Sunday, June 30, 2013

Georgian wines back on Russia market after ban

by Max Delany (AFP)

30.06.2013. As hundreds of bottles hummed past him along a conveyor belt towards the packing bay, winemaker Levan Garchechiladze says the return of Georgia's iconic wines to their crucial Russian market was long overdue. Earlier in June -- over seven years after Moscow slapped a ban on Georgian wines amid spiralling tensions that erupted into a brief war in 2008 -- the first batch of wine from the tiny former Soviet state was allowed back across the border into Russia.

"Now, thankfully, the politics seems to be out of the way and we can go back to doing our business," Garchechiladze, head winemaker at firm Kakhetian Traditional Winemaking (KTW), told AFP. Several days earlier Garchelchiladze loaded two trucks with some 30,000 bottles of wine bound -- for the first time in years -- for restaurant tables and supermarket shelves in Georgia's giant northern neighbour. "The Russians always used to love our wine -- sweet, dry, red, white -- so we are thinking why shouldn't they still be crazy for it even after all this time," he said.

Photo AFP
That is a big hope for the entire wine industry in Georgia -- a mountainous republic on the Black Sea that is considered by many experts as the cradle of wine-making. Georgian-born Soviet leader Stalin reputedly liked Khvanchkara so much that he served it to US president Franklin Roosevelt and British prime minister Winston Churchill at the crucial World War II summit in Yalta in 1945.

Georgian wine remained popular in Russia even following the collapse of Communism, with Russia accounting for the lion's share of the export market.

"Before the 2006 ban, Georgian exports to Russia accounted for approximately 91 percent, at 52 million bottles," said Irakli Cholobargia, head of marketing at Georgia's state-run National Wine Agency.

The embargo saw exports slump from over $80 million in 2005 to as low as $29 million in 2007 and -- despite steady growth over the past few years -- the level has not yet reached pre-ban highs. After a long absence, however, experts say that regaining Georgian wines will struggle to reach earlier volumes on the Russian market.

Cholobargia targets sending just 10 million bottles to Russia by the end of the year. Since 2006, cheap wines from new world countries such as Chile have flooded the Russian market. Meanwhile, the Russian embargo - which Moscow said was down to poor quality control and included other products such as mineral water and spirits -- forced Georgian wines to change fundamentally as the industry boosted quality and prices in the hunt for new markets.

"Simply said, today's Georgian wine is a completely different product," said Alexander Kaffka, who publishes Hvino News, a website dedicated to the Georgian wine industry.

"The market conditions are also completely different -- a whole new generation has emerged in Russia, which is not familiar with Georgian wine at all, and is used to consume other brands," Kaffka said.

While improved quality has played a role, observers put the ending of the Russian ban down to two major factors -- a change of guard at the top of Georgian politics and Russia finally joining the World Trade Organisation last year after Georgia dropped its long-standing opposition.

Last October the party of fervent US-ally President Mikheil Saakashvili -- who fought and lost the brief 2008 war with Russia over the separatist region of South Ossetia -- lost out at elections to a coalition headed by current Prime Minister Bidzina Ivanishvili. While Ivanishvili has pledged to maintain Saakashvili's pro-Western course, he has also made normalising relations with Russia a foreign policy priority.

Although wine was the Georgia's seventh largest export last year, experts say that the lifting of the Russian ban is unlikely to have a major impact on the country's overall economy. Agriculture only accounts for some 10 percent of the country's total gross domestic product, meaning the return to Russia is likely to be more psychological than financial for a country that prides itself on its millenia-old winemaking traditions.

"The importance of wine for Georgia is rooted deeper, as it's so closely related to country's ages-long history and culture," wine industry expert Kaffka said.

While they are welcoming a return to the Russia, producers say the ban forced them to develop new markets elsewhere. While sales have risen in other former Soviet republics, such as Ukraine, markets have also opened up from Poland to China and Georgian wine has increasingly been winning international plaudits.

"The Russian market was so big and will be important again but now we have opened up new opportunities and we are not going to focus on just one again and let any of the others suffer," says Oksana Bugrimenko, KTW's export manager. After so many years away, Bugrimenko said that Georgian exporters were waiting to see how the sales to Russia would go. "So much time has passed since Georgian wine was last in Russia no one can tell what will happen," she said. "It is good that we are back but we will see how it goes."


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