Saturday, November 17, 2012

Ok, Russia lets Georgian wine in, what’s next?

by Alexander Kaffka

17.11.2012 (Hvino News). The long-awaited return of banned Georgian wine and mineral water to huge Russian market seems to approach. Last week was full of high-level signals coming from both sides, which communicate positive message to eager market players as well as thirsty consumers.

Relations between Georgia and Russia are still at nearly lowest possible level. Let’s say they are a tiny bit above the lowest level. What has been once a total vacuum for citizens of two countries – absence of diplomatic relations, ban on visa issuance, lack of direct transportation means – became slightly better with introduction of direct airline service and one-sided visa-free regime for entry to Georgia. But this is not a breathable atmosphere, because entry to Russia is still practically closed to most Georgians including businesspeople.

Recent political change in Georgia gave hope of fresh air to the breathless contacts between two nations. Comeback of Georgian wine and Borjomi – country’s “signature products” - to Russia will seemingly be the first tangible dividend of that kind.

While restoration of diplomatic relations is deadlocked by the issue of Georgia’s breakaway territories, such steps as lifting the ban on Georgian products, complemented perhaps by cultural exchange may serve as gestures of good will. To improve bilateral relations thoroughly, however, much more good political will is required than is available now.

Under that angle, the political and symbolic significance of Georgian wine’s comeback prevails over its economic impact.

From business viewpoint, permission to export to Russian market is excellent news for Georgian winemakers and hopefully for the agriculture industry of Georgia. After all, Russia has been the natural consumer market for Georgian agriculture for centuries.

In Russia the Georgian products will find certain demand, but will face hard competition. I may reiterate what I told to Wine Spectator magazine in September: it will be challenging, if not impossible, to regain the market share Georgians used to have in retail.

Given the high cost of marketing campaign in Russia’s huge market, the importers are likely to use more cost-efficient solutions such as distribution through Georgian restaurants. Georgian cuisine is in high demand in Russia, and no additional marketing is necessary to offer authentic Saperavi and Kindzmarauli to clientele of thousands of Georgian restaurants.

There is no doubt that high-end supermarkets and wine boutiques will also stock Georgian products. In the lower market segments, however, Georgian brands may again face the problem of counterfeits. The problem of fake Georgian wine existed in Russia before the ban. It’s no secret this problem still exists in other markets – including even the USA (read more: "Khvanchkara Scandal": Who tries to undermine the image of Georgian wine in the United States?)

What can be done to fight against counterfeiters and to secure quality of Georgian brands? 21 century’s technologies offer a range of solutions – from online wine shops with direct sales from the producer, to special labeling with RFID chips, which allow the wine label to be read by mobile phones. Maybe it is good time for technology-savvy Georgian producers to consider the next steps to fully take advantage of the new opening opportunities.

Alexander Kaffka Ph.D. is director of Artenom Consulting and founder of Georgian business news resource Hvino.com

© Hvino News

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