FEATURE-Bulgarian winemakers pin hopes on quality

By Tsvetelia Ilieva

BRESTOVITSA, Bulgaria, Dec 23 (Reuters) - Bulgaria's economy is fast losing steam, exports are shrinking and corruption is threatening the European Union aid that has underpinned growth. But the Todoroff winery has a strategy.

"We expect a collapse which we will try to overcome with high-quality wine," says its manager Kiril Izmirov.

Wines from the Balkan country have been known more for quantity than quality, and Bulgaria now accounts for only 0.6 percent of world production.

Boutique wineries such as Todoroff, which have made use of European Union funds in the past five years to recast Bulgaria's reputation, hope a mix of Thracian mystery and top-quality grapes from one of the world's oldest winemaking regions will help.

Perched on the hillsides of what was once the heart of ancient Thrace, Todoroff includes a chic hotel that offers body therapy based on grape products. Its bet is that consumers will keep drinking wines and, even if overall prices come down, good quality at a reasonable price can survive.

Financial problems and an economic slump in Bulgaria's main export markets -- Russia, Britain, Poland and Germany -- are likely to reduce sales abroad by about 30 percent this year, says Radoslav Radev, managing director at Vinimpex, Bulgaria's biggest wine exporter, controlled by Belvedere of France.

Tighter credit has cramped the wine industry's investment plans globally and consumption of expensive drinks has suffered. Analysts say demand generally will remain high, however, and financial turmoil opens the way to consolidation and efficiency.

"The view is that consumers would not walk away from wine because it is considered by many as a luxury for the masses," said Arend Heijbroek, a wine analyst at Dutch Rabobank.

"The overall demand will remain roughly the same. We will not see an enormous drop in volumes that consumers are buying but they may cut down the prices," he added.

Bulgarian industry officials say mass producers, mainly former state-owned wineries now in private hands, will suffer most from the slowdown because of a drastic drop in demand from Russia, which takes 80 percent of total exports.

"The exports for Russia have almost halted," said Yordan Vutchkov, a member of the supervisory board of the national vine and wine chamber. "Buyers are not placing new orders as they cannot get credits."

The chamber expects a further 20 percent drop in total exports for 2009.

ANCIENT GLORY

Todoroff -- created in 1945 in the southern hamlet of Brestovitsa and then nationalised during the communist era -- said its sales had been unchanged for the first nine months at 1.45 million levs ($948,000).