Issue 6, 2011. December-January

   

GEORGIAN WINE: TO HONG KONG AND BEYOND

While the WTO agreement with Moscow might reopen the Russian market for Georgian wine, Tbilisi is focused on opening new markets in the east, particularly the fast growing markets in Hong Kong, China and India.


Finding a new, large market for Georgian wine - like China - would be a coup for the Georgian government, which is grappling with high unemployment in rural, wine producing regions such as Kakheti and mountainous Racha.

In November, Kindzmarauli Marani's Saperavi 2006 Vintage won the grand prize at the Hong Kong International Wine and Spirits Competition, a large contest that attracts wines from around the world, including France and Australia.

In Tbilisi, the success is viewed as a signal that this could be the right time for a marketing push into Asia.

Tina Kezeli, the head of the Georgian Wine Association said the win in Hong Kong is particularly important because Hong Kong is "a hub" for the region.

"... if you are present in the Hong Kong market it means at the same time that you are in the Chinese market - if you work properly in the right direction," she said.

The Georgian National Investment Agency (GNIA) is already trying to cultivate fans among Chinese wine connoisseurs. Keti Bochorishvili, head of the agency, said a special iPhone application that matches Georgian wine with food dishes is in the works.

In addition, the GNIA tapped Lisa Perroti- Brown, a master of wine from Hong Kong, who presented at the November alcoholic beverage expo in Tbilisi. Perroti -Brown is a well respected authority on the Asian wine market, Bochorishvili noted, - and her participation in the Georgian expo gave the event additional importance for wine importers and enthusiasts in China and neighboring countries.

According to Kezeli, since China is a new market for Georgia, the expo was a good opportunity for Georgian producers to understand Chinese and Asian tastes in wine.

"The thing is that now many new markets have opened up and this is the moment when you need a huge, sustained approach to enter strongly into these markets," she said.

"I don't see any markets as a real substitute and there shouldn't be any market substitutes... You have to be known on different markets..."

In 2009, the Chinese drank 1.2 billion bottles of wine - a 104% increase from 2004, according to a study by Vinexpo.

Giorgi Gaganidze, the head of Georgia's former export agency, said if Georgian wine exporters can tap into the Chinese market, the potential volume of sales would help buoy up an industry that is currently focused on niche markets in North America and Europe.

"The major problem for Georgian wine is the question where should Georgia go," he said, noting that just 90 thousand tonnes of wine was produced in Georgia last year.

Breaking into the Chinese market would offer Georgian wine makers a potentially safer alternative than the resuming of mass exports to Russia. While the new WTO agreement with Moscow could reopen Russian markets to Georgian wine producers, potential exporters should be cautious about returning there, Kezeli said.

"...of course Russia is a very important market and I should be glad to make use of it - but there should be a very careful strategy of how, who and when... this is not so easy," she said.

"... in this situation, I think they [wine producers and exporters] will be waiting and looking at the market... Russia should be handled, in my opinion, like any other potential market. No special preference - no difference."

Wine exports to new markets, like the United States and the EU, have increased, but the volume of wine sales has never reached its pre-embargo height. In 2005, Georgia exported $81 million worth of wine. Last year wine exports were roughly half that, $39.2 million.

While the Russian market was "important" for Georgian producers, Irakli Matkava, a deputy economy minister said diversification has made Georgian exports stronger.

Matkava was speaking from South Korea - on one of the latest in a year of trips to Asia that underscore the government's new focus. Prime Minister Nika Gilauri traveled to the region in September, and the Georgia National Investment Agency (GNIA) has participated in three beverage expos in Hong Kong and China over the past year.

Georgian exports to China and the Southeast Asian markets have increased over the past three years from just under $12 million in 2007 to over $39 million in 2010.

Bochorishvili said the Chinese market is a natural choice for Georgian producers.

"In the Asian market, the consumption of alcoholic drinks is increasing - especially in China. Of course there is opportunity and the market is not really mature at all so it is easier for us, and less expensive, to achieve results," she said.

RUSSIA'S ENTRY TO THE WTO: WHAT DOES IT MEAN FOR GEORGIA?

Georgia can only benefit from having Russia in the World Trade Organization, according to Giorgi Shengelia, a senior associate at BG Capital.

Years of negotiations over Russia's entry to the World Trade Organization (WTO) could prove to be a boost for both Georgia and Russia, Shengelia said.

While it is unlikely that Georgia will immediately resume high volumes of trade with its estranged northern neighbor, Shengelia noted that the WTO's rules and procedures should make Moscow a more reliable trading partner in the future.

"Before Russia's embargo on the Georgian products in 2006...more than 60% of Georgian agricultural products exports - mostly wine and mineral water, went to Russia," he said.

" We probably won't see trade volumes with Russia picking up to the pre-embargo levels straight away - due to capacity restrictions for producers as well as existing commitments with current export markets - but in the long term Russia will probably reemerge as one of Georgia's main trading partners."

He added, however, that it is unlikely Georgian companies will "expand their businesses" to Russia due to the strained relations between the two countries.

But indirectly, the WTO deal between Tbilisi and Moscow could help Georgia attract more foreign direct investment, Shengelia noted.

"[Russia's entry to the WTO] may have a positive effect in attracting investors in Georgia, as they will have an opportunity to operate their business in the most liberal market environment in the region and will also have the possibility of exporting their products to Russia."