The FINANCIAL — Vano Merabishvili, Georgian Interior Minister, told the Russian Kommersant in the May 28, 2008 interview that six or eight years ago, the Kremlin wrote a plan for stopping Georgia from entering NATO.
“They planned the embargo of Georgian wines. And everything is going according to that plan. The person who organized it is Kholmogorov, who was a department head in the FSB. They thought it would destroy the Georgian economy,” claimed the Minister.
According to Merabishvili, Russians thought that there was a lot of Georgian wine in Russia. Kholmogorov told him in Vienna that they shut Georgia out of more than USD1 billion in exports.
“When I answered that Georgian wine exports to Russia were only USD 65 million, he was very surprised. They probably counted every distillery around their dachas in Balashikha [outside Moscow] that bottles Georgian and French wines. But nothing terrible happened as a result. Our economic growth totalled 12.5 percent,” declared the Minister.
Focus news in Georgia especially over the last couple of months has been the April 2008 Bucharest summit of the transatlantic alliance on whether the country and its neighbour Ukraine would get the so-called Membership Action Plan, or MAP. Though, eventually, due to strong opposition from Germany and France, the two countries’ route to MAP has been postponed till the end of 2008. Germany and France were said to have been blackmailed by Russia and urged to deliver negative voting.
However blackmail hasn’t yet concerned the Georgian wine export of these two European countries as Georgian wine producers claim to regard Germany and France as promising markets.
Since the official announcement of the embargo on Georgian wines in spring 2006 (accusing the whole sector of Georgian wine-producers in exporting infringed wines to Russia), Georgian winemakers sought for new markets and opened brand new opportunities for broadening the spectrum of export capabilities and even started active expansion in a rather sophisticated European market.
“In 2008 our aim is to enter the resort regions of the Eastern European markets Croatia and Bulgaria. At this point we’re holding negotiations on expansion to Turkey, which is also an issue of interest for the companies operating in resort regions,” Liza Bagrationi, PR Manager of Badagoni, told The FINANCIAL.
According to Bagrationi, Badagoni produced 1,500,000 bottles of wine in 2007. As for the wine varieties, Tsinandali (dry white) and Saperavi (dry red) were the best selling brands by Badagoni last year. Although it’s also important to admit that the luxury line – Kakhetian Noble (white) appeared to show impressive sales as well. Regardless of relatively high prices, these wines were on top of the list in terms of sales in 2007.
“The only measure we could take in order to fight against falsification of our wines abroad was to provide the monitoring bodies with relevant information,” said Bagrationi.
As Bagrationi noted, it’s important to stress the establishment of business contacts with Poland last year, where in June 2007 the company Badagoni-Europe was founded. This company will serve the means for the transit of production to European countries and will control logistics and export issues. The very first year of cooperation with Poland has turned out to be a success as Badagoni exported around 100,000 bottles of wine there. In 2008 the company plans to have increased the figure by 300%.
Today Badagoni wines are best-sellers in the Benelux counties: Belgium, Holland and Luxemburg. Though the most successful export markets are regarded Italy and France, countries which are well known for their own wine making traditions and have relatively strict criteria set for evaluating the quality of wines.
Entering the Canadian market was also a success. As for Kazakhstan, the first transition will be carried out shortly.
“Badagoni is fully mobilized both in terms of technical and marketing directions. In case the Russian embargo is lifted on Georgian wines, we’d be more than ready to supply the market at its maximum,” said Bagrationi.
“I’m sure that a large number of wine producing companies are fighting against falsification on their own, but I do not consider it enough; I’d like to have one common policy and coordinated activity regarding this problem,” Ana Beriashvili, Director of Operations, Georgian Wines & Spirits Company Pernod Ricard, told The FINANCIAL.
GWS volume of sales of the 2007 8 financial year (2nd Q 2007 – 1st Q 2008) is 1 million litres, mainly exported.
“We’re already represented in Germany and France and plan to expand to Canada, Israel and Sweden soon,” noted Beriashvili.
“I’m unable to provide exact figures in this case, but one thing is obvious, the Russian market reopening will create big opportunities for Georgian wine producers,” Beriashvili claimed.
“Bagrationi reveals falsification cases by means of its distributors. The samples are delivered to the special state organizations as Samtrest and the latter takes subsequent measures,” Irakli Tsereteli, Bagrationi, told The FINANCIAL.
According to Teseretli, in 2007 in Georgia the company sold 1,776,356 bottles (GEL 6,807,324), in Ukraine – 170,520 bottles (GEL 553,494), in China – 12,000 bottles (GEL 80,531).
In the 1st Q of 2008 in Georgia 223,551 bottles (GEL 969,750) were sold, in Ukraine 60,000 bottles (GEL 173,550).
“Our company plans to enter the following markets: Germany, the U.S.A, U.K, Baltic States and Belarus,” said Tsereteli.
In his words, the expected sales in 2008 are: 2 million bottles in Georgia and 600,000 bottles in foreign markets.
“By our estimates our company could have sold up to 1 million bottles in Russia in one year,” claimed Tsereteli.
“If we or our importer in Ukraine have any strong suspicion about the quality and origin of Georgian wines on the shelf or restaurant, we inform the local ruling body in charge of our suspicion and ask them to take the appropriate steps. We take photos, collect all the information available and present it to Samtrest for further action,” Zurab Ramazashvili, Telavi Wine Cellar, told The FINANCIAL.
According to Ramazashvili, unfortunately, the Georgian Wine Producers’ Union is not financially strong enough to fight all the false wine producers who are using the good name of Georgian wine.
As far as sales statistics are concerned, Telavi Wine Cellar sales in 2007 were “Local sales – GEL 144,536; Kazakhstan – GEL 176,332; Ukraine – GEL 388,046; The rest – GEL 297,125; Total – GEL 1,006,040.
In the 1st Q of 2008: Local sales – GEL 49,173; Kazakhstan – GEL 59,329; Ukraine – GEL 238,725; The rest – GEL 187,783; Total for 1-4 months of 2008 – GEL 535,010.
“We plan to start sales in Belarus in 2008, expected sales are around 100,000 bottles,” said Ramazashvili.
“At this stage it’s difficult to define the actual financial benefit in case the Russian market is reopened. Assuming from our experience of the Russian market, I would forecast about 2 million bottles in the first year,” claimed Ramazashvili.
Teliani Valley is expected to increase the realization of its wine in the Baltic market by 100%. The company together with its partner distribution companies has recently held extravagant presentations at the large Latvian and Estonian supermarkets and restaurants. Georgian mineral water Borjomi, which was also banned in Russia, was presented there.
Teliani Valley plans to have 200 thousand bottles export annually to the Baltic market, which is 10% of the company’s total realization figure.
Park M V will sell Teliani Valley’s wines in Latvia and Danker, in Estonia, the two large distribution companies united in one holding.
The majority of sales – 150,000 bottles will be realized in Latvia, where there’s a bigger demand for Georgian wines than in Estonia.
Telianvi Valley wines in these markets will cost from EUR 8 to EUR 20.
According to the Department of Statistics for Georgia, the total amount of Georgian wine export in 2007 was 29,197,40 (1 000 USD).
When Russia placed an embargo on Georgian wine in spring 2006, the industry suffered the loss of its biggest market. Georgia used to export 90 percent of its wine to Russia. Countries in the Commonwealth of Independent States remain the biggest buyers of Georgian wine, but exports have increased to Poland, Germany, the UK and the US.
As for the separate markets, the amount of wine export to the USA was 1,584,20 (1 000 USD), Belarus – 1,452,92 (1 000 USD), Latvia – 1,531,40 (1 000 USD), Poland – 1,131,54 (1 000 USD), Ukraine – 14,798,43 (1 000 USD).
According to the State Department of Vine & Wine Samtrest, the total volume of Georgian wines exported in the 1st Q of 2008 was 1,635,602 litres, 1,010,666 litres out of which were to Ukraine , 136,661 litres – to Latvia, and 81,441 litres – Belarus.
Samtrest deals with the regulation of wine quality and provides certification of quality and origin. Samtrest is the Association of Wine Making and Viticulture of Georgia. This organization not only deals with the problem of falsification of Georgian wines but is also concerned with the import of foreign grapes and concentrate, which are then fermented and sold as Georgian wines.
According to Georgian legislation, companies have to be registered and issued with a specific certificate. The wine-making process is controlled by the juridical face of public law, Samtrest, which is controlled by the Ministry of Agriculture of Georgia.
Recently Georgian winemakers have responded to the statement by Russian Foreign Minister Sergey Lavrov, who said that Russia was prepared to resume wine import from Georgia and have kind, friendly relations with its Southern neighbour.
The Union of Georgian wine-producers said that if Lavrov’s statement is not just a political statement and really aims at resuming political negotiations about the issue, the Georgian side is prepared to start cooperation.
The founders of the Georgian Wine Producers’ Union are the leading Georgian wine-producing companies: Georgian Wines & Spirits – GWS, Teliani Valley, Tbilvino, Khetsuriani, Wineman, Shumi, Vazi-1, Askaneli Brothers, Telavi Wine Cellar.
The main reason for founding the Georgian Wine Producers’ Union was the threat of losing the trust of consumers in the category Georgian Wine in the chief export markets – Russia and Ukrine, which in turn may cause irreversible damage to the image and sales of Georgian wine.
As the Investor Overview of Alcoholic Beverage Sector in Georgia 2008 report, supported by USAID, reads, according to the Ministry of Agriculture, the total number of registered companies producing alcoholic beverages in Georgia amounts to 218. In fact, 180 companies are functioning, and 35 companies out of these are engaged in export activities.
There is a wide range of alcoholic beverages produced in Georgia, but most of these are wine, sparkling wine, vodka, liqueur, brandy, and different spirit drinks. Often, wine, vodka and chacha are produced by households for personal use or for sale at bazaar outlets.
Wine continues to be the most demanded alcoholic beverage in Georgia. The total given excise stamps to the sector equalled 25 million (USD 10.7 million), out of which 77.5% was given to vodka, 9.5% to sparkling wine, 7.3% to wine, 1.3% to liqueur and 1% to different spirit beverages. The remaining 3.4 percent of excise stamps were given to champagne, tequila, whisky, rum etc.
Excise payments for domestic producers and importers are the same. In 2008 prices for wine exports will be increased by approximately 15% from 2007, while on the local market prices are not expected to increase significantly. In 2007, the average sales of Georgian alcoholic beverages, principally wine, in comparison to the 2006 sales level, increased in Ukraine by 160-180%, in Kazakhstan by 80-90%, and in Poland by 20-25%.
The number of excise stamps given to this wine segment is relatively low due to high exports. The key industry players are export-oriented, export activities reaching 80-95% of total production. The Georgian wine market is divided into two main segments: semisweet – representing about 65%, and dry – about 35%.
Due to climate and soil characteristics, Georgia is divided into five main wine producing regions: Kakheti, Kartli, Imereti, Rach-Lechkhumi and the Black Sea Subtropical Zone. The opinion of sector representatives is that the best vineyards for wine production are located in the Kakheti and Kartli regions of Georgia.
The main players in this segment include: Tiflis Wine Cellar Ltd, Georgian Wines & Spirits
Company Ltd, Tbilvino JSC, Telavi Wine Cellar Ltd, Badagoni Ltd, Teliani Valley JSC, Taro
BZI Investment Incorporation in Georgia, Vaziani JSC, Hareba Ltd, Corporation Kindzmarauli
JSC, Tbilvazi Ltd, Mildiani Family Ltd, Shumi JSC, Tiflis Marani Ltd.
The best vineyards for sparkling wine (Shushkhuna Gvino) production are located in the regions of Kartli and Imereti. In 2007, sparkling wine sales increased by an average of 30% over the previous year. The mostly domestic market is serviced by local producers, who maintain about 99% of the market. About 10% of both locally produced and imports are top market oriented.
The main players in this segment include: Bagrationi 1882 JSC, Vaziani JSC, and Teliani Valley JSC.
Among the companies based on foreign capital are: Georgian Wines & Spirits Company Ltd,
Telavi Wine Cellar Ltd, Badagoni Ltd, Teliani Valley JSC, Taro BZI Investment Incorporation in Georgia, Bagrationi 1882 JSC, Ushba Distiller Ltd, and Kazbegi JSC.
In data from 2007 (9 months), the alcoholic beverage sector employed approximately 5,000 people within Georgia. Trainings for the sector representatives are organized by the companies’ top management, which recruit highly-specialized trainers and foreign short-term consultants. In addition, on-the-job trainings are implemented.
The following alcoholic beverage companies have issued an ISO 900x quality certificate:
Company Activity Standard
Badagoni Ltd. Wine producer ISO 9001:2000; ISO 22000:2005
Georgian Wines & Spirits Wine producer ISO 9001:2000
Company Ltd.
Gomi Spirits & Vodka Company Vodka & Spirits producer Will issue in July, 2008 ISO JSC 9001:2000
Teliany Valley Wine & Spirits producer ISO 9001:2000; ISO 22000:2005
Telavi Wine Cellar Ltd. Wine producer ISO 22000:2005; ISO 9001:2000
Ushba Distiller Ltd. Vodka Distiller Will issue in spring, 2008 ISO
9001:2000
Saradjishvili JSC Cognac & Liqueur producer ISO 9001:2000; ISO 22000:2005
Mildiani Family Ltd Wine producer Will issue in February, 2008
ISO 22000:2005;
ISO 9001:2000
Shumi JSC Wine Producer ISO 9001:2000
Kindzmarauli Marani Ltd. Wine Producer ISO 9001:2000;
ISO 22000:2005
As for bio wine, according to Elkana consultant of vinery and wine making – George Barisashvili – in an interview with 24 Hours, “Demand for bio-wine production has increased by 200% in Europe. Local bio-wine makers do not produce the wine in large quantities, and only several farmers are certified to bottle bio-wine in Georgia.
In 2007, 20,000 bottles of bio-wine were produced in Georgia. In 2009 the number of bottles will be augmented by 200 to 300 thousand, but when factories are provided with adequate certificates, the bio-wine production is expected to soar to 6-7 million bottles. Provided the plan is implemented, Georgia will make a dramatic leap forward.
Written by Kate Tabatadze
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