Dato Kutchashvili
PhD Student
The University of Georgia
Wine and Alcoholic Beverages Sector in Georgia
Abstract
Georgia is the homeland of wine. It has 8000 years of unbroken tradition of winemaking. Over 500 varieties of indigenous grapes have been domesticated and spread in Georgia. Winemaking and production of alcoholic beverages are strategically important for the economy of the country. Production of alcoholic drinks in Georgia is one of the fastest growing and profitable industries which is indicated by the increase in demand for alcoholic beverages in the local market and the popularity of Georgian wine and spirits in international markets.
Over the years the mentioned sector was characterized by a growth trend the main factor of which was the increase in supply along with the increase in demand in both international and local markets. However, this favourable dynamic did not last long as an unforeseen circumstance like the Corona Virus completely upended everything. It brought disastrous results to the economy of Georgia, in particular, the gross domestic product of the country became negative and amounted to 5% which was an indication of the beginning of an economic crisis.
The pandemic led to a decrease in public participation and output which triggered Georgia’s recessionary processes and affected the state’s alcoholic beverage system. Considering that alcohol is not a product of primary consumption and at the same time the incomes of the society decreased, it became necessary to save financial resources. Such behavior led to a decrease in the demand for alcoholic beverages. This in turn reflected in the earnings of businesses involved in this industry.
Conversely, a decline in the companies’ earnings and a decline in market demand resulted in heightened competition. It's also important to note that, in addition to the domestic market, the demand for Georgian alcoholic beverages declined abroad during the pandemic, which had a negative impact on exports and the earnings of businesses in this industry.
Regarding the businesses involved in the alcohol sector, they vary in terms of technology used in alcohol production, recipes, tastes, product diversity, quality, packaging, etc. It should be mentioned that there are not many Georgian businesses operating in the spirits industry. Within the alcohol industry, the majority of businesses export their goods to foreign markets, accounting for over 70% of their total sales. Georgian companies sell a significant portion of their products in Russia which in turn represents a big challenge for them. Due in part to the enormous market and proximity to Russia, which helps with cost savings, a significant portion of Georgian items are exported to that country. However, the Russian market is associated with certain risks despite its considerable market share.
This article will look at the international variables that affect the growth of the mentioned industry as well as the companies' ability to meet their targets. These include the following: 1) the conflict between Russia and Ukraine;
2) the epidemic;
3) the government's recent efforts to raise the quality of wine and grapes;
4) the extent of reliance on post-Soviet nations.
Keywords: Wine; alcoholic beverages market; Russia-Ukraine war; COVID-19.