The Ecstasy and the Agony of Exporting to Russia

Last year was a phenomenal one for exports of Georgian brandy and wine, with the bulk of exports going to the Russian Federation and the greatest wine export revenue in history being achieved. Grape prices for some varieties reached record levels, with Saperevi averaging GEL2.65/kg in 2014. A recent analysis conducted by our company suggested that, on a farm-gate basis, sales of grape (both table and wine types), home-made wine and chacha in 2014 accounted for over 20% of Georgia’s total agricultural output in GEL terms, making the viticultural sector the largest non-livestock segment of Georgia’s agricultural sector by a wide margin.

 In terms of Georgian Wine export, 2014 was a genuinely special year for the last 10 years. Conferring of intangible cultural heritage to Qvevri winemaking, and canceling of the Russian embargo on the Georgian wine, had important influence as on quantity, as well as on visibility of the product.  

According to the data, provided by the National Wine Agency, incomes received from the sales of wines exported from Georgia in 2014 were increased in 30% in comparing with the incomes of 2013 and it was about 184,927,801. Sales of wine brandy increased in 15%, unlike Chacha, which fell down with 24%.

Source: vinoge; Georgian Wine Club and Samtrest

However, exporters have reported in 2015 that Russian importers in December and January demanded steep discounts of around 25% from contracted orders, arguing that the depreciation of the rouble against the dollar and the euro made it necessary. In late January, restrictions on Russian companies and Russian banks remitting foreign currency offshore have caused many orders to be cancelled, as described below.

According to Nutsa Abramishvili, the  CEO of the wine company Schuchmann Wines  10 trucks loaded with 100 000 bottles of wine stopped due to the  limited transfer of foreign currency outside of Russia because of the ruble devaluation.

“We’ve received  excise stamps from Russia that have already been pasted on the bottles, in fact the products have been sold. But based on the fact that  goods are shipped in case of  prepayment  and the transfer of currency abroad is limited because of the economic crisis, we had to stop already marked goods, “- she says.

According to her, the shipment should  be resumed in February, but due to  the unstable situation in Russia, there is no guarantee that the problem will be settled, and the goods will be sent  to partners.

via Export of Georgian Wine to Russia Halted | Caucasian Business Week.

While diversification of markets has been a priority since the Russian embargo of 2006, inroads into European, Asian and American markets have been very modest. China is likely to exceed Russia as a consumer of wine by 2016 according to many analysts, and export growth in 2013/14 to that market has been very encouraging. Wineries, the Georgian Wine Association and government will need to work hard on a coordinated approach so that the wild feast-to-famine fluctuations in profitability linked to dependence on the Russian market can be overcome by a diverse market for Georgian wine.

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