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Wednesday, May 22, 2013

Georgian National Wine Agency (Interview with Levan Davitashvili)

22.05.2013. The American Times sits down with Levan Davitashvili, Chairman of the National Wine Agency, to get an understanding of what their function is as the head of Georgia’s most precious commodity and what markets represent opportunities for wine lovers and investors alike.

What is the role of the National Wine Agency in Georgia?

The National Wine Agency is a state regulator for the Georgian wine industry and grape production and operates under the Ministry of Agriculture. It’s founding is accorded by Georgian law regarding wine and bottled wine which is rooted in EU wine making standards. Although modern we are currently making amendments to the law in line with EU changes as well as our own specific modifications.

More specifically we control the stock’s quality, certify products for export and monitor quality in local markets. This encompasses the administrative work the agency conducts. The secondary function is in promoting the Georgian wine industry regionally and throughout the word.

Since there are so many private producers of wine or very small companies that produce wine, how big of an issue is the quality control?

Every winemaker needs to be registered with the agency. Regarding exports, the controls are very strict; no wine can enter the export market without checking labels and meeting our standards. Every wine should be traced to the grape it was made from and the vineyards it came from and which harvest yielded the product. As part of those quality control regulations we also administer tasting control. Based on those three parameters we then issue a certificate of origin and certify wine for export.

Regarding local markets, wine falls under Georgian food security regulations and there is no special control although we can check them randomly. The legislation is not entirely clear and does not offer us the full authority to check and trace all the wines that are sold locally in the market. That legislation under the new government will be adjusted to adhere most closely to our international standardization process. This is not just for the safety of the local consumers but also to create uniform quality standards which maintain the strong reputation of Georgian wine. As an example, many tourists come here and drink our wines; as such they can influence the reputation of our wine. But legislation is nothing to be afraid of, in fact, most wineries in the country will tell you they want uniform standardization.

How close is the National Wine Agency to its winemakers? In what main capacity?

A crucial component towards development is increasing competition not just production. As such, marketing is a core function of the agency and my approach is a top to bottom structure. We intend to recreate the marketing board and when we do, communicate with the industry to gain an understanding leading to a common approach. At this stage it is critical that we cooperate and coordinate with the industry’s winemakers very closely as my marketing staff will be limited. So in the end, the winemakers acting as the majority board members will collaborate to decide on market entry strategies and execution thereof.

Does the NWA send audit teams to the wineries?

Yes and the process are quite transparent. It is organized in such a way one cannot bribe or pass through poor quality or defective wines to the markets. There are two authorized laboratories with modern equipment which check the properties of wine upon inspection. As a result, we fully meet OIV [International Organization of Vine and Wine], EU and Russian standards of quality. We have different parameters for different countries and will work on the wine policy with the Minister of Agriculture as well as restructuring the agency in order to have separate departments. These departments will work on the general strategy, legislation and policy of the structure. We are also introducing a vineyard cadaster in a 4-year plan to ease the incorporation process.

Russians have a historic taste for Georgian wines. What kind of market do you think they will represent to Georgia after 7 years of an embargo?

When Russia was an available export market we were at about 55 million bottles annually. Right now, the total market for Georgian wine is around 23 million. However, in value, we have almost the same figures as we did during the Russian occupation. Our segment is medium/high priced and we are competing with French wines as we don’t produce low quality wines.

After the Russian ban of Moldavian and Georgian wine the market was filled by French, Italian, Chilean and South Africa products. It is promising though that Georgian and Russian officials are in talks of opening the embargo up to Georgian waters and wines. As you said, a large part of this is because of historic tastes. In Russia we have great awareness stemming from over 200 years where Georgia supplied the official wine for the Royal Court. As such, in Russia we are considered an elite wine.

But even with that history we were afraid that after 7 years’ time they may have adapted new tastes but as we test the Russian market and when Russian delegations visit they are all asking for Georgian wine! It is human nature as well; what is prohibited is what’s desired. When the Russian market opens up sometime this year our first year forecast is between 6 and 10 million bottles exported.

Overall, Georgian wine is very special and quite unique and we represent a niche segment: Those who look for unique, tasty and interesting wines and of course Georgian wine is one such example. We have great variety, strong technology combined with historic methods and a very long and attractive history.

What other countries are you looking at beside Russia?

We have a map of Georgian wine across the world and we are definitely interested in CIS countries and ex-Soviet countries as well as Poland. We possess strong awareness in those markets making them ideal and important markets to enter in the near future.

Additionally, we are interested in Southeastern Asia. In China for example we have exceeded 1 million bottles in 2012 and forecast 2 million bottles in 2013. Aside from China which is becoming the largest consumer market on earth we are looking at Hong Kong, Singapore, South Korea, Taiwan and India is also starting to drink our wine too.

These are interesting markets. How were you able to enter these markets?

China and India are very active in Georgian economy; they invest a lot and conduct business in Georgia outside of the wine industry which creates a good link. They are coming here and they know what the top Georgian commodities are. One company, for instance, is in the market for electronics distribution but also sees the opportunity in the wine trade.

Another important link is a large private client of the agency which is the Estate Railway of China which has over 50,000 employees. They purchase our wines for their in-house and business uses and maintain a strong relationship with Georgia.

Seeing these synergies develop we made several campaigns in China by participating in 4 trade shows in different regions. We will definitely accelerate our thrust into China. India is more difficult; it is poorer and at least 15-20 years behind China. Aside from that they are overly bureaucratic, impose huge taxes on imports and overall hold truly detrimental barriers to entry. China had the same system but they are more open right now. But we are optimistic and are beginning to place our footprint there; it is better to be a pioneer in a market that large.

What about the US market?

The US is one of the priorities and but we cannot approach hundreds of markets. We have limited production and we will make a list of priority countries with the US at the top outside our regional focus. So together with CIS countries, Southeast Asia states and the EU we have our agenda in line. We can’t go everywhere.

Do you have a US market-entry strategy?

Yes. We are currently re-strategizing and have different proposals from several agencies who are experts in the test markets as well as in executing campaigns concerning alcoholic beverages. We will select one company to work on our American plan and we will implement that plan live around springtime [2013].

If you were to give a message to our investors and subscribers in the US, what would that be?

It is very easy to work with Georgians because we don’t create any bureaucratic barriers and [most] Georgians are English speakers. It is a nice country. It reminds me of California in certain respects. It has a huge history. It’s secure and there is potential for development; one can definitely earn profit.

Additionally, 50% of our population resides in villages. This is like no other country in Europe. We can have a labor force for many projects but produce a mere 7% of GDP from this 50%. There is huge potential and the government, specifically; the Ministry of Agriculture via Prime Minister Ivanishvili has made agriculture a Number 1 priority.

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