Page 51 - BNE_magazine_bne_September 2019

bne September 2019 Southeast Europe I 51
“We expect 2019 to be another record- breaking year for the sector, with rev- enues set to increase up to 10% year on year thanks to an unprecedented grape harvest in 2018 and expected export growth,” Bochorishvili said in the report.
Georgia’s push to open new export markets has been given a huge impetus by a Russian embargo on the import of Georgian goods that was imposed in 2006. To break into Western markets producers were forced to up their game and improve the quality of Georgian wine to meet stricter European stan- dards. Russia was almost the sole consumer of Georgian wine before 2006, absorbing 92% of total wine exports, but the embargo has resulted in new exports to the EU, Asian and other markets. Consequently Georgia now exports wine to 53 different countries.
Reorientation from the Russian market is high on the agenda again. Once this market was reopened to Georgian wine in 2013, exports quickly rebounded to make it once again the largest single market for Georgian wine, although its overall share was reduced to c.60% of the country’s total wine exports in 2018.
“This is the result of brand awareness and reactivation of old trading networks. While the topic of a possible Russian trade embargo is closed for now, it dis- turbed winemakers and [the need] for
Wine exports, 2018
further diversification [has] dominated recent headlines,” says Bochorishvili. “Low price per exported litre in Russia is another argument to intensify efforts to reorient from the Russian market. On a positive note, [a] number of wineries [have] rejected relatively easy money in [the] Russian market since 2013 and invested heavily in expanding in non- traditional markets.”
Wine and spirits exports to non-tradi- tional markets tripled in dollar terms during 2013-18, which seems a good achievement considering bottlenecks in brand promotion and positioning. The availability of various grants and subsi- dised loans from government in recent years considerably increased the number of small-scale wineries, with little capa- bility to invest in brand development and distribution networks. Given the continued growth in wine consumption in Asian markets, enhanced efforts in brand recognition and distribution net- works can generate $120mn in exports in the next five years, surpassing what Russia absorbs currently.
However, the challenges to developing the Georgian viniculture sector further remain significant. The wine and spirits sector lacks a unified strategy, says Bochorishvili.
“We interviewed a number of market players with an aim to identify major
bottlenecks for export diversification. [The] absence of an industry collaboration platform or agreement regarding long- term positioning in export markets, weak corporate governance and little progress in cluster-building were identified as key difficulties by sector players amongst others. Technologically unsophisticated production methods, [the] high produc- tion cost of grapes, the low yields, a lack of consistency in price and quality and frag- mented processing base are other factors dragging consolidation and economies of scale in the industry,” says Bochorishvili.
The main wine-making region in Georgia is Kakheti, which contains 73% of the country’s vineyards and grape production. Georgia has 18 wines with a protected designation of origin, of which 14 are located in Kakheti. The most common grape varieties in Georgia are Rkatsiteli and Saperavi, converted into white and red wines respectively.
But viticulture is very fragmented in Georgia. Despite its ancient pedigree and huge hinterland, the the vast major- ity of vineyards are owned by house- holds that use technologically unso- phisticated production methods. This
is the main reason why yield in Georgia at 3.8 tonnes per hectare is 2.1x lower compared to productivity in European countries and 2.6x lower than the world average, thus showing considerable room for improvement in the sector.”
Georgia's exports by products, 2018
Source: Ministry of Finance
Note: Brandy is included in spirits category, holding 83% share in total this category
Source: Geostat
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