Finding the growth as war rages east
Bulgarian white Çecil Peyniri cheese. Credit: Copyright Raimond Spekking / CC BY-SA 4.0 (via Wikimedia Commons)
The Bulgarian dairy market and industry is struggling to survive and grow after the Covid-19 pandemic hit sales, followed by steep inflation and economic disruption caused by Russia’s invasion of Ukraine. But innovative companies are building a future by developing quality and new dairy products, making the most of Bulgaria’s special yogurt and cheese traditions.
The Bulgarian dairy sector predominantly focuses on the production of yogurt, curdled milk and other fermented products, with a production volume of 160,000 tonnes in 2022, sold for €150 million, according to Eurostat, the statistical office of the European Union (EU). The European Dairy Association (EDA) said this is followed by cheese (97,600 tonnes) and milk (68,100 tonnes) also in 2022. The country, however, still imports less than it sells to foreign markets, Eurostat figures show.
In August 2022, six months after Russia invaded Ukraine, whose southern border is just 250 km from northern Bulgaria, the European Commission approved a €218 million national government subsidy programme (state aid, in EU jargon) to support agricultural producers struggling because of the war, notably from the flood in imports of products from Ukraine, whose trade was diverted from Russia and Belarus. In June 2023, an additional €8 million scheme was also approved as direct grants to help agricultural producers in Bulgaria reduce fuel dependencies and be able to cover higher water costs.
Then, €9.77 million came a few days later directly from the EU to support EU farmers impacted by adverse climatic events, high input costs, and diverse market and trade-related issues. However, despite this flurry of support from Brussels, these financial packages have been deemed as insufficient and flawed by larger milk producers in Bulgaria and in November 2023, the capital of Sofia was blocked by animal breeders and farmers demonstrating about their economic hardship – protests that occasionally descended into rioting.
The chairman of the Bulgarian Association of Dairy Processors, Dimitar Zorov, said that the problem was that Bulgaria was not the only EU country benefiting from relaxed EU largesse. Indeed, the Commission allowing all member states to increase subsidies to their agricultural sectors was “an ill-considered package” that opened a Pandora’s box, which allowed wealthier countries to support their farmers to a greater extent. This made it tougher for producers coming from less-wealthy countries, such as Bulgaria, to complete within the EU’s single market.
Unhappy processors
Larger dairy producers in Bulgaria are particularly unhappy, as they are faced with an aid ceiling in Bulgaria of up to €62,000 per company producing primary agricultural products, including dairy.
Given the cap, many large farms have cows attracting zero subsidies, which are paid per cow, although smaller farms not hitting the cap do better proportionately. A small additional local compensation of Bulgarian Lev BGN468 (€239) per cow is a scant compensation, said Zorov, “representing 1/23 of the annual feed for just one animal. This will lead to the destruction of the backbone of livestock farms, a folly that is leading to all the riots,” he said.
Moreover, operating in these turbulent times, dairy processors have not received help from the state at all. Milky Lux is one. Situated in a small town in the north-central region of Bulgaria, the company has traded since 1996 with a milk processing capacity of 100 tonnes to make white-brined cheese and 20 tonnes for Bulgarian kashkaval, a semi-hard staple yellow cheese. One of Milky Lux’s co-owners, Nikolay Georgiev, told DII that Covid-19 hit his business hard, forcing him to lay off workers and slow down investments.
Now, Georgiev is seeking financing and expanding Milky Lux’s product range. Company market research has indicated a niche market for low-fat and high-protein beverages and foods in Bulgaria: “They are more popular, more in demand by young people and we think there is potential in them. We are just now sampling the new products. Hopefully, within a month or two, we will have technology to match our goal,” he said.
Milky Lux is testing quality and shelf life, leaving every sample in the warehouses for at least 30 days and checking products’ longevity. Georgiev plans to eschew major supermarket retailers, instead working with distributors across Bulgaria who stock small-and-medium-sized shops. He added that while business cannot “suddenly go back to the way they were before Covid, the company is hiring people and expanding production.” Faster expansion could have come by selling lower priced products, “but we insist on quality and our prices are a bit higher. Our products have the best milk from nice farms.”
Big in Japan
Laurens van Delft, trade and economics director at the European Dairy Association (EDA) said the Bulgarian dairy industry does possess innovators. “The Japanese have recently gone crazy for the classic Bulgarian yogurt and a new joint research institute has been set up by Japan’s [dairy product manufacturer] Meiji, the company spearheading the Bulgarian yogurt craze in Japan, and Bulgarian state-owned dairy company LB Bulgaricum,” he said. This company has also been patenting discoveries with added probiotic strains to yogurts with a traditional thick and rich Bulgarian look and taste.
Meanwhile, the 10-year-old Sofia-based dairy manufacturing company, Milky Group Bio, is expanding regional exports. According to Albena Yordanova, its marketing director, the company targets neighbouring countries such as Greece, Romania, Serbia, North Macedonia and Türkiye. Additionally, it serves countries with a significant Bulgarian diaspora. Yordanova believes that enhancing Bulgarian branding and promoting its traditions would significantly elevate the country’s dairy products in export markets. She emphasised that Bulgaria presently lacks an international fair where local producers can showcase products and forge new business agreements. Addressing another significant challenge, the company is coping with a shortage of human resources by collaborating with universities and schools, undertaking staff requalification initiatives, and embracing technological automation. However, Yordanova underscored the need for a more comprehensive national-level strategy to effectively overcome the lack of skilled workers.
The Bulgarian Association of Dairy Processors’ Zorov added that one silver lining for the Bulgarian dairy sector in 2023 is that the country’s Traditional Dairy Products Association “has protected the designations of origin for Bulgarian yogurt and white-brined cheese, which for the country is a great achievement.” He added that if the Bulgarian government and companies grasp this opportunity, national traditional dairy products “could be in many years’ time be something that the Greeks have done with their Feta or the Italians with their Parmigiano.”
