Could you please give us some background information on Domaine Boyar?
Our 10th anniversary is next week; we celebrate the foundation of the company in 1991. Over the past couple of years, the company has developed a lot and now it has a completely different structure. Now, 39% of Boyar Estates are held by a big American conglomerate, Seaman Corporation; among other investors, a Dutch company has 4% and 36% belongs to individuals which have been associated with the company for the last 10 years. Some of them are Bulgarians and some of them are from the UK. So, that's why I say that we are very much an international company. There are some very important stages in our development. For instance, at one point we were set up as just a purely trading company. We represented, at that time, 12 Bulgarian wineries and for the first year of our existence we managed to sell approximately 1.5 million cases of wine. Then, we took part in privatisation, and we privatized all the existent Bulgarian wineries in Jambol and in Shoumen, which are located in the northeast and southeast of Bulgaria. Later, we developed a project with the European Bank for Reconstruction and Development for $60.5 million. Domaine Boyar AD, as the company was known in 1998, started renovating its technical equipment in existing wineries, especially the ones situated in the town of Sliven, which is one of the best wineries in Europe. It's state of the art, I'd say.
How old is this winery?
It is 3 years old. We started in November 1998 and we commissioned it in September the following year. It's a $15 million investment. As for the capacity of the crush, it can handle approximately 14-15 million kilograms of grapes. It's Australian design - the best available technology - and this is the third reintegration of this winery, we call it "brewery", and if you find some bottle, produced there, already available all over the country, try it, I think it's worth it. Last year we made another important step, we merged with 'Vinprom Rousse', which had been privatized by the local company, Seaboard Corporation. We created Domaine Boyar, which is actually a holding company, registered in Luxembourg and that fully controls all of the companies in the DB AD Group and 'Vinprom Rousse'. It means that for the moment we have 4 fully functioning wineries in Bulgaria and 5 wineries for wine reproduction. We have our foreign trade organization in UK called 'Boyar International' and our company has distribution companies in Germany, Benelux, in Belgium, and in Austria. Our main market is definitely the UK, about 28-30% of the total sales, next is probably the Benelux countries, then the Scandinavian countries, followed by Germany, Canada, Japan and others. Last year, we started operating on the East European markets, which had never been the case for us, we usually worked only with Western markets and I'd say it was quite a successful year; by the end of the year we will be close to 3 million bottles sold. In our diversification efforts our main target is Germany, as it is a very important market and the fact that we are much too dependent on the UK.
Is this a difficult market?
It's one of the most difficult markets, that's true, and that's why our targets are Germany and the United States. We have sent representatives to the States permanently, and we recently signed a contract with Metro Cash & Carry in Germany for promoting three of our wines. It's a huge promotion and we very hope that it will be a successful one. We want to occupy a different price level and to get rid of the image of the wines that are usually sold on the German market. They are seen as very poor quality wines and people think this is the quality of the Bulgarian wines as well. This is not the case, these are the wines actually produced especially for Germany, because in former East Germany they used to drink such kind of wines.Total sales were over 30 million bottles last year. We are not in the expensive price category but our slogan is good wine for less money. Our bottles are selling, for example, in the UK between £2.99 and £4.99, which is not the cheapest, but the second tier of price levels. We recently started in Switzerland, and we are negotiating with Match Worldwide; it is a huge company with 7.000 shops - most of them are in Belgium; it's a very difficult market with less than 2% of Bulgarian wines, the other wines are French.
Are you going to place your wines in the very high quality segment?
This will be impossible. It's impossible to compete with France, because wine is an image product and Bulgaria still doesn't have the necessary image in order to be able to sell at this price level; but we are working on this. We have already started our own program for developing more sophisticated wines so this is something for the future; at the time being we are not ready for this. We are a very young company and we have only been in production for five years, so it's impossible to enter the very best and expensive market of wines due to this. Also, most of us come from different backgrounds. No one has come from the trading side of this business. I, for example, come from the financial side.
You are an economist.
Yes. I used to work for the Foreign Ministry for many years, negotiating with international organizations and the World Trade Organization. I have an education in economy and finance. I was a banker when we got together with Margo and decided to start negotiating this project and that is why we joined hands and continued working together. Last year, I became the new Managing Director and Chairman of the Board; the person responsible mostly for marketing and sales.
How would you rate the wine industry in Bulgaria?
The wine sector is in a very serious crisis in the world, I'd say. We are the only company, successful both domestically and internationally and there are many reasons for this. For instance, there were no investments in the wine industry during the last 15-16 years, and most of the wines were neglected because of the commodity policy, pursued by all the governments since 1989. Also, there was no market for lands; the way the land was handled was totally economically ineffective and now this process is in chaos. A country that was in a position to feed two or three other countries can hardly feed itself now, which is a very pitiful situation. So now we are paying for all those mistakes made during the last ten years. There were no investments in orchards that supplied us the fruit and in its quality. This is why we are trying to establish long-term cooperation with some of the biggest suppliers, cooperatives and private producers and we are trying to provide them with advice through our specialists, in order to increase both the quality and the quantity of the fruit we need.
Our next step, of course, is to develop our own wines. We have already purchased about 300 hectares of land, and we will use another 300 hectares given to us from the government. We just completed a project with the best-known agricultural company in Australia that will probably start implementing this project next year.
What is your contribution to the sector?
We are definitely the biggest producer and therefore the biggest exporter of Bulgarian wines and we are moving opposite to the direction Bulgarians are moving which is not good even for us. It's good to have competition, otherwise we are going to run into problems sooner or later. Also, on the international market there is a decline, and Bulgarian wines are out of fashion. Even a top producer like us, for example, would face a problem.
Do you think that Bulgaria is matching the world trends in the wine industry?
We are successful because we are very well known;
this is not the case with most of the other Bulgarian
wineries. What the market prefers now are the young,
fresh, fruity wines, which can be drunk even without
food. This is what the market requires at the moment
and where the volume is. |
How is the legislator reacting to such changes?
The wine law was adopted last year and we are trying to convince both the people in the Parliament and the Government that this law is not good for Bulgaria. I'm sorry to say so, but the wine law frequently used is the French law, and I don't think that this is a good example for us. The French law is excellent for the French wine producers, however it's too restrictive for us as our main competitors are not the French producers. OK, let's say the South of France is a competitor but our main competitors are Chile, South Africa, Argentina and they have completely different wine laws. These laws are more flexible, not so restrictive and this immediately puts them into a better position. I deeply respect the French wine industry, for me it's definitely the best and most sophisticated, and very difficult to copy. There wines have been developed for so many years, so to try to reproduce this knowledge and experience, and to link it with the image of our country and to compete with French using their wine laws is not a very clever step.
So, what do you suggest?
Much more flexible law, not so restrictive, very similar to the one existing in Australia, in Chile or even Spain; these are more advanced from that point of view. I think there was one analysis from a very important financial institution in the Netherlands which said that probably the very restrictive and out-of- fashion laws in Europe, keeping in mind Portugal, France, Germany and Italy, are the main reasons for the decline of their sales and for the success in Australia, Chile and South Africa. Probably that's why most of the big producers in France have their own wineries in Chile, California, Australia as well as other countries.
Do you think that wine is an image product for Bulgaria?
Bulgaria is a very nice country, not very well organized and that has not been very well managed for the last 10, 20, 50 years, probably more, but it has a beautiful nature. It has a huge potential for agribusiness and for tourism and I think these are very interesting as they give us a comparative advantage with other countries. That's why I do think that wine industry could be one of these image making products for Bulgaria.
So what should Bulgaria do to create the right image?
I don't think we have to stress on the wine itself, we have to promote the country because wine goes with the country. It's so easy to sell French wine because it comes from France, and the same with Italy. Sometimes, I come across wines that are not very expensive and if you compare it with the quality of French and other wines in the same price category, you will see that they are better, but French is French, excuse the way I think. It's very closely connected with the image of the country and once the image of the country is high, the sales will immediately go up. That's why we hope that in a year or so, when the King comes back to Bulgaria and forms the new Government, this will happen. It seems that it won't be as easy as we thought at the beginning but we will see what will happen, as people are very supportive of him and his Government.
He is actually in Brussels; did he carry any bottles of wine with him?
That is an interesting story as the King gave us the right to use his family seal on our labels in 1991 and we still have this right.
Bulgaria might join the EU in 2007, what main problem do you think it is going to face in order to meet the requirements?
I think it will be good both for Bulgaria and the wine industry because a market of 300 million people is opening up for Bulgaria. Our products are West and export oriented, and this will help us to regulate our domestic market, as there is a huge, I mean huge production of homemade spirits, I think equal, if not even exceeding the industrial one, which is not allowed in the other European countries. So, I'm not afraid at all, just the opposite, we are striving to join the EU as soon as possible.
As one of the biggest companies in Bulgaria, what is your social contribution?
We are very active in many fields. We are a very active member of the Employers' Organization of Bulgaria. I'm a member of the management board, and we are trying to create a business climate and environment, which will be used to solve the different business problems. Also, we have for the moment about 550 people working for us and with wine developments; I think there will be more in the future. We formed an association to help the people from the wine sectors that are in a very difficult situation. We pay a lot of attention to the education of the young people, sending them to other countries in order to learn as much as possible. For example, we now have our wine makers in France for three months. Last year we sent people to the USA, Australia, and New Zealand; so, we constantly train our people to give them an international background. I would never forget what a famous person once told the old wine producers: 'I don't want to produce what is considered good wine, I want to produce sellable wine, the market is the one to tell you what's good and what's bad'. Probably that's when the thinking in the wine industry started to change and the Bulgarian wine industry was one of the few that did last during the years, maybe for that reason. You will see that the only consumer product that was sold massively on the Western markets was Bulgarian wine. We used to have 6.5% of the UK market in 1994, now it's about 3% but it is still a huge quantity. Bulgarian wine was a success, now it's in decline. Domain Boyar's doubled sales are kind of shocking at the moment as we have had a 35-40% increase from last year.
How do you perceive the investment climate in Bulgaria?
I'm a firm believer that Bulgaria needs multinationals to come; they will create a different atmosphere and create different morals in business. When METRO and SHELL came, everything changed quickly. Unfortunately, that hasn't been the case for many years. Many politicians tried to privatize the country by themselves and for themselves, that's why we were so slow with the reforms. Now it's too late, those who wanted to invest in Eastern Europe have already invested and we have to find some new players to convince. When His Majesty won the elections it was probably the first time we were on the front pages, now is the moment to try to convince such serious international investors to come. You must have a vision, create the project, and then try to find the buyer and to sell to a strategic investor. Some people in the Government think they can privatize the country through the stock exchange. I don't think this is right, it's a secondary market more or less, it could be a primary market but not for Bulgaria. I believe that we have to sell projects; this is the only way to attract investors of the rank of British-American Tobacco or Deutsche Telecom. It used to be the case that they would sell to offshore companies, or to the so called, always politically backed, 'managerial buyouts', which they use just for their own profit and not for investing.
What would be your positive message to our readers?
There is a lot of potential in this country; sooner or later Bulgaria will be a member of the European Community. Bulgarian people are very open-minded and they have a very good nature. I speak often with key investors and all of them are very happy to be here, although it has been a tough decision for them.
Note: World Investment News Ltd cannot be held responsible for the content of unedited transcriptions. |
