Political – With W&BD’s other venture, the future of the pub industry is threatened by a

possible slump in sales after a smoking ban in England and Wales, rising energy costs and the
impact higher taxes and other costs on consumers. Raising taxes on alcohol and cigarettes is a
popular revenue-raising instrument used by successive governments, as indirect taxation
remains favoured over other methods, such as increases in income tax. The government is
vindicated in this policy through a steady stream of press articles that illustrate the medical
and social problems caused by the excessive binge drinking the British are rightly famous for.

Excise duty takes proportionally less of a share of the price of beer than it does for wine and
spirits, while the retailer takes a bigger proportion of the costs in beer. This is principally due
to the outlets at which beer is predominantly bought, namely pubs and bars. Pubs and bars
have much higher overheads, such as land rent and wages, and beer is the principal product
sold. Thus, this external environment is really crucial factor that will affect a brewery and pub
business that W&BD has ventured into.

Economic – As cited by marketing reports issued by Datamonitor and Euromonitor, sales of

alcoholic drinks are expected to remain virtually static in total volume terms and to grow by
just under 3% in total current value terms in 2005 over the previous year. Growth in the off-
trade is expected to be 2% in volume terms and this will make up for the 1% drop in on-trade
volume sales. Rising living costs and the "big night in" trend saw drinkers shun the pub in
favour of drinking at home. For W&BD’s interest, beer is expected to experience a 2%
decline in total volume sales in 2005.

The decline will follow two years of growth, particularly in lager that was attributed to the
European Football Championships in 2004 and the hot summer of 2003. However, beers
inextricable link with football will guarantee that beer sales will pick up again with this year
because of the Football World Cup in 2006.

Social – According to a European lifestyle survey conducted by the GfK Ad Hoc Research
Worldwide and Wall Street Journal in 2003, people from the UK currently go out to eat more
often than the residents of any other northern European country, including France. 71% of
consumers eat out more than once a month.

But as Euromonitor (April 2006) had diagnosed, consumer expenditure on alcoholic drinks is
expected to grow by 3. 6% in current value terms over the previous year to just over ? 15
billion in 2005. Growth was driven primarily by the changing consumption habits of UK
consumers, who increasingly showed a preference for consuming alcoholic drinks at home
and away from traditional pubs and bars. This trend away from the on-trade was driven by
changing leisure habits, with many consumers preferring to have friends round for a meal or
to relax at home whilst also benefiting from low off-trade pricing.

Technological - The majority of beer in W&DB is brewed in traditional cask beer. But the
process fermentation, where vessels are blended together in a holding tank before being filled
into the cask is already up-to-date. In a first for W&BD’s brand Pedigree, SMS text
messaging has been used to entice mobile phone users to visit Pitcher & Piano for a free pint
of Pedigree. W&BD used this as an advertising campaign that ran over a two-week period in
the Leeds and Soho Pitcher & Piano’s and reached around 7000 drinkers.

The campaign was launched with a teaser text message sent to the 7000 selected mobile
phone users which read: "Are you the right Pedigree? Find out 16th August" (W&DB News,
22 August 2002). Environmental - The issue of smoking in public places was high on the
political agenda since the New Labour government was returned to power in 2003, with a full
ban on public smoking being part of its election manifesto. With 13 million smokers living in
the UK, the government appeared to have bowed to pressure from a traditionally reactionary
drink and food industry to issue just a partial ban towards the end of 2005.

Premises that sold food were to be included in any ban and those that did not were to be
allowed to continue as usual. As this is an environmental issue, W&BD complied with this as
their board determines their environmental policy and the Environmental Committee, chaired
by the Finance Director, is responsible for policy implementation. Aside from that, the
company also aim to minimise energy consumption by its continued use of measuring and
monitoring techniques and by setting challenging targets for energy reduction to ensure
continuous improvement in environmental performance.

In their pubs, W&BD dispose of grease in a responsible manner. Whilst some used cooking
oil is collected and disposed of by a waste contractor who then recycles the material, much of
the need for disposal has now been removed with the introduction at many pubs of “grease
guzzlers”. This patented system uses enzyme technology to break down fats on site (W&BD
Annual Report 2005, p. 23). Legal – In UK, the laws surrounding alcohol advertising are
complex. Although alcohol is a legally available product, purchasing is restricted to those
over the age of 18 and therefore there is a need for careful monitoring of advertising.

Clearly, the purpose of alcohol advertising is both to encourage current drinkers to switch
brands and to encourage non-drinkers to start drinking or indeed light consumers to consume
more. As a result, there is concern that children might be targeted by advertisers or at least
tempted by promotions that target the younger end of legal drinkers aged 18-24 year olds. The
European Advertising Standards Alliance (EASA), of which the UK Advertising Standards
Authority (ASA) is a member, issued a Statement of Common Principles and Operating
Standards of Best Practice in 2005.

This set of principles and operating standards is based on a self-regulatory framework, which
responds to complaints made by consumers, leaving what is deemed offensive and inoffensive
up to the consumer and following up complaints with an impartial investigation. The
Statement was issued in a move to harmonise advertising standards across the EU. For all
non-broadcast forms of marketing and advertising, this is carried out by the Advertising
Standards Authority.

Broadcast media was regulated up until 1 November 2004 by Ofcom but these functions were
taken over by the Advertising Standards Authority. Also, the government decision in 2002 not
to reduce the drink-driving limit from 80mg to 50mg of alcohol per 100ml of blood and thus it
remained the same in 2005. The reason for not reducing the limit was that statistics seemed to
show a small increase in accident risk for drivers when the blood alcohol level rose from
50mg to 80mg but not enough to suggest that the reduction would lead to a further reduction
in lose of life.

Also, the smuggling of cheap alcohol into the UK remains a major concern. As it is an illegal
trade, it is very difficult to estimate the amount of alcohol smuggled in. The Office of
National Statistics estimated in the late-1990s and 2000 that between 2-3% of total
consumption or 40-50 million litres was smuggled alcoholic drinks. The British Beer & Pub
Association estimated that personal imports, including smuggling, accounted for 3% of
apparent volume consumption in 2002.

Finally, the new Licensing Act is seen as an important step to prevent binge drinking and the
related social problems, as it allows for more flexible opening hours and is likely to reduce the
pressure on consumers to drink as they can before 2300hrs. This act will mean closing times
will be staggered, thus reducing the potential for trouble and also allowing consumers to
change their drinking habits. Preliminary indications show that councils are reluctant to grant
these extra hours, however, out of the fear of gaining a reputation as a haven for binge
drinkers.

Brewers, who produce 85% per cent of the nation's beer, will be putting labels on bottles and
cans to show how many units of alcohol they contain by the end of 2005. Responsible
drinking messages on packaged beer will more than double in the same period. A survey by
the British Beer ; Pub Association (BBPA) shows that 17 major British brewers will have unit
labelling as standard on their beers by the end of 2005. As a result, 85% of beer sold in cans
and bottles in the UK will be unit labelled. By the end of the same year, 84% of bottles and
cans will also carry a message encouraging people to drink responsibly.

Bulgaria’s demographic crisis continued to have a negative impact on volume sales

of beer during 2019. High levels of emigration among recent graduates and young
professionals, considerably lower levels of immigration and the country’s low birth
rate have resulted in a shrinking population, which means lower demand for beer.

CRAFT BEER CULTURE GROWS AS NON ALCOHOLIC BEER REMAINS

NICHE DESPITE NEW LAUNCHES

Towards the end of the review period, significant steps were seen in the ongoing
development of Bulgaria’s craft beer scene. This scene can now be accurately
described as operating largely independently from the category mainstream, which
continues to revolve around domestic standard lager.

CARLSBERG BULGARIA AD, KAMENITZA AD AND ZAGORKA AD

REMAIN THE LEADING PLAYERS

At the end of the review period, the three leading players in beer in Bulgaria
remained Carlsberg Bulgaria AD, Kamenitza AD and Zagorka AD. These are all
foreign-owned local entities offering mainly domestic lager brands, with Plovdiv-
based Kamenitza owned by Molson Coors Brewing Co and Stara Zagora-based
Zagorka owned by Heineken NV.

2020 AND BEYOND

COVID-19 IMPACT

On-trade volume sales of beer are expected to fall by 34% in 2020 in light of the
impact of COVID-19. This compares very unfavourably with the expected 1% rise
forecast for 2020 during research conducted in May 2019, ie before the spread of
COVID-19.

AFFECTED PRODUCTS WITHIN BEER

With sales of beer in Bulgaria heavily dominated by domestic lager, this is the
category that will have inevitably been most negatively affected by the COVID-19
situation in actual sales terms. In particular, domestic economy lager is likely to
have been hardest hit as the consumer base for this category, low-income people
and those living in rural areas, are more likely to have curbed their spending on
alcoholic drinks as a result of the economic pressures that have emerged in the
wake of COVID-19.

RECOVERY AND OPPORTUNITIES

The shift towards home consumption as a result of COVID-19 is likely to remain

an influence on the sales in Bulgaria for at least the initial stages of the forecast
period. With alcohol consumption in general and beer drinking in particular
considered a very social activity in Bulgaria, it is simply a matter of time before
consumption returns to the on-trade, however.

PEST analysis shows that breweries have the threats in the political and economical
spheres, such as strict laws and high taxes and struggling economy and high prices on fixed
costs respectfully. For example, today trend is to decrease allowed volume of beer
package, what leads to modernisation of companies and requires additional financial
resources. The taxes on beer or alcohol beverages were increased by government
(Lithuania in 2018, for instance), so the prices on products were increased as well, what
can lead to decrease in consumption.
At the same moment, brewing companies have some opportunities, which can help them
to receive additional profit. Beer is very popular product and there is an area to develop it
and create something new: add new flavours, mix them or choose another percentage of
contained alcohol.