Saturday, January 16, 2016

Leading Georgian winemakers expecting 10% sales growth in 2016

16.01.2016. Leading Georgian wine companies ended 2015 with a drop in sales of over 20% due to the economic difficulties of their main trade partners. The reduction of the wine industry has shown a 39% decline compared with 2014. Regional economic difficulties are expected to continue in 2016 as well. However, the environment looks set to remain predictable for businesses, making them optimistic about achieving over 10% growth this year.

 “The boom in Georgian wine that was shown in 2014 should not be expected to be repeated in 2016. This year will also be full of challenges. There will be an environment of economic crisis in our main partner countries. The national currencies are expected to continue devaluating in Ukraine, Russia, Kazakhstan, Azerbaijan and Belarus. These are markets which make up over 80% of the total sales of Georgian wine,” Giorgi Margvelashvili, President at Tbilvino JSC, told The Financial.

However, a good trend of this year according to Margvelashvili is that while the overall environment is not ideal, it remains predictable. “Some unexpected, upcoming drops should not be expected. 2016 will be more predictable and accordingly, the wine industry along with our company are meeting the year more prepared and we know what to expect. Predictability is a core factor for business,” said Margvelashvili.

According to the National Wine Agency of Georgia, 36,071,399 bottles (0.75 litres) of wine have been exported from Georgia to 46 countries of the world. Export worth USD 98,102,614.

The amount of export during 2015 to the top five export destinations is as follows: Russia - 18,308,177; Kazakhstan - 5,195,949; Ukraine - 3,412,453, China - 2,672,154; and Poland - 1,600,302 bottles.

The political and economic instability in Russia and Ukraine contributed to the wine export drop last year. Total wine export to Russia was reduced by 51%, and to Ukraine - by 56%. The decline in these two countries had a negative impact on the Georgian wine industry and caused a 39% export reduction in comparison with 2014, which was a boom year for Georgian winemakers.

Tbilvino JSC, the leading Georgian wine producer, exported 3.5 million bottles to 30 countries in 2015. The figure was 25% less than in 2014. The main export markets were: Kazakhstan, Russia, the Baltic States, Ukraine, Poland, China, Belarus, Azerbaijan and Canada. The top export market, Kazakhstan, made up more than 25% of total export in 2015.

“The share of the Russian market does not exceed 20% of total sales at our company. Compared with 2014, export to Russia dropped by over 60% in 2015. However, as Russia did not make up a big number of our sales, it did not have a dramatic impact on the company,” Margvelashvili said.

The reserves of Tbilvino that were not sold in 2015 will be realized in 2016.

Teliani Valley, another leading Georgian winemaker, exported 1,980,000 bottles in 2015. The volume was 15% less in comparison with the previous year.

Ukraine was the top export market for Teliani Valley in 2015, making up 37%. It was followed by Poland - 15%; Russia - 13%; Kazakhstan - 10%; and Latvia - 7%.

Schuchmann Wines Georgia exported over 1 million bottles in 2015. “It was a crisis year due to the financial difficulties in our main partner countries. However, this process is short-termed and we are expecting stabilization. It will increase wine export from Georgia next year and also in upcoming years,” said Nutsa Abramishvili, CEO at Schuchmann Wines Georgia.

Export of Schuchmann Wines Georgia was reduced by 20% in 2015, compared with the prior year.

“The top trade partners for our company are: Ukraine, Kazakhstan, China and the US. The share of the Russian market has been significantly reduced in 2015. Accordingly, it no longer makes it into the top five export countries for our company,” said Abramishvili.

“2015 has not been as good a year in terms of sales as 2014 was. However, in general a crisis period reveals new opportunities; I mean a focus on more stable markets, and the priority of market diversification. Accordingly, we already have the results of this work and expect a better picture in 2016,” Abramishvili said.

In 2016 Tbilvino expects over 15% sales growth in comparison with 2015.

“Our main markets will be Kazakhstan and Russia. Despite the existing crisis, we plan to work harder in Ukraine and double our sales there. The Baltic States, and Asian countries - China and Japan, will be our target countries in 2016. Last year we resumed exporting our product to the US, so it will also be a target market. European countries are allocated a stable share, Western European countries make up more than 25% of our export portfolio. We annually have a small but increasing trend in Europe,” Margvelashvili said.

Teliani Valley aims to get 7-10% sales growth in 2016 compared with 2015.

“The target markets will be Ukraine, Poland, Kazakhstan, China and the Baltic States. The company does not plan to enter new markets this year. We plan to strengthen our positions in the existing export countries,” said Shota Khobelia, Director General at Teliani Valley.

The most important countries for Teliani Valley are: Ukraine and the Baltic States. “We are also actively strengthening positions in England and China,” said Khobelia.

According to Abramishvili, Schuchmann Wines Georgia, this year the company will continue its active work in line with its market diversification policy. “We will continue and become more active in Asian countries, which are the biggest market and where there is lots of work to be done. Target markets will also be the US and European countries.”

In 2016, Schuchmann Wines Georgia plans to better position itself in China, Japan, Britain and other European countries where it is not yet positioned. “Our expectations are high and the result will be appropriate,” said Abramishvili.

“China can be considered a replacement of the Russian market for Georgian wine with its size and geography. However, under a diversified policy exporters can be presented on different markets with different shares. It helps to reduce risks, get uninterrupted production and enhance awareness of Georgian wine,” said Abramishvili.

A sharp increase in wine export was maintained during the whole of 2015 in China. China is one of the most strategic markets for Georgian wine. 2,672,154 bottles were exported to China last year. The figure is 122% more than in 2014. China entered the list of the top five export countries for Georgian wine. Following Russia, Kazakhstan and Ukraine, China became the fourth export destination in 2015.

Last year an increase in export was observed to a number of EU countries: Poland - 3% (1,600,302 bottles); Lithuania - 4% (658,666); Estonia - 54% (506,124); the Netherlands - 58% (51,432); France - 190% (37,956); Denmark - 100% (34,840); and others.

Export growth has been shown in other strategic markets such as the US - 31% (248,075); Canada - 48% (157,836); Japan - 5% (138,290). Exports also increased in Kyrgyzstan - 79% (185,514); Israel - 48% (35,820); Korea - 37% (24,054); and others.


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