Economics of the rakija market in Serbia: Macroeconomic and microeconomic analysis

The originality of this study, which represents a pioneering investigation in its field, stems from its thorough integration of both macroeconomic and microeconomic factors related to the rakija market in Serbia. This research combines macroeconomic indicators with all available academic literature that has analyzed the economic aspects of rakija, although this body of work is relatively small, consisting of fewer than ten studies. This paper aims to explore the factors contributing to the commercial underachievement of the traditional Serbian spirit. The author adopts a critical realist approach, employing a variety of research methods, such as interviews, analysis of secondary macroeconomic data, and a review of current microeconomic literature. Research shows that Serbian distillers struggle with marketing, hindering the development of a quality brand that can achieve growth through economies of scale. The rakija sector has yet to embrace the concept of terroir, but trends as craft spirits and premiumization are gaining traction, with new distilleries boosting export potential. Despite growth in exports and prices, Serbian rakija still accounts for a small share of the market compared to older European nations. The Serbian diaspora remains a loyal consumer base, with rakija now available in renovated airport duty-free shops. Domestic consumers express concerns over high prices and inconsistent quality. Rather than for personal consumption, rakija in Serbia is primarily purchased as a gift or for special occasions. In summary, while there is potential for Serbian distilleries to position rakija as a premium export, they currently lack a strong domestic market presence.