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Wednesday, March 13, 2013

Russia Lifts Seven-Year Exile for Georgian Wines

13.03.2013. Russia has lifted the seven-year ban on the import of wines from Georgia leaving the State of the erstwhile Russian Republic (USSR) in the lurch but the producers are not overly excited since the market dynamics have changed and they have found alternate markets, though the increase of business of about 10 million bottles would be welcome

In Indian mythology Lord Rama had to undergo a 14-year exile for no fault of his own. Georgia, one of the States of the erstwhile USSR had to suffer half the sentence only as the wines that were exiled in 2006 from Russia will now be allowed to enter as Russia announces lifting of the ban which crippled Georgia’s wine economy as 80% of its wine production was then shipped to this market.

The wines are expected to go on sale in May, as Russia allowed registration of 36 wineries for import and carried out the first round or sanitation checks. Though the reasons for the ban were political in nature, officially the Russian health and sanitary agency had banned all imports, proclaiming that the wines did not live up to the health standards laid down.

The opening up of the Russian market is credited to the billionaire Georgian Prime Minister, Bidzina Ivanishvili, who had promised to improve political and economic relations with its neighbour in the north following his election victory last October. Russia joining WTO was also a positive factor because as a WTO member, Russia is obliged in theory, to open its market to other member states like Georgia.

Georgian producers are happy but not overly excited by the lifting of the ban. After going through a difficult phase initially they looked outwards and developed other markets. Levan Davitashvili, the head of Georgia's National Wine Agency, reportedly says “The Russian market was always important for the Georgian wine industry. But between the embargo and now, Georgian wines have found their way through to other world markets such as China, Poland and the US.”

The agency has an outlay of US$500,000 this year to spend on these emerging markets and will be doubled next year. Georgian wine used to occupy 30% of Russia's premium wine sector; this capacity has now been diverted mainly to other former Soviet republics like Ukraine, Belarus and Kazakhstan, says Davitashvili. These countries continue to be their most important markets though Georgia exports to 50 countries.

Before the ban was imposed in 2006, Russia was a 50 million bottle market for Georgia. Now they expect the exports to be around 8-10m bottles a year. Russian market has since changed. It has become a saturated and diverse wine market with the new generation of wine drinkers possibly not looking at Georgian wine as exciting. It has also become a lot more expensive since then, especially the bottled wines which reportedly cost three times as much as the bulk wine of the same quality.

Since the reason given at the time of the ban was that Georgian wine contained dangerous levels of pesticide, it may have left psychological scars on the customers’ minds and it may not be easy to ward off the negative, even though the same agency will certify for its safety now. However, thousands of Georgian restaurants which are very popular all over Russia would mean a huge market for the wine.

“The process of entering the Russian market begins, but it’s too early to say how much increase we expect in sales,” said George Margvelashvili, President of Tbilisi-based winery Tbilvino which also exports its wines to India through Gurgaon-based Tabuni Wines. Thanks to the significant presence of Russians in Goa, Tabuni is doing very well in that market which it entered recently. They also distribute in Delhi, Gurgaon, Mumbai and Pune. Besides Tbilvino, wines from Askaneli are also in their portfolio.

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