Samenvatting

The following report is a feasibility research and serves as an initial guideline to Bulgarian dairy companies in relation to the possibility to import Bulgarian dairy products into the Peoples’ Republic of China. The document describes possible opportunities for Bulgarian dairy processors related to the future lift of restrictions for Bulgarian dairy products by China.
The need for Bulgarian dairy processors to reorient their export activities comes from a combination of recent developments in the dairy sector in Europe and the long lasting problems of the Bulgarian dairy industry. The former include the removal of dairy quotas in the European Union and the Russian embargo that have caused inflow of foreign production in the Bulgarian market while the latter include the low productivity of the Bulgarian dairy farms, high production costs and discrepancies between the quality of the production and the EU requirements.
The Bulgarian dairy sector is not in a favourable position. Productivity is around 60% of the European average which is a major issue. In addition, Bulgarian dairy processors experience problems with milk deliveries due to the fact the production of Bulgarian dairy farms is usually more expensive compared to the one their European counterparts provide on the Bulgarian market. Quality is also an issue as large amounts of extracted milk falls into 2nd and 3rd category which is not allowed to be exported outside the country. Nevertheless, in recent years more and more Bulgarian farms have been approved for production of 1st category milk and small dairy farms are being replaced with larger medium-sized ones which are significantly more productive. Lastly, Bulgarian dairy market is rich in variety of products that are unique in the region not only with their taste but also the benefits they provide for the human health.
The Chinese market for dairy products has been expanding extensively since the 1990s. Especially in urbanized areas consumption of dairy products is on the rise, therefore the demand for this type of products is constantly increasing and is expected to continue increasing in the future. Nevertheless, there are many important factors that would make extremely difficult for Bulgarian dairy processors to import independently into the country. The biggest concern is related to the taste preferences of the Chinese population. The most differentiated and unique Bulgarian dairy products such as the yogurt and white brined cheese do not fall into the category of preferred products for Chinese citizens due to their saltiness and sour taste. In addition, competition on the Chinese dairy market is rather intense and in order to compete successfully via marketing and distribution tools high amount
The Hague University of Applied Sciences Aleko Popov
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of capital would be needed. Last but not least, the whole import process is quite complicated and takes time and resources which would be a major difficulty for the relatively small and inexperienced dairy processors.
Therefore, the report has concluded that the best possible option for export would be through cooperation with the Chinese government and Chinese companies. As milk is a product that Bulgarian dairy processors can provide and is preferred and highly consumed by many Chinese citizens it would be the desired option for export. Furthermore, such cooperation needs to follow certain parameters on how it should be done in order for the Bulgarian dairy producers to be capable of exporting their production. It is advisable to exclude the possibility for transportation of the production all the way to China by Bulgarian companies and instead to be organized with the assistance of Chinese distributors which would take care of the distribution and marketing of the milk in the country. Bulgarian dairy companies and the Bulgarian state could assist the marketing activities by participating in trade forums in China and promoting Bulgarian dairy production in fairs and free trade zones there. In such scenario the Bulgarian dairy processors need to make sure and if needed to cooperate with each other in order to meet the potential demand that would allow higher profits due to economies of scale. In conclusion, this export opportunity would support the strengthening of the Bulgarian dairy sector in its aim to become more productive and profitable.