Issue 6, 2013. December-January



Monica Ellena

Christmas is the season of goodwill, festive cheer - and fat profits for retailers. Like it or not, the commercialization of this Christian holiday offers plenty of opportunities for the discerning businessman (or woman). But could Georgian businesses be doing more to cash in?

Georgia has one lesser-known comparative advantage at this time of year: Christmas trees. The Caucasian Fir - better known as Nordmann Fir or AbiesNordmanniana, named after Alexander von Nordmann, a Finnish biologist who extensively studied it in the nineteenth century -is a towering evergreen native to the Caucasian mountains. It is also Europe's favorite yuletide tree.

"Georgia dominates this niche market," explained Marianne Bols, social entrepreneur and founder of Fair Trees, the only Fair Trade-certified Christmas tree grower, which is based in Denmark."The Nordmann fir is a house-friendly tree, it is not sticky, and its needles are softer and less likely to fall off. Plus it is beautiful."

Georgian Seeds, European Trees

But Georgia does not export fully-grown trees. Rather, it sells seeds fromNordmann Firs to growers abroad, who plant them in local nurseries. These seeds account for 90 percent of the roughly 45 million Christmas trees sold every year in Western Europe, according to Fair Trees.Denmark is Europe's largest exporter of Christmas trees, supplying 7 million trees per annum on average.

Could that change? In 2011 the Georgian government's sovereign fund, the Partnership Fund, asked PricewaterhouseCoopers (PwC), the international professional services firm, to conduct a feasibility study into the potential of Christmas tree farming in Georgia.

"The idea came after a close look at seeds trading," explained Nino Cholokoshvili, one of the Fund's senior investment officers. "We thought about expanding to actual tree farming."

According to the study, current planting estimates suggest that Christmas tree production in Denmark will double in the next ten years. Increased production by Denmark and other European countries is likely to result in stable or decreasing Christmas tree prices and aneven greater emphasis on product quality in European markets.

"A full value chain, from seed harvesting to tree farming and export, would create business and employment opportunities in Racha," said Nika Abuashvili, who conducted the research for PwC. "Georgia has cheap and available land and labor, in addition to the seeds."

But it would not be easy. "Georgia, though, lacks the capital and the know-how of Christmas tree growing, which resembles high-tech horticulture," Cholokoshvili continued. Moreover, the time needed for a production cycle - seven to nine years for one generation of trees - is a deterrent for small investors. The business suits European tree growers interested in diversifying their products and markets beyond Europe.

"Europe has a mature and rooted market. Entering in competition with established farms the size of 500 hectares is almost impossible for Georgia. Moreover, a strict phytosanitary regulation is in place making importing live plants into the EU a challenge, although there is track record of exporting live plants and seeds by both local and foreign companies to EU from Georgia," adds Abuashvili. The South Caucasus market may be another story. The study highlights that the market for live Christmas trees is limited due to supply shortages. The main competition comes from artificial trees, which are mainly produced in China. According to the study, Georgian-grown trees would be cheaper.

Risky Business

In the meantime, Georgia could also improve the business of seed collection. Seed collection per se is an old practice, dating back to the early part of last century. In Soviet times it was strictly regulated by the forestry authorities. In the 1960s Danish and European Christmas tree farmers started traveling to the Caucasus to study the tree and develop seed trading between Europe and the USSR. Harvesting seeds on a commercial basis poses a number of challenges.

The first is licensing. Georgia has approximately 130,000 hectares of forests available for licensing. In 2009 the body that regulated forestry management was abolished. Companies still have to apply for a license but inspections are carried out only following specific complaints to the Ministry of Environment. Environmental organizations have been calling for years for a package of legislative changes for forest monitoring, taxation and licensing.

Collecting the seeds can also be dangerous.The best trees are in Racha, and can grow up to 60 meters. Pickers have to climb up to the very top of the trees, where they find the best cones. Safety equipment is rarely used and pickers are paid a pittance (as much as 2 GEL per kilo of cones, but more often 1 GEL per kilo). It takes 10 kilos of cones to make 1 kilo of seed. "We provide insurance and safety training twice a year to our pickers, who have been working with us for years," Bols explains."There is a narrow window of two weeks in September for harvesting, and every year forests around the Shaori Lake are invaded. It is the cone rush. People come from all over the country to pick up cones, risking their lives to make some extra money."

Fair Trees established a foundation aiming at drawing attention to and improve the living and working conditions for the cone pickers in the area. The foundation runs projects like dental care for children, scholarships, and is currently building a new kindergarten. "Racha lacks resources, and those beautiful trees are a treasure," Bolds adds."If we get the seeds, the least we can do is make sure that the community also benefits from this trade."