Food and Beverages: Lower Revenues amid Falling Commodity Prices

Food and Beverages: Lower Revenues amid Falling Commodity Prices

Even though just three of the companies in the ranking worked at a loss, the average profitability slightly deteriorated

© Julia Lazarova

• For the first time the sectoral ranking is headed by Razgrad-based Amylum Bulgaria, a producer of corn products.

• Thirteen of the companies in the ranking report a drop in sales.

The performance of the food and drink sector was mixed last year: while the business of 2/3 of the companies grew, representatives of various branches reported declines which are most visible among cooking oil producers. However, on average the revenue of the top 30 companies in the food and drink sector rose by 3.4% year-on-year in 2017, reaching 4.9 billion levs.

Prices also moved in opposite directions: cheaper raw materials like grain are in contrast to the more expensive dairy products. As a result, the revenue growth rate of the food and drink sector is much lower than the double-digit rates achieved by other sectors. The same is true for profits - half of the top 30 companies in the sector reported higher financial results compared with 2016, but Rosa, Tirbul and Danone Serdica were in the red. The average profitability in 2017 was slightly above 6%, while the indicator exceeded 7% in the previous year's ranking.

The new leader

For the first time the sectoral ranking is headed by Razgrad-based corn processor Amylum Bulgaria owned by the US-based Archer Daniels Midland (ADM). With almost 600 million levs in revenues in 2017 (nearly 19% annual growth), the company has replaced former leader Oliva at the top of the list.

Privatized 25 years ago and after several changes of its owners, the corn processing plant in Razgrad now plans to invest 200 million levs to double its production capacity by 2020 at the latest. The plan is to process about 900,000 tons of corn per year, producing the two main products of the company - sweeteners for the food industry and starch, which is used not only in the food industry but in the pulp and paper industry as well.

The customers of Amylum Bulgaria are major food and beverage producers such as Nestle, Coca-Cola, Pepsi and others, and its main markets are Southeastern and Central Europe.

A bunch of six

The previous leader in the top 30 group - Oliva, ranks second in 2017. The company, which owns two cooking oil plants - in Knezha and Polski Trambesh, reported the highest drop in revenues among the companies on the list, of 22%.

"This is mainly due to lower sales prices of our products. An additional factor is the significantly smaller volume of traded goods in the financial year compared with the previous 2016," sources from the company explain. The majority shareholder of Oliva is the grain trader Bildkom owned by Angel Georgiev. While Oliva's revenue fell, the company almost doubled its profit in 2017.

Five more vegetable oil producing plants are present in the ranking. Papas Oil climbs one position with more than 10% revenue growth, securing it a seat among the top 3. The company has refineries in Yambol and Balchik as well as a plant for production of cold-pressed vegetable oils in Byala Slatina; it also trades in grain.

"Bulgaria is one of the main sunflower growers in the world. The large raw material base has enabled the development of processing industry. Last year's conditions were favorable for farmers and they offered larger quantities of sunflower. We focused on production, not on trade, we also optimized our activity and made internal restructuring," says Tsvetelina Peneva, CFO of the company.

Papas Oil has signed long-term contracts with major customers throughout the EU, in Turkey, Egypt, the Middle East. "In 2018, the sunflower sown areas are less than in 2017, according to official statistics, but there is an increase of the areas sown with rapeseed. So, the year could be at least the same as the previous one for the processing plants," Peneva predicts.

The majority stake in Papas Oil (53.33%) is owned by Saint Giran company with sole owner Georgi Tashev. He also owns the Sunfoods cooking oil company, based in Balchik, which climbs to 15th place and is second in the revenue growth chart for 2017.

The chart also includes Biser Oliva (28th place), which is part of Gradus group owned by Angelov brothers Ivan and Luka and Alexander Dmitrievich Minov, a Ukrainian citizen holding a Bulgarian passport. Minov also holds shares in Papas Oil.

The revenues of Rosa - Popovo (18th position) dropped by 11% and the company reported a loss of15 million levs in 2017. Class Oil (27th) based in Karapelit village, in Dobrich Region, closed last year with higher revenues and a slim profit of 27,000 levs. The company, founded in 2001 by Kenan Yilmaz and Mert Yilmaz, invested in the construction of a new extraction plant with 300 tons-per-day capacity.


Coca-Cola Hellenic Bottling Company (4th) dropped from the previous year's third place with a negligible margin. The company reported 7% growth in sales and ranks third in terms of profitability among the top 30.

Last year Coca-Cola HBC invested 6 million euro to expand production at its plant in Kostinbrod and by the beginning of 2019 it will invest a further 20 million euro in the site. "As a result of the investment, the production capacity of the company will grow by about 30%. The goal is to make the Kostinbrod facility a regional hub and to export its output to neighboring as well as more distant countries," comments Svetoslav Atanasov, CEO of the company. In 2017, Coca-Cola HBC marked 25 years of operation on the Bulgarian market.

Devin bottling company (20th) is second in terms of profitability in the sectoral ranking. Since March 10, 2017 it is owned by Belgium's Spadel following a record-breaking deal that valued the company at 120 million euro. Spadel bought a majority stake from the US-based Advent International at a price 11 times the 2016 gross profit of the company.

Devin claims the leading position on the bottled water market in Bulgaria with a share of 30% in terms of value. The company's exports go to Moldova, Ukraine, Romania, Estonia, the United Kingdom and the United States. At the beginning of this year, Devin signed a partnership and export agreement with South Korea's Encyiks and Human Group Co.

Two producers of alcoholic beverages are present in the Top 30 ranking. VP Brands International (formerly known as Vinprom Peshtera) takes 14th place. The company has reported a one-digit drop in 2017 revenue but is profitable, unlike in 2016.

SIS Industries (19th), which owns 99.97% of wine and spirits producer Vinprom Karnobat, grew revenue slightly in 2017 but its profit more than halved.

Bitter and sweet

Chocolate and sugar producer Nestle Bulgaria (5th place, unchanged) invested nearly 6 million levs in 2017, taking its total investment since it entered the Bulgarian market in 1994 to over 260 million levs. "Last year the Bulgarian company reported higher turnover and lower profits, the major factor for the decline being the increased prices of raw and other materials," explains Marian Marinov, financial manager.

Chipita Bulgaria (9th position, unchanged) reported a slight decrease in revenue and profit in 2017. The company, however, retained its leading position on the domestic croissants market with 82% share in value and on the bake snacks market (58%), its annual activity report shows. Chipita expects revenue growth in 2018 on the back of increased sales and higher spending on TV advertising and promotions to end users.

After splitting its business in Bulgaria into several separate companies, the global producer of chocolate, biscuits and cocoa Mondelēz International (previously Kraft), participates in the ranking with two of its companies. With more than 10% revenue growth, Mondelēz Bulgaria (which deals in marketing, trademarks, sales and distribution in the country) climbs to 10th place. However, the company's profit more than halves.

Mondelēz Europe Procurement, which coordinates the supply of goods and services, including to related companies in Europe, goes down from 7th to 17th position.

Position 24 is occupied by confectionery items producer Prestige-96. The company based in Veliko Tarnovo is third in terms of profitability in the sectoral top 30 ranking. Last year, Prestige-96 entered the niche of the so-called healthy foods, or superfoods.The market for biscuits, wafers and sponge cakes, on which Prestige-96 operates, is estimated at 300 million levs per year, according to AC Nielsen, said Ivan Stoev, marketing director. "Prestige-96 is the leader in sales in all the three categories. In addition, our total market share has grown, reaching 23% in terms of value", said Darina Stoyanova, CEO.

Gorna Oryahovitsa-based sugar producer Zaharni Zavodi climbs three positions to spot 26 in the sectoral ranking. The public company comprises several enterprises producing respectively sugar, confectionery, ethyl alcohol and high-protein animal feed. According to the company's own data, it is the market leader in terms of sales of hard and soft sugar candy, Turkish delight and halva. The company's newest project is production of anti-microbial candies for sore throat treatment.

Meat producers shine

Razgrad-based poultry meat producer Pilco reported a double-digit revenue growth rate and almost double profit relative to 2016, retaining its sixth position in the sectoral ranking. The company is part of Ameta Holding owned by one of the largest chicken producers in Europe - Germany's PHW. The group brings together two poultry farms with slaughterhouses - Pilko and Ludogorsko Pile in Razgrad, Rositsa fodder plant in Pavlikeni, Svinevadstvo Asparuhovo pig farm near Pleven and Enevo Farm in Shumen.

Boni Holding goes up two positions to 8th spot. "In 2017 Boni Holding launched a procedure for acquiring full control of its partner slaughterhouse in Targovishte. The activities for designing and providing all necessary permits for the construction of the new high-tech industrial slaughterhouse continue. It will be situated close to our main meat processing plant in Lovech," said Mariyan Mihaylov, marketing manager.

He elaborated that most of the investment of the group was allocated to the plant in Lovech for the construction of an automated line for cutting and packing pork cuts. "For yet another year Boni is the most popular TV spot in the category of meat products," Mihailov noted.

The other big producer of chicken meat and sausages - the Stara Zagora-based group Gradus, participates in the ranking with two of its companies - Gradus - 1 (16th place), which reports the highest profitability among the top 30 companies, and Biser Oliva.

This year, Gradus made a debut on the Bulgarian Stock Exchange. The company plans to use the proceeds from the IPO to finance an investment program stretching to 2020. The planned investment aims to increase poultry meat capacity, expand the breeding egg business, the "I Eat" sausage product line and the horeca market, for marketing and introduction of new products.

The revenue of Ken, a producer of fresh, cured and cooked-smoked sausages (30th place) increased in 2017, but the profit growth rate fell. According to data of the Stara Zagora-based company, it has achieved more than 50% growth in the market share of frankfurters category in the last three years and now holds 20% of the market of perishable sausages.

Double-digit revenue growth and a slight drop in profit in 2017 were reported by Bella Bulgaria, which climbs a notch to 7th position. The holding owns nine factories for meat products, pastry, margarine and other foods with a daily capacity of 350 tons of food. Its direct distribution reaches over 12,000 points of sale in the country (chain stores, shops, warehouses).

The group, which makes over 200 products under its own and private brands, last year added to its list the manufacture of healthy products - pastry sheets under improved recipes, filo pastry without preservatives for the horeca sector.

Beer is beer

Last year, a total of 5.47 million hectoliters of beer was sold in Bulgaria by 23 companies - micro, small, medium and large, sums up Ivana Radomirova, executive director of the Union of Brewers in Bulgaria. In 2017, the members of the union which are the largest brewing companies in the country - Bolyarka-VT, Britos, Zagorka, Kamenitsa, Carlsberg Bulgaria, Lomsko Pivo, sold 5.13 mln hl of beer, which is almost 1% less than in 2016.

The three largest breweries have their places in the top 30 ranking. Zagorka (11th) remains the leader of the beer producers in the country, even though it marked a slight decline in both revenues and profits.

Carlsberg Bulgaria (12th) climbs, overtaking Kamenitza. In 2017 Carlsberg Bulgaria reached 31.6% market share, the company said, quoting Nielsen agency data. In comparison, the company's share was 26.8% in 2016. Its Pirinsko brand has remained market leader in the past two years, reaching 19.8% market share in terms of volume. The Shumensko brand has also gone up, reaching 10% market share by volume in 2017.

Kamenitza (13th) also goes higher in the ranking. The company reported a one-digit decline in sales and more than double increase in profit last year. "In 2017, Kamenitza continued to invest in its production facilities," company representatives said. The construction of Kamenitza Brewery complex worth 2 million euro continues on section of the site of a former brewery in the city of Plovdiv. According to the company's own data, Kamenitza is the leader in the higher segment of the Bulgarian beer market with its brands Stella Artois and Staropramen.

Golden milk, cheap flour

United Milk Company - UMC (21th place), which produces under the brand Vereya, reported a rise of almost 10% in sales revenue and a slight drop in profits in 2017. "Last year, the biggest challenge was the increased price of raw milk, which rose by 17.7% relative to 2016. But UMC sales rose by 6.6% in terms of volume," commented Yolita Boteva, marketing director.

Sliven-based dairy products maker Tirbul (25th place) reported revenue growth of almost 20% in 2017, but remained in the red, with a loss more than twice as big compared with 2016. Last year the company, which manufactures under the Olympus brand, completed a step-by-step investment in capacity expansion worth 18 million euro. The investment was focused on expansion of buildings and the purchase of a new production line for hard cheeses. As a result, capacity doubled.

Danone Serdika (29th place) finished 2017 with a slight year-on-year decrease in revenues and reported a loss of 4.3 million levs.

Flour milling company Topaz Mel (22nd place), which is in the same group of companies with spirits producer SIS Industries, ended the year with profit growth but posted 12.19% drop in revenue. The reason probably was the cheaper raw material - the wheat.

Goodmills Bulgaria (23th place) - the owner of the Sofia Mel flour brand, reported a decline in both revenue and profit. Data from Nielsen's latest market research shows that the Sofia Mell brand has 60% market share in terms of value. Some 35-38 percent of the company's output is exported.

• For the first time the sectoral ranking is headed by Razgrad-based Amylum Bulgaria, a producer of corn products.

• Thirteen of the companies in the ranking report a drop in sales.
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