Bulgaria Food and Drink Report Q2 2008

Recently Bulgaria's snack food sector has witnessed considerable activity with a number of expansions and acquisitions, as discussed in BMI's recently-published Bulgaria Food & Drink Report for Q208.

First, in early January American soft drinks and snacks company PepsiCo announced that it had signed an agreement for the acquisition of Penelopa, a leading Bulgarian snack company. PepsiCo is already present in the Bulgarian market, distributing a wide range of products, including Lay's, Ruffles, Cheetos and Doritos brands, which are imported into the country from neighbouring Romania, Greece and Turkey. Penelopa's product range includes branded peanuts, sunflower seeds and other snacks, which are distributed throughout the country, primarily through its dedicated distribution network.

PepsiCo has said that this acquisition is 'very consistent with our global focus on addressing consumers' growing interest in health and wellness', as the company looks to increase its presence in what it has deemed a high growth market.

This was followed by the announcement by local producer Ital Food that it planned on increasing its share in the local snack food market from 12% to 30% by the end of the year. Ital plans on achieving this very strong rate of growth through a combination of new product development, launching new flavours of existing popular brands, and the restructuring of its operations. While production facilities will remain in Shumen, in the north east of the country, management and marketing operations will be moved to the capital Sofia. The company has also recently opened a new EUR4mn (US$5.9mn) factory at the end of 2007, making such ambitious growth plans more achievable. Lachita, another local producer also announced investments, reportedly investing EUR15mn (US$22.1mn) in a wafer biscuit manufacturing facility, as it plans to double its current staff of 200.

Although current spending on food and drink is low when compared with some of its regional peers, due to a low GDP per capita, we are forecasting significant growth as disposable incomes rise and consumers switch over to processed foods. As the above developments indicate, the Bulgarian snack food market is heating up, as consumers find themselves with more money to spend on non-essential food and drink items. Health consciousness is another major trend in the food and drink sector, one which PepsiCo is well positioned to capitalise on with its recent Penelopa acquisition.