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Saturday, November 30, 2013

Sales of beer and spirits set to increase, claims report

by Mariam Papidze

30.11.2013. Sales of Georgian alcoholic beverages are expected to grow fast, according to the Euromonitor International summary provided exclusively to The Financial. The main threat to stable growth of the market is a possible delay in the economic recovery in the country, but this is not very likely. The categories which are expected to experience the fastest growth by 2017 are beer and spirits.

Sales of spirits and beer grew much faster, with beer witnessing its strongest growth in 25 years. Sales of spirits increased the most in 2012, reflecting the increase in demand for vodka in recent years. As for wine, it grew more slowly than other alcoholic drinks categories, as it is among the most traditional alcoholic drinks in Georgia and is quite mature, according to Euromonitor International.

“Georgian consumers have gradually switched from wine to various other spirits, in particular, vodka. Traditionally, Georgians would drink mainly wine during so-called “supras” - traditional festivities, where people consume numerous Georgian dishes and make different toasts. However, in recent years, Georgian consumers have gradually decreased the amounts of food consumed and instead focus on smaller quantities of stronger spirits. As a result, sales of vodka increased visibly in 2012. As long as the imported and local vodka brands are priced similarly, imported brands prevailed in the preferences of local consumers, because Russian and Ukrainian vodka have a better image,” says the report.

32,425 thousand litres of alcoholic drink were exported from Georgia in 2013 with a total value of USD 139,126 thousand. As for in 2012, 38,922 thousand litres of alcoholic drinks were exported, with a total value of USD 149,348 thousand. The wine of fresh grapes makes up the largest part of exported alcohol - 21,187 litres.

12,847 thousand litres of alcoholic drink were imported in Georgia with a total value of USD 42,910 thousand in 2012, and 11,177 thousand litres were imported in 2013 with a total value of USD 31,320 thousand, according to GeoStat. In this case, the largest share is made up by alcoholic drinks like vodka, whiskey, liquor, rum and gin.

The trade value of alcoholic drinks by retail selling price consisted of GEL 447.1 million in 2012. It is forecasted that the trade value could reach GEL 457.8 million in 2013, according to Euromonitor International. Growth of trade value by retail selling price was 11.5 percent in 2011-12 and is forecasted to be 2.4 percent in 2012-13. Trade value by retail selling price was GEL 338.1 per household and is forecasted to be GEL 344.3.

Company shares by global brand owner are as follows: Anadolu Group, which unites Natakhtari, Kaiser, Mtieli and Kasris, takes 33.6 percent; Kazbegi JSC - 7.5 percent; Castel Group - 7.1 percent; Kartuli Kudis ko - 3.9 percent; and Carlsberg A/S - 3.4 percent. As for the brand shares by global brand name: from Anadolu Group Natakhtari takes the largest share - 12.9 percent; Kazbegi (Kazbegi JSC) - 6.9 percent; Kaiser (Anadolu Group) - 6.5 percent; Mtieli (Anadolu Group) - 6.10 percent; and Kasris (Anadolu Group) - 4.5 percent.

In total, 208 companies are represented on the Georgian alcohol market, according to GeoStat. Here are the 10 largest Georgian alcohol companies according to annual turnover: Lomisi; Georgian Beer Company; Nafareuli 21; Castel Georgia; Kakhuri Traditional Winemaking; Sarajishvili; Kazbegi 1881; Telavi Wine Celler; Tbilvino; and Gomi, which produces vodka.

Elite Alco is a wines and spirits shop where about 200 kinds of alcoholic beverages are sold. Its director Marina Gvinashvili said that Georgian customers mainly prefer more popular foreign brands when choosing alcohol. “Whisky is very much in demand, particularly Jack Daniels. Vodka is popular, especially Russian vodkas. As for Georgian wines, Telavi Cellar is the bestseller,” she said.

New product developments and increased advertising in the economy and standard segments are expected to stimulate greater competition. At the same time, an overall reduction in unit prices will help the official producers of alcoholic drinks to compete against illegally-produced alcoholic drinks, according to Euromonitor International.

The alcoholic drinks market in Georgia was characterised by stable growth of sales in both current value and volume terms, only partially hampered by the economic crisis in 2009. During the past five years the disposable income of Georgians increased rapidly, which resulted in higher spending on alcoholic drinks among other things, according to Euromonitor International. The recent economy slowdown in Georgia affected the sales growth rate as well, so market representatives say. But from December 2013, during the pre-New Year period, the companies expect a peak in sales.

“Economic slowdown may have caused decreased sales in some of the months of 2013, but in general, the situation has been stable,” said Irakli Tsereteli, Sales and Marketing Director at Bagrationi 1882. “Maybe there were some economic problems on the Georgian market but on international markets the situation was better. Bagrationi 1882 exports its produce to 10 countries where the company had positive sales which balanced slightly decreased sales in Georgia. Besides, the Russian market is open now for Georgia and this helps us to maintain positive revenues. As Russia is an enormous market it allows us to export a large number of our products there, which means that more products will be sold and better revenues will be fixed,” he added.

“As for the fact that beer consumption is increasing, it is not surprising. We should take into consideration the fact that beer is more affordable, cheaper than wine for example. Also, its consumers are mostly young people who tend to drink beer casually in the streets. In contrast to that wine is a traditional alcoholic drink and has its customary rules that people should adhere to. So it is not surprising that the beer market is large,” Tsereteli said.

Bagrationi 1882 is producing sparkling wine in Georgia. The company aims to develop further and add a new line to its production - fresh wines. As Tsereteli said, the company will produce its first fresh wine in the nearest future.

The sales figures of Kazbegi JSC have been maintained as well. “The good thing is that the beer market is free from the Government’s involvement. Imported beer is no longer lobbied. Any imported beer was linked to the previous government which of course badly affected local producers. Now we are not facing that problem. The only thing is that it is preferable that our customers have better solvency,” said Tea Skhiereli, of Kazbegi JSC.

Local companies are leading in the sales of alcoholic drinks in Georgia, according to Euromonitor International. The country is traditionally strong in the production of wine and brandy and there are good conditions for the cultivation of various grape varieties. Georgian production not only accounts for the major share of sales of beer and wine in Georgia, but a considerable amount is intended for wine export. However, there was local demand for imported spirits, especially at the premium end of the market, according to the report.

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