio foods are expected to increase their potential over the forecast period. Increasing disposable incomes and greater awareness will stimulate the penetration of these products in the retailing channel. Presently, these products are only available in Sofia, where demand is higher. Other major cities like Varna, Plovdiv, Pleven, etc also have the potential to attract bio food retailers over the next five years.
Future Impact
Notably high prices were the only factor that prevented bio foods from putting in a better performance over the review period. It is expected that this will also remain a defining factor over the forecast period. If demand remains low, producers will face uncertainty and will keep production levels low, which will maintain the high prices of bio products.
If demand increases, as expected, although still relatively high, prices will surely decline compared to the review period. That would benefit not only producers and retailers, as they would be able to attract a wider audience, but consumers as well. The overall consumption of bio foods will increase, creating a more competitive environment, which will keep prices from rising too much.
Infrastructure projects improve distribution
The economic crisis in the 1990s left Bulgaria with an infrastructure in a rather poor condition. Within the past decade, however, much investment has been made in the rehabilitation of the road network, which has attracted further investment around Bulgaria. One of the areas which has attracted a great deal of investment is logistics and distribution. Leading manufacturers have taken advantage of newly established warehouses. Some have even built their own, for example retailer Maxima Bulgaria and the large food producer Bella Bulgaria. In addition, the Bulgarian government launched an ambitious road network programme, which in turn should benefit trade.
Current Impact
The impact on the packaged food industry can barely be measured in terms of value or volume sales growth. The contribution of this better developed infrastructure should be a notable improvement in the quality of products on offer. The rapid distribution of dairy products, chilled processed foods, ice cream, sauces, dressings and condiments, bakery products, etc is essential and more easily achieved thanks to the help of these recently built logistics facilities.
The improvements in infrastructure benefit mostly consumers as they are able to enjoy a wider variety of fresh products that can be stored for longer periods at home. Retailers also profit as they are able to offer higher- quality products, thus increasing their number of potential clients.
Outlook
The construction of a logistics park or any other similar infrastructure project is a long-term investment. Currently, there are many projects under way in line with the development of the entire construction industry – at some point the services offered by logistics centres will certainly surpass demand but for the packaged food industry will mean lower costs and the wider availability of services. This is why the trend is expected to have a positive effect on the packaged food industry and is even likely to stimulate the expansion of retail chains, which remain the main distribution outlets for the industry.
Future Impact
The development of logistics parks can only benefit the packaged food market and all the key stages from the production of raw materials to processing and packaging and then distribution to the end user.
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Overview
Discover the latest market trends and uncover sources of future market growth for the Packaged Food industry in Bulgaria with research from Euromonitor's team of in-country analysts.
Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.
If you're in the Packaged Food industry in Bulgaria, our research will save you time and money while empowering you to make informed, profitable decisions.
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The Packaged Food in Bulgaria market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation of international and local products
- Historic volumes and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- What is the market size of Packaged Food in Bulgaria?
- What are the major brands in Bulgaria?
- As economic prospects slowly improve, are consumers starting to eat out more and spending less time cooking at home?
- How is private label performing in the wake of retail consolidation and the global economic hangover?
- Do consumers want value for money or added value?
Why buy this report?
- Gain competitive intelligence about market leaders
- Track key industry trends, opportunities and threats
- Inform your marketing, brand, strategy and market development, sales and supply functions
This industry report originates from Passport, our Packaged Food market research database.
