Market research
An over-reliance on one market is always a danger. Georgia's wine producers found this out only too well, when Russia closed its doors to Georgian wine in 2006. Since then, however, the country has looked to expand wine exports past its eastern neighbour. What was initially a problem has become an opportunity, as Mark Godfrey reports.
//i2.aroq.com/1/georgia2.jpgGeorgia's wine industry took every opportunity to bask in the limelight earlier this year, when the 2010 International Organisation of Vine and Wine (OIV) Congress was staged in the country's capital Tbilisi. Opening the congress, held back in June, Georgian President Mikheil Saakashvili even took the opportunity to describe the country's win as "freedom wine", boasting that Russia's four-year ban on Georgian wine has only improved its quality. Georgian wine companies, he said, had been forced to export to more selective markets.
The country's winemakers may, indeed, be finally getting through to new markets: in 2009, Georgia exported wine to 45 countries, up from only 22 the year before, according to figures from its Ministry of Agriculture. Official data shows top export destination Ukraine doubled its imports in the first quarter of 2010 to 2.5m bottles. Second-placed Kazakhstan bought 394,000 bottles in the same three-month period, up from 161,000 bottles in the same period last year while third-ranked Poland imported 140,971 bottles, an increase of 30,000 bottles.
Now, the sector has set itself a bold mission of exporting 2m bottles of wine to the US by 2012 - a huge jump from the 400,000 bottles it shipped to the country in 2009.
"Georgia has come a long way in understanding the market outside of Russia," says Jim Krigbaum, head of 2020DC, a US-based consultancy hired by international aid agency USAID to advise the nation's winemakers on the US market. Georgian wine firms, says Krigbaum, "have improved quality consistency, label design and pricing to meet global demands".
Sales are being driven by a government marketing push to deliver new export markets. A US$500,000 government campaign this year is pushing a 'Wines of Georgia' alliance of wine companies in North America. Stickers bearing the Georgian national flag "will make it easier to advertise wines from Georgia, rather than to promote wine companies separately", explains Vasil Managadze, chairman of Samtrest, Georgia's agriculture ministry's department of vines and wine.
That said, even if this goal is achieved, the total would be barely adequate to replace Russian shipments, which reached 10m bottles-a-year before Moscow barred imports in 2006, claiming Georgian wine was unsafe for consumption. The outlook would be more promising if Samtrest achieves its US target - along with another goal of 1m bottles in sales to Canada within a similar timeframe.
Georgia's wine industry does have some innate hurdles to overcome, however. While boasting 500 indigenous grape varieties, the country suffers a lack of world-recognisable grape types, according to Krigbaum. He also believes the comparatively high price bottle prices (US$30 to US$50) and the small scale of Georgia's wine makers requires winemakers here to pitch their product as a "package" of history, culture and politics. "Georgia must remain focused on the niches where their competitive advantages go beyond price to include history and tradition," he says.
Europe is another option, though, and several firms have shown an ability to capture markets in the continent.
Giorgi Salakaia, general director of Badagoni, a key producer, says his company's current focus is on Western Europe, particularly Germany. So far, the bulk of its exports - red Rkatsiteli wine and tannin-rich red Saperavi are Badagoni's two top sellers - go to Kazakhstan and Poland. Badagoni, as well as Tbilvino and Teliani Valley, have all won awards at European wine shows this year. Tbilvino exports 90% of its total production to foreign countries - a quarter of it to Kazakhstan. The firm's export manager, Beka Khergiani, predicts sales to Kazakhstan in 2010 to reach 500,000 bottles.
Meanwhile, exports to Russia have not stopped entirely: up to 10% of Georgia's annual wine production is reaching Russia from neighbouring Azerbaijan and Armenia as well as via Belarus - a feasible option given Georgia has free-trade arrangements with all three countries.
Statistics from UN body the Food & Agriculture Organisation offer proof of the damage of the blockade: In 2007, Georgia's wine exports were worth US$30m, down from US$80m in 2005). That pushed wine from first to fourth among the country's export commodities, behind the likes of hazelnuts and distilled alcohol.
In the meantime, Georgia has looked further east. One of the firms seeking alternative markets is Telavi Wine Cellar, whose Marani dry reds retail in China for CNY90 (US$13.24) per bottle. Distributed by Shanghai-based Ge Xin Import Export Co, the Saperavi-grape wine from Georgia's Kakheti region has sold "steadily" in Beijing and Shanghai says Ge Xin's sales manager, Wang Tao, "but there's still too little known about Georgia or its wine in China." Ge Xin is seeking new distribution points for the wine, notes Wang.
Also in Asia, Singapore-based Georgian Wine Distributors was set up in 2009 by Georgians Temur Iremadze and David Khakhutaishvili to promote 'Old World Georgian wines' such as Teliani Valley and Kindzmarauli Marani in Singapore, Malaysia and Thailand. Khakhutaishvili says sales are "steady but rising slowly," notably in Thailand.
Meanwhile, there are obvious limits to local consumption: Georgia remains poorer than its neighbours, with an annual GDP per capita of US$2,900, though GDP growth is predicted to hit 4.5% this year, after a 3.9% contraction in 2009.
Evenso, Russia's lock-out has shaken Georgian winemakers into a re-evaluation that could have long-term effects on the country's wine export prospects. Echoing the Georgian leader's evaluation, OIV president Yves Benard, said at the conference that Georgia has improved its wine quality and marketing, shifting away from the sweeter product preferred in Russia to dry wines. Georgia, said Benard, is scoring "very good results, both in red and white wines."
The embargo has also forced vine growers to grapple with over-production: Georgian producers, said Benard, now see the future of their wines "is not in volume, but in quality." However, Georgia still has much to do to institute standards that would assure western markets, he warned.
There also remains the challenge of convincing new markets. Shalva Khetsuriani, president of the Association of Sommeliers of Georgia, says the government's new branding effort will only work if overseas wine drinkers are at the same time educated about the different Georgian wine varieties.
Ultimately, Georgian wine's fate remains tied to that of the pro-Western administration of Mikhail Saakashvili. While he has been able to open doors for "freedom wine" in far flung regions, many look to the end of his second term in office in 2013 as the key to re-booting ties with Moscow.
Sectors: Wine
