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Composition of the Bulgarian seafood sector
In 2015, Bulgarian fishing companies generated EUR 5 million in landings income. Processing companies generated EUR 63 million in 2016 (see Table 13).
Bulgaria had a trade deficit in fish and fish products of EUR 26 million in 2016. It imported EUR 89 million worth of fish, but only exported EUR 63 million. Its main fish import partners were Denmark (12%), Greece (11%) and Spain (10%). Bulgaria exported 33% of its fish to Sweden, 19% to Romania, and 12% to South Korea. 71% of its fish exports were to EU member states, while 79% of its fish imports originated in other EU countries.
Even though Bulgaria’s landing income is relatively small, in 2017 it had a fleet of 1,897 vessels operated by 1,828 companies. 68% of the fleet was active. 6% of the companies own more than one vessel. The low average tonnage is an indication of predominantly small-scale fishing companies.
Fishing companies employed 608 FTE in Bulgaria in 2015. The fish processing segment with 1,482 FTE employed more than twice as many in the same year.
The registry shows that there are 101 vessels above 12 metres, and only 24 vessels above 20 metres in length. There are only two quotas active on Bulgarian catch – for turbot (57 tonnes) and sprat (approximately 8,000 tonnes) (Undercurrent News, 2018d). Together this constitutes less than 10% of the total catch in Bulgaria. Moreover, the sprat quota is never reached (Gospodinov, 2018).
The production of fish and fish products in Bulgaria increased by slightly over 4% in value in 2015 to almost EUR 54 million. Of this, 62% (EUR 33 million) was realized abroad and the growth of overseas sales compared to the previous year was 4.8%. A major segment with a share of 44% of total revenues continued to be shellfish. Ninety-six percent of this production was exported, making the segment the most export-oriented. In Bulgaria, more than three quarters of fish and fish products end up in the retail sector (see Figure 7). The likely customers are Metro Cash and Carry, Billa, Fantastiko, Carrefour, Kaufland, and 345. A quarter of fresh fish is sold to the food service sector.
That majority of fresh fish is sold unbranded (see Table 14). Canned fish in Bulgaria is mostly sold as branded products. Frozen fish is sold as both unbranded (45%) and branded (45%). Own brands account for around 10% in all categories.
The Bulgarian fish product market is dominated by local brands. Important brands for fresh fish include Atlantik AD with a market share of approximately 15% of the fresh segment, and Chernomor Burgas with around 13%. Atlantik AD also holds a share of around 20% in the frozen fish segment of the country. In the canned segment, Slavjanka is a key brand with a market share of approximately 17%, Saupiquet (part of Bolton Group (Netherlands)) accounts for around 9% of canned fish. Atlantik AD also holds a share of around 12% of the dried/smoked/salted fish segment in Bulgaria (FFT, 2018).
Bulgaria has no recognized producer organisations. However, there are two associations that represent the fishing sector. The largest of these is called BGFish. It has 76 member vessels (6 are sub-rented from other companies), and a total of 34 member companies. 25 large ships are members of the association. It receives 12 tonnes of the turbot quota and represents both fishermen and processors (Gospodinov, 2018).
The BGFish board of executives is formed by the CEOs of the largest integrated companies. In an interview, the CEO of BGFish – Yordan Gospodinov – stated that the association is the biggest producer organisation active in Bulgaria with the largest catch. It represents several production plants, the only fish exchange in the country as well as several import and export firms. The producer association offers no direct marketing, but supports its members, for example in assisting them to obtain finance.
Gospodinov is predominantly positive about the introduction of EU regulation and quotas. The sector is prospering although 20% to 25% of all Bulgarian capacity had to be scrapped as the vessels could not match EU regulations (Gospodinov, 2018).
The second association is Chernomorski Izgrev (Blacksea Sunrise). It organises 45 mid-sized vessels of 10 to 20 metres length. These receive 25 tonnes of the turbot quota.
With 80%, the Bulgarian sector is predominantly engaged in demersal fishing. The quota distribution is largely based on historical catch and quotas are not transferable. The two associations jointly receive approximately 65% of the national quota, which they distribute to members. A member of one association cannot leave it to join the other association and keep his quota. The government distributes the remaining quota. The distribution is largely based on historical catch. Quotas are not transferable (Gospodinov, 2018).
36 companies are registered as fish and fishery products in Bulgaria. There are no publicly listed companies on the Bulgarian stock exchange employed in the fishing sector. There are some joint stock enterprises, with just a few owners. The largest companies in the sector are family owned. There are also a large number of sole proprietorships, i.e. fishermen, usually with a single small boat (IARA, 2017).
The overall turnover of the top 25 companies active in the Bulgarian sector in 2016 was 6.5% higher than in 2015. The export value of these companies increased by 14%. The top 25 companies account for 97% of total sales of Bulgarian fish products in 2016 (Capital.bg, 2017).
Many of the key companies operating in the fish catching segment have invested in processing plants. It is very likely that a large part of the country’s catch is processed by the few key actors selected here. All of them have processing capacity.
According to the directors of the two producer associations in Bulgaria, among the largest companies with a catching division are Elekta, Chernomorski ribolov Burgas, Ding Pavlovi & Sie, Nesebar Fish and Morski Ribolov Nesebar. The sixth largest company, Sever-Export, was identified in a recent market review. All these companies have a processing plant as well as their own fleet.
Elekta is a family owned business with several subsidiaries. All are majority owned by Lyubov Georgieva. Detelin Valisev Tzvetanov is a minority owner. With revenues of EUR 3.4 million the company ranked third in 2016 (Capital.bg, 2017a). It engages in catching, processing, storage and trade of fish and fishery products. Elekta first had a processing plant and then entered the fish catching segment to guarantee supply (Georgieva, 2018). A substantial part of its business is shellfish processing. More than 90% of the company’s products are exported. Key destinations are in Asia and America (Capital.bg, 2017).
CEO Georgieva states that integration has benefited the company. It has become more efficient and costs are lower. However, the company is not yet 100% integrated, as it considers this to be risky. While operating its own fishing fleet, the company purchases about 50% of the catch it needs from external suppliers. This allows for more flexible responses to market demands (Georgieva, 2018).
Chernomorski ribolov Burgas
Chernomorski ribolov Burgas (“Black Sea Fishing – Bourgas”) is privately-owned and family operated. Owned by Vladimir Stoyanov and Emil Stoyanov through their company “Bieseff” and their father Petar Stoyanov. In 2016, it generated revenues of EUR 560,000, a decrease by 56.6% from the previous year due to a decrease in exports (Capital.bg, 2017a).
It is engaged in trawling, freezing, processing, cold storage, transportation and trade of frozen seafood on the domestic and international markets as well as import and export from and to the European Union and third countries. The company operates two trawlers and 18 other vessels. The company has renewed a modern processing plant. 70% of raw materials is caught by own vessels, the remainder is bought from external parties, mostly Romanian suppliers. Chernomorski ribolov Burgas produces and offers a wide range of frozen, dried, smoked, dried and pickled products and is the owner of the “Perla” brand. 80% of Chernomorski ribolov Burgas’ production is exported, mostly to France and Spain. Chernomorski ribolov Burgas domestic clients include large supermarkets, e.g. Fantastiko, Kaufland and other distributors, and some wholesalers (Stoyanov, 2018).
According to CEO Stoyanov the company’s costs are optimized because of integration. Chernomorski ribolov Burgas is more competitive both domestically and internationally due to veritical integration. Higher foreign prices help to cover the company’s costs. But Chernomorski ribolov Burgas is also in close contact with its key competitors. “We represent the industry and often have common interests, so we stand together and cooperate” (Stoyanov, 2018).
The company has undergone significant optimization and automation in its processing plants, however, no workers have been laid off. Employees have become more highly skilled. In fact, the company has increased the size of its workforce alongside integration and processing optimization. Quotas have not had an impact on Chernomorski ribolov Burgas’ business as it targets non-regulated species (Stoyanov, 2018).
Ding Pavlovi & Co
Ding Pavlovi & Co is a leading exporter of Black Sea sprat from Bulgaria to other EU countries, namely Spain, the UK and Romania. The company owns five trawlers and is specialized in fishing, producing and trading frozen, breaded, salted and marinated Black Sea Sprats. The company states to run one of Bulgaria’s most modern factories for processing and freezing of fish. Besides frozen sprat it also offers frozen bluefish, anchovies, horse mackerel, red mullet as well as breaded, marinated, glazed and floured products. Moreover, it produces whitebait and blanchbait for the UK market (Ding Fish, n.d.). Its revenues reached EUR 700,800 in 2016, of which approximately 60% were derived from exports (Capital.bg, 2017a).
Nesebar Fish is engaged in catching, processing and marketing of fish and fish products. It also has positions in the meat market and is exports to a number of neighbouring countries. Nesebar Fish owns the biggest fishing vessel in the country. It later developed a fish processing factory, as well as a distribution network with cold transport and storage (Geglev, 2018).
CEO Geglev says that the company is not more competitive than other integrated businesses but that it is in a better situation than small-scale fishermen. No Bulgarian company can compete with other EU integrated fishing companies (Geglev, 2018).
Geglev states that earnings are down, barely enough to cover expenses. The CEO does not see a positive future for his company under the regulatory and fishing conditions in Bulgaria. “If someone would just come and buy my ship and the factory I would sell immediately. There’s no fish. There are no scientific studies why […] Uncertainty in regulation, bans or laws is a big problem; requirements are ambiguous and multiplying; instead of just adopting direct EU regulations, which would be preferable” (Geglev, 2018).
Morski Ribolov Nesebar
Morski Ribolov Nesebar is a family enterprise. It operates a fishing vessel, fish processing plant and distribution network. Morski Ribolov Nesebar also exports its products. The main target species is sprat. In 2016, the revenue of the company declined by 35% in comparison to the previous year to EUR 734,000 (Capital.bg, 2017a). It is owned by Georgi Zhelyazkov Martinov, Steliyan Georgiev Martinov, Mariyka Grigorova Martinova, and Elena Georgieva Petrova (see Figure 12).
Sever Export was the second largest company by income in the Bulgarian fisheries sector in 2016 with a turnover of EUR 5 million. It has a wide portfolio, but the main share of its revenue is the export of frozen meat from rapanas (an invasive, carnivorous sea snail) with a share of 77%. The company operates a fishing port, fishing vessels, a seafood processing factory, and cold storage. In addition, it imports, processes and markets fish fillets. It manufactures marinated and smoked products with the brands “Sever Export” and “Varna Fish”. It is owned by seven individuals, including the children of founder Jordan Harassimov. It is managed by one of the shareholders – Nedelcho Asenov Stoychev (Capital.bg, 2017a). Besides their own stores, key customers are supermarket chain Billa and Metro Cash and Carry, next to other shops, restaurants and hotels. It owns four fishing vessels and works with 12 other vessels on a long-term contractual basis (Sever Export, n.d.).
Based on the findings in section 4.3 as well as expert interviews, it can be observed that the Bulgarian fishing sector is showing strong signs of vertical integration (Dimitrov, 2018; Georgieva, 2018). Many of the key companies active in the fishing sector have developed processing plants (Gospodinov, 2018). In contrary to that, no sizeable horizontal integration has taken place (Dimitrov, 2018; Geglev, 2018; Georgieva, 2018; Gospodinov, 2018). One interviewee noted that “Bulgarians don’t have the mentality to do that [horizontally integrate]”. The lack of horizontal integration means that Bulgarian fishing companies are not competitive and are less present on international markets than players from other EU countries (Gospodinov, 2018).
This lack of horizontal integration is caused by three factors: a lack of capacity / catch limits, the regulatory environment, and regulatory uncertainty. Overall, the Bulgarian fleet has been downsized. This was driven by EU regulations, as 25% of Bulgaria’s fleet could not meet EU standards. Consequently, vessels were scrapped. Furthermore, there are limits on fish resources, meaning that capacity – and therewith fleet sizes – cannot be increased. To increase capacities, old boats are scrapped, and their permits collected on a new vessel with larger capacity. However, this is quite rare. Moreover, according to the CEO of the biggest fishing sector association, BGFish, there is insufficient quota. In his opinion, the turbot quota should be tripled to be adequate and should be distributed more fairly. Furthermore, BGFish wants to be an EU recognized PO, but the government is blocking them (Gospodinov, 2018).
The regulatory environment also seems to play a role in preventing companies from increasing their fleet sizes or adjusting the composition of their fleets. As put by the CEO of BGFish, the “bureaucratic machine of Bulgaria” makes it difficult and expensive for fishermen to run their business (Gospodinov, 2018). The owner of Nesebar Fish describes huge problems with Bulgarian legislation, namely that “there isn’t any”, but what little there is, is a big hurdle for the sector. Uncertainty in regulation, bans or laws is experienced as a big problem. Requirements are ambiguous and multiplying, instead of simply adopting direct EU regulations (Geglev, 2018). Stoyanov of Chernomorski ribolov Burgas similarly decries the large legal/regulatory uncertainty calling it a “big hurdle” for further development. He states that government decisions are taken without implementing necessary research and studies and are often completely unjust and unjustified. He concludes that decisions on government level actually accommodate and stimulate the grey economy (Stoyanov, 2018). Gospodinov state that the EU legal framework concerning fisheries is not adopted in Bulgaria, which he believes is a massive impediment for the sector (Gospodinov, 2018). The CEO of Elekta would also prefer to see the EU frameworks completely implemented in Bulgaria, because currently there is considerable unclarity in the Bulgarian legislation. He states that EU membership has thus far already brought some transparency and order, but more needs to be done to create an attractive investment climate (Georgieva, 2018).
All respondents agree that there is a need for more horizontal and vertical integration in the Bulgarian sector. Geglev states that “there is complete need of integration”. The reason Nesebar Fish developed its processing plant was that there were no buyers for its catch. With the processing plant access to the retail and food service markets could be established. Integration and the development of larger enterprises will give Bulgarian fishermen more direct access to big supermarket chains, which demand fixed quantities on a daily basis (Geglev, 2018). A lack of integration or sufficient size means that fish catching companies cannot guarantee that they can meet these fixed quantity demands. In addition, it is cheaper to integrate as it takes away the need for middleman and thus decreases costs (Stoyanov, 2018).
The CEO of BGFish, Gospodinov, notes the positive effects of companies that have integrated. “They are better off. They have managed to attract very educated and western educated personnel and some visionaries. They have new ideas. I think this has impacted the entire industry. I have seen the uniforms and the people on the fishing boats, I see them changing for the better. I have seen better equipment and higher standards. Export companies are faring best for sure, as they sell at international prices while producing at low local costs” (Gospodinov, 2018).