Issue 5, 2013. October-November

   

THE COMEBACK KID: GEORGIAN WINE OUTPERFORMING EXPECTATIONS IN RUSSIAN MARKET

Russian demand for Georgian wine has exceeded predictions, creating an exciting potential for Georgian exports returning to the market for the first time since the 2006 embargo. Investor.ge spoke to Château Mukhrani, Georgian Wines & Spirits Company and Teliani Valley about their sales to the Russian market and how it will influence future production.

After seven years of embargo, Russian wine drinkers welcomed Georgian wine with open arms, purchasing seven times more wine since the market reopened in June than anticipated, according wine producers like Château Mukhrani and Georgian Wines & Spirits Company.

The Ministry of Agriculture reported that Georgia exported 1.7 million bottles of wine to Russia in just the first month after the embargo was lifted; 65 wine companies and four mineral water producers received permission from Moscow to export their products to the Russian market.

"[T]he conclusions of the first months are that the Russian consumer has not forgotten the Georgian wine, but on the contrary rushed to the shops to buy the first wines imported from Georgia leaving our distributors in a difficult situation to fill up the shelves in Russian shops," noted Jacques Fleury, CEO of GWS/ Georgian Wines & Spirits Company.

"All Russian importers are presently trying to originate more wines than they expected from Georgia."

Tea Kikvadze, the marketing executive at Teliani Valley, said currently 10 percent of the company's production is going to Russia but, based on the demand, 15 percent will be earmarked for the Russian market next year.

But, despite the surge of initial demand, wine producers are not abandoning the markets outside of Russia that helped them survive the embargo years.

Before the 2006 Russian embargo, 80 percent of Georgian wines were exported to Russia. In 2005, Georgian wine exports were worth $81 million; in 2012, after years of struggling to find new markets, exports were only $65 million.

"We do not want to change anything in other markets," Kikvadze noted."We operate in more than 25 countries and we are stable there. So we want to continue and increase sales in these countries."

Fleury stressed that no one is willing to forget the lessons they learned from the embargo - but if the Russian market remains open, there is room for Georgian wine producers to grow.

"The lesson from the 2006 embargo has taught us not to return to such a situation and to continue diversifying the markets for Georgian wines, and in any case ... we shall keep ... the markets that saved the Georgian wine industries during those ultimate 7 years," he said.