Bulgarian Breweries Grow at Frothing Pace

What fuels Bulgarian market reform? It’s beer, the only sector in this former Communist country that isn’t flat--growing seven times faster than the national economy.

Brewing is the only industry in this Balkan country that has been almost fully privatized. Of 13 breweries, 12 are already in private hands, attracting over $30 million in foreign investment.

“It is good time to invest in beer,” said Oleg Zhablyanov, owner of a small brewery in the Bulgarian capital. “So far this year, our sales have grown 20% over last year.”

Zhablyanov, 45, a former television cameraman, and two partners bought the debt-ridden state brewery last winter and are not sorry for the investment.

Although Bulgaria is known mainly for its wines, it has a 100-year brewing tradition and 50 local brands of beer.

But beer has never been bigger here, with production expected to grow 30% this year--compared with the 4% growth forecast for the national economy.

And nearly all of the estimated 104 million gallons that will be produced this year will be consumed domestically, with only about 2% exported, said Peter Paunkov, chairman of the Brewers’ Union said.

“The demand for beer grows due to the good quality of local beer, its affordable cost and the extreme heat [over the] summer,” Zhablyanov said.

A pint-size bottle of Bulgarian beer costs the equivalent of about 30 cents, while the average monthly salary is the equivalent of $100.

The boom for beer has spilled over into related enterprises such as restaurants, cafes and bars.

“We work around the clock, and the place is overflowing most of the time,” said Violeta Georgieva, a 23-year old chemistry student working part time as a waitress in a downtown Sofia beer hall.

Zhablyanov and his partners paid $700,000 for a 62% stake in their factory. The buyers promised to invest $550,000 in a new production line and assumed a $300,000 debt the company had amassed while in state hands.

“The brewery has been poorly managed,” Zhablyanov said. “We switched it from one to two shifts per day to more efficiently use the equipment. In June we raised wages by a fifth.”

With some 13,000 gallons per day, his company, Sofia Brewery, is much smaller than Bulgaria’s flagship breweries Zagorka and Astika.

Zagorka is owned by Dutch beer giant Heineken and Belgium’s Interbrew holds a controlling interest in Astika, as well as in two smaller breweries.

“Competition by foreign investors is strong, but we mustn’t let them stamp out local producers,” Zhablyanov said.