"Rose oil distillers offer 1.50-1.60 levs per kilo of roses, but pickers want 1 lev (0.51 euro). There will be nothing left for the owner," says Koycho Koev, a small rose grower doing business near Kazanlak, the center of the country's rose oil industry.
Bulgaria is one of the world's biggest producers of rose oil, accounting for close to half of global output. Hence, a problem in the local rose business will have far-reaching repercussions. It seems that 2021 will be such a year: Koev says he doesn't remember one like it in his 25 years in the business. Production of rose oil in Bulgaria has suffered from structural problems for years and the coronavirus crisis has now sent the industry to its knees. Huge inventories are withering, businesses lack working capital, and market prospects are unfavorable. These factors have been forcing distillation companies to process flowers only from their own gardens or buy only small quantities from growers. As a result, purchasing prices have slumped to a level where it would be preferable not to harvest this year's crop of oil-bearing roses at all.
Which way the situation will unfold from now on is unclear. The pandemic reduced sales of high-end cosmetics and perfumes, which in turn depressed demand for rose oil. It is unlikely that the market will recover in a year, industry sources say. Add to that suspicions of unprofessional practices by traders in the country such as mixing rose oil with cheaper substitutes from other countries, and rising pressure from competitors like Turkey, and, understandably, Bulgaria's rose oil business is feeling like its back is against the wall.
Idle post-covid season
Over the past few years, the rose market has been facing challenges. Around 2015, investments in new rose plantations increased along with high market prices at the time. Consequently, as supply rose, prices dropped. Pressure has been building up ever since, reaching a culmination last year due to the coronavirus crisis. On the one hand, the harvest was good, which led to a bigger supply of rose oil - about 3.5 tonnes compared to 2.5-3 tonnes in previous years, according to industry associations. On the other hand, international demand crashed as sales of high-end cosmetics and perfumes plummeted along with the closure of malls and duty-free shops.
Consequently, orders to rose oil distilleries in Bulgaria dropped, and the industry began 2021 with high inventories and liquidity issues. "Some of the distilleries won't even purchase roses, others will be working at full capacity, but the majority will be working at 30-70% capacity", Gergana Andreeva, CEO of Bulgarian National Association of Essential Oils, Perfumery, and Cosmetics, told Capital Weekly. According to the association's most recent data, only about 46% of Bulgaria's almost 2900 rose growers have contracts for the purchase of their harvest. Considering that the rose-flower picking campaign is nearing this season's end, catching up is unlikely.
Stuck between low prices and high costs
"Purchase prices have been going down for three years straight. At first, they were 2.50 levs per kilo, then 2 levs, this year - 1.50 levs", says Hristo Kralev, one of the largest producers in the region of Pavel Banya with 24 ha of rose plantations. According to him, rose pickers are demanding a price of at least 0.80 levs per kilo. Due to a shortage of labor in the region, we're bringing people in from Sliven and other regions, and travel costs are adding up," says Kralev. He needs 130-140 pickers for his fields but has had difficulty hiring that many people for several years. The reason is that rose-picking is arduous labor, and pickers prefer either working abroad for a higher pay, or in other, less labor-intensive sectors like cherry-picking.
Thus, Kralev took an unprecedented decision to declare 2021 a year with no business activity and cut down his rose fields. Cutting the rose bushes down is a pause which is even recommended for their rejuvenation, it doesn't mean uprooting. "It will still cost us a lot, but much less than the alternative,'' says Kralev.
Not harvesting is the cheapest option for most producers this year. Koycho Koev, who has leased out his 0.3 ha of roses, says that this year the tenant won't be harvesting them. At the traditional peak of rose harvesting, picking either hasn't started yet or is limited in scope in most fields. At the end of May, producers staged an impromptu protest by publicly destroying plantations.
The recovery of the cosmetics industry is dependent on tourism and trade in luxury goods, which means that global sales in the rose oil industry will likely continue to be depressed this year. But the problems faced by the rose oil industry in Bulgaria are not limited to the impact of the pandemic. In recent years, the country lost competitiveness in international markets to neighboring Turkey due to the weakening of the Turkish lira and the Turkish government subsidies to the local industry. Thus, according to representatives of the industry, Turkish rose oil distilleries are undercutting prices on international markets by offering a kilo of rose oil for under 5,000 euro. For comparison, Bulgarian companies have been offering the same quantity for about 6,000 euro.
The outlook for the Bulgarian rose oil industry is not very optimistic. "It seems that over the past few years we've reached a point of oversupply, while the sale of rose oil has become more difficult," says Hristo Kralev. A colleague of his believes that some rose producers will switch to other businesses in the coming years, as demand and profitability dwindle.