BUSINESS & ECONOMICS
Molly Corso
10/27/06
With the end of Georgia’s grape harvest season, officials are claiming that a government campaign to defend the country’s wine industry against a seven-month Russian embargo has triumphed. But despite the optimism, serious obstacles – from low grape prices to rampant falsification – remain.
Using a mix of patriotic rhetoric and military jargon, President Mikheil Saakashvili has compared the Russian embargo on Georgian wines, one of the country’s top exports, to an "economic war." At the beginning of the harvest season, Saakashvili promised support to farmers and wine companies alike for the battle ahead.
"An economic war has been declared on us to make us weak now so that they do not lose a bigger war later," he said in an opaque reference to Russia during an August 31 speech in the lush, southeastern region of Kakheti, the Mecca for Georgian viticulture. "We will incur a loss, but we must not make the enemy happy. We must not let the enemy achieve its goal."
With Russia, the main market for Georgian wines, now gone, the challenge was to find substitute overseas clients with a taste for a fruity Tsinandali white or a robust Kindzmarauli red, as well as for dozens of other appelations. As part of the government’s harvest strategy, high-ranking officials – Prime Minister Zurab Noghaideli, Agricultural Minister Mikheil Svimonishvili, Interior Minister Vano Merabishvili, Defense Minister Irakli Okruashvili, and Prosecutor-General Zurab Adeishvili – were assigned to the five biggest grape-producing regions of Kakheti: Sagarejo, Gurjaani, Telavi, Kvareli and Sighnaghi. The five men were tasked with providing logistical support to farmers looking for clients and to buyers looking for grapes.
The plan was for the government to provide farmers with everything from tractors to organizational skills, but without subsidizing the price of grapes. Instead, to pick up the slack in demand, Saakashvili encouraged Georgian businesses to support the grape harvest and to buy ten tons of grapes each.
"We should all help Kakheti this year… no one is forcing you to do anything and no one is threatening you…[but] I would like to extort a little bit of money from you today, for the first and the final time," he said during his speech in Kakheti.
Some 5,000 tons of grapes – out of an estimated 140,000-ton harvest – were bought by private businesses, according to Giorgi Tskhakhaia, head of the Ministry of Agriculture’s harvest headquarters in Kakheti. The president also announced that the city of Tbilisi would purchase an additional 4,000 tons of grapes.
Nonetheless, certain organizational hurdles exist in the government’s campaign. A spokesperson for the Tbilisi city government stated that the city had never purchased the 4,000 tons of grapes mentioned by President Saakashvili. Nor is marketing without its hiccups. Despite repeated attempts by EurasiaNet, spokespersons for Defense Minister Irakli Okruashvili, who was tasked by Saakashvili in April with marketing Georgian wines abroad, did not respond to inquiries for information about the minister’s efforts.
Government officials, however, have hailed the campaign as a success. Wine exports abroad have tripled, they say. And local wineries, they stress, have purchased more grapes than originally anticipated.
Early predictions put company purchases at no more than 30,000 tons. However, the Ministry of Agriculture’s Tskhakhaia stated that over 50 wine industry companies bought approximately 40,000 tons of grapes or a little more than one-quarter of the harvest. "[There was] no problem in selling it [grapes]," he said. " Everyone had an option for [selling] his grapes."
Giorgi Chonishvili, general manager of the Georgian Rural Development Fund, an organization that provides technical support and financing to grape farmers, believes that the government’s program helped save this year’s grape harvest. When the Fund responded to Saakashvili’s appeal to buy grapes, the regional government in Telavi, Kakheti’s administrative center, told Chonishvili they had no more white grapes left to sell, he said. Another positive trend: loan payments from wine industry clients have arrived on time this year. Chonishvili attributes that change to the government demand that businesses buy grapes.
But some wine companies say they do not need all the grapes that farmers want to sell. In 2005, the Telavi Wine Cellar, a Telavi-based winery, bought over 4,000 tons of grapes from farmers throughout the country, according to general director Tengiz Javakhishvili in Kakheti. This year, those purchases dropped to about 100 tons of grapes.
Some $1 million-worth of wine was returned to Telavni Wine Cellar from Russia once the embargo started in March, Javakhishvili added, and reservoirs remain from last year. The company also owns nearly 150 acres of vineyards.
Some farmers complain that wine companies are not only buying fewer grapes, but paying much lower prices.
Temuri Juliashvili, who grows black and white grapes on 2.5 acres of land in the village of Chaliaobari in Kakheti’s Gurjaani region, said that he can only receive between 25 and 30 tetri (about 14 cents to 17 cents) per kilogram for his produce. By contrast, grapes in Georgia’s many outdoor bazaars – the final destination for an estimated 40 percent of the harvest – sell for one lari (about 57.5 cents) per kilogram. "If I can get back what I spent, I will be satisfied," Juliashvili said.
The agriculture ministry’s Tskhakhaia agrees that grape prices were low this year, but asserts that the price reflects the quality of grapes for sale. Overall, white grapes went for between 30-70 tetri (about 17-40 cents) per kilogram and black grapes ran from 60 tetri (about 34.5 cents) to a little over a lari (about 57. 5 cents) per kilogram.
Falsification may prove a trickier obstacle for the government and wine industry to overcome. A report published by the United Nations’ Food and Agriculture Organization (FAO) in July 2006 stated that as much as 90 percent of the Georgian wine sold worldwide is, in fact, not Georgian wine. The FAO recently launched a project with the government to address the issue, but observers say that it is a fight that will never entirely be won.
"The major part of false wine is produced abroad…that is the major threat for Georgian exports," Mammuka Meskhi, the FAO’s assistant representative in Georgia, said. "Now it is very difficult to restore the image of Georgian wines."
In order to help wine companies break into new markets, the Georgian government has embarked on an aggressive battle against falsification.
The Ministry of Agriculture recently introduced a passport system for all grapes that create Georgia’s most famous brands including appellations like Tsinandali, Mukuzani, Kindzmarauli, and Kvanchkara. The government has also – together with the German aid organization Gesellschaft fùr Technische Zusammenarbeit – created a wine laboratory to screen the quality of Georgian products.
Lab director Nugzar Ksovreli notes, however, that screening alone is not the answer to Georgia’s wine woes. "Everyone thinks that if we have a laboratory, everything will be OK, but, of course, that is not true," Ksovreli said. "We need to create a whole system [of monitoring.]"
For others, fighting back against falsification is a matter of cultivating business capabilities – an attribute the government also urges in its exhortations for Georgian wine companies to soldier on against the Russian embargo. Notes Telavi Wine Cellar’s Javakhishvili: "[E]veryone understands that if they do not make good wine, they cannot sell it."
Editor’s Note: Molly Corso is a freelance reporter and photojournalist based in Tbilisi.
