Georgia looks to replace Russia with China for its wine

2011-10-14 15:33:31

Georgia is looking east to bolster trade, with officials picking China's rapidly growing market for wine imports as a particular target.

The push east is being driven by the government’s focus on diversification, Irakli Matkava, deputy economy minister, tells bne. "Naturally, we want to be plugged in the global economy as widely as possible, so all regions are interesting and all partners are important," he says. "Asia is very interesting for wines and spirits companies and their products. All global companies are fighting for market share there and we have to become part of this competition and try to be successful."

Matkava, speaking from South Korea, is on the latest of a flurry of official trips to Asia that underscore the government’s new focus. Prime Minister Nika Gilauri travelled 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 has increased over the past three years from just under $12m in 2007 to over $39m in 2010. Keti Bochorishvili, head of the Georgian National Investment Agency, believes there is room for more growth, especially in wine and alcoholic beverages. "The Asian market, the consumption of alcohol drinks – especially in China – is increasing. Of course, there is opportunity and the market is not really mature at all so it is easier for us, with less spending, to achieve results," Bochorishvili says. "We talked with the Georgian companies and the Georgian companies have already entered the American and European markets… but the Chinese market is somehow new. The companies have not been there, so we want to some how support them entering there."

Wine aps

The agency is already trying to cultivate fans among Chinese wine connoisseurs: Bochorishvili says a special iPhone application that matches Georgian wine with food dishes is in the works and GNIA has tapped Lisa Perrotii-Brown, a master of wine from Hong Kong, to present at a November alcoholic beverage expo in Tbilisi. A parallel expo is planned for non-alcoholic beverages, with a focus on mineral waters for Middle Eastern countries, Bochorishvili says.

But finding a new market for Georgian wine – especially one as large as China – would be a political and economic victory for the Georgian government, which is grappling with high unemployment in rural, wine-producing regions like Kakheti and the mountainous Racha.

In 2009, the Chinese drank 1.156bn bottles of wine – a 104% increase from 2004, according to a study by Vinexpo. The potential for Georgian wines is good, says Giorgi Gaganidze, head of Georgia’s former export agency, who reckons the large Chinese market would offer a good balance to existing niche markets in Europe and North America. "The major problem of Georgia wine: where should Georgia go? This is the question, because we are a country with very little land resources," he says, noting that just 90,000 tonnes of wine was produced in Georgia last year – a limited supply when divided among the country’s 12 types of wine.

"We should make a strategic decision [and] I think that now we are – some portions should go to the very high-quality wine and on the other hand, produce high volumes. If you are producing the high volumes, then you have this very good opportunities in, say, China," he says.

Breaking into the Chinese market could be a windfall for Georgian wine producers who are still struggling to replace the Russian market, which has been closed to Georgian wine exports since the 2006 embargo. Wine exports have increased to new markets, like the US and the EU, but the volume of wine sales has never reached its pre-embargo height. In 2005, Georgia exported $81m worth of wine; last year, wine exports were roughly half that at $39.2m.

While the Russian market was "important" for Georgian producers, Matkava stresses that diversification has made Georgian exports stronger. "The Russian market was an important market, yet most Georgian companies did manage to diversify away," he says. "[Now] the objective should be to penetrate high-growth, high-potential markets of the Gulf and East Asia. The potential is truly remarkable."