Tuesday, November 8, 2016

Lift your spirits: The Georgian way

by Keti Sidamonidze and Ludovig Girod, Experto Consulting

08.11.2016. One would logically imagine, entities in the alcohol business have more talkative and forthcoming employees as compared to other industries because of the nature of business and that their representatives make perfect respondents. This notion could not be any further from truth in the Georgian reality.  After having approached all major spirits producers in Georgia with due notice, we managed to obtain more or less plausible answers from only two respondents despite having received pledges from a couple more; but what is surprising, some outright refused to participate, with the expressed “why do you care” concern.

The oblivious attitude of high level representatives of those entities makes us wonder whether they honestly do not understand the benefits of having a 100% free exposure in a feature article written by an independent professional or they just act ignorant because they want to avoid extra efforts of having to give answers backed by actual facts. Enough about rhetoric and painful concerns.

The good news is that The Drinks Business anticipates “disruptive or accommodative technologies will reshape product offerings, challenge drinking rituals, accelerate and add layers of complexity to brewing and maturation techniques, revolutionize promotional campaigns, expand distribution and accessibility options and reassess reviewing methods” worldwide sooner rather than later.

In the initial days of the European Union, spirits definitions were not harmonized, and each Member State continued to abide by its own rules.  In order to ensure some EU-wide basic quality standards for spirit drinks, Member States acknowledged the need for a harmonized rulebook. The current legal framework favors the introduction of technological innovation alongside traditional methods of production.

Before zooming in on Georgia, we deem relevant to define spirit drinks according to the EU standards: “alcoholic drinks intended for human consumption. By definition, they possess particular organoleptic qualities and have a minimum alcoholic strength of 15 %. They are produced by distillation, by maceration or by the addition of flavorings, or by mixing a spirit drink with another drink, ethyl alcohol of agricultural origin or certain distillates”.

Undenatured ethyl alcohol, spirits, liqueurs and other spirituous beverages hold the 2208 HS Code and according to the National Statistics office of Georgia, in year 2015 under this category the country imported goods worth USD 44,646.5 thousand, while exporting the goods amounting to USD 64,891.7 thousand during the same period. The largest export is accounted for the year 2013 with the total transaction value of USD 99,830.6 thousand.

According to Euromonitor, excise tax hike and currency rate fluctuations shrunk the market in 2015. A 50% hike in excise tax in the first quarter of 2015 negatively affected the total volume sales performance of Spirits. Gomi Spirit & Vodka Factory led spirits and was ranked sixth in alcoholic drinks in total volume share terms in 2015. This year the industry seems to be rebounding with the total export value for the spirits amounting to USD 60,758.8 thousand for the first nine months, already nearing the value in 2015.

In a country, where wine production counts over several thousand years, the first Georgian wine brandy was brought to life only in the 19th century by David Sarajishvili. Mr. Alexander Sakandelidze, Chief Sales and Marketing Officer at JSC Sarajishvili told Experto that “we proudly continue being devoted to the traditions established by the founder and keep producing premium quality drinks. We clearly see quite a big potential in the modernization of the spirits industry. We are already holding the uncontested leading position for the domestic market and want to keep this position in the new setting as well”.

Sarajishvili is currently supplying products to 21 countries worldwide. Top priority markets for them appear to be the CIS countries, as awareness for their production is quite high: “we are not neglecting the EU and Asian countries either. They also fall in our high priority list. We are not stopping on the already achieved milestones and continue to conquer new markets. We aim to see Sarajishvili products be exported to as many countries as possible”, elaborated Mr. Sakandelidze.

The Chief Sales and Marketing Officer of Sarajishvili revealed to Experto that they are covering 98% of the Georgian market: “meaning that, the Sarajishvili products are available practically everywhere, i.e. in most existing channels that sell spirits in Georgia”. But if you are searching for more exclusive Sarajishvili items, then you should pay a visit to their own boutique shop at the factory: “the expansion of the boutiques is planned and shortly, consumers will be able to visit our branded shops in the city centers and main regions of Georgia as well”.

Mr. Sakandelidze also noticed a trend that customers are getting more and more educated and sophisticated, thus starting to distinguish the quality of spirits, bringing them to the willingness and readiness to pay more in return for getting higher quality drinks - “that is why we are starting to concentrate a lot more on the luxury segment”, he concluded. Note to our readers – Experto is assisting several European clients producing high quality and efficient machinery and production lines needed for the sector enter the markets that we cover. We discovered that Sarajishvili house is the only company in Georgia using the French Charente distillation machine.

Speaking of the “only company”, the first ever Georgian whisky named Jimsher is around the corner [read also here]. Four different varieties of Jimsher will appear on the Georgian market within 6 months:  “One of the most successful Georgia-based winemakers, Mr. Jimsher Chkhaidze had long argued that Georgians, besides historically traditional alcohol beverages, could create unique whisky varieties. He spent the past ten years in search for that uniqueness. After we had at last tasted the result of his search, we exclaimed in unison that his extensive efforts were worth it!” explained to Experto Ms. Sopho Lomtatidze, the Marketing Manager of Jimsher.

Mr. Chkhaidze wanted to have the best Georgian designer work on the design of bottle and label for Jimsher, thus ensuring it fully featured the Georgian character, so he asked Mr. Zviad Tsikolia work the magic.

“Our products will hit the Georgian market in six months and we will be present both in off-trade and on-trade channels. Our next stage will be to conquer the export markets. After we have announced the launch of the brand, we have been contacted by representatives of around 20 countries and we are in active negotiations with them”, the Marketing Manager of Jimsher revealed to Experto enthusiastically.

To conclude with a metaphor, as Robert Louis Stevenson has put it, “our business in life is not to succeed, but to continue to fail in good spirits”. In the spirits business that, ironically, should be relatively easy.  Or not. In any case, responsible drinking should be promoted actively by all stakeholders of the industry and beyond.


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