25 March 2019
Georgian Wines and Spirits Set to Conquer Asia Via Hong Kong
Free-trade link makes Hong Kong first port of call for former Soviet republic's export-minded producers.
As the first former Soviet republic to ratify a Free Trade Agreement (FTA) with Hong Kong, Georgia is keen to leverage its SAR connection as a means of boosting its exports throughout the wider Asian region. In particular, it is looking to promote its wine industry, said to be one of the world's oldest, with some evidence that fermentation was practised in the country as long ago as the Stone Age.
Although it also trades in certain ferro-alloys and fertilisers, as well as gold and copper, wine is, by far, the country's flagship export. In the first two months of this year alone, it exported the equivalent of 12.2 million 0.75-litre bottles of wine to 32 international markets – a 20% year-on-year increase in volume terms.
In value terms, for the same period, the country recorded revenue of US$45 million, a 13% rise over the same period last year. As well as the income directly accruing from wine sales, these figures also take into account exports of other distilled beverages (including brandy and chacha, a local grappa) as well as neat alcohol.
The country is home to 115 registered wine and spirit exporters, many of which have successfully grown their customer base in both the US and Asia, while retaining their long-standing presence in a number of East European wine-loving nations. Inevitably, though, this export success has changed the hierarchy of its customer base.
While Poland, for instance, used to be the third-largest market for Georgian wine exports, it has now been relegated to fifth place – this is despite the fact that, in absolute terms, sales to its former Soviet ally have grown by 42% (to a total of 628,022 bottles). This, however, has been dwarfed by the 1,000% increase in the level of Georgian wine exports to the US, which now total 1,281,450 bottles. Over the same period, exports to China grew by only a comparatively minor 7%, although this still represents an all-time high of 600,783 bottles.
With early 2019 having turned out to be a bumper period for Georgian wines and spirits exporters, sales were also up in a number of other relatively new markets, including Lithuania (75%), France (24%), Sweden (313%) and Bulgaria (6%). At the same time, its more traditional markets also held up well, with substantial increases recorded for Russia (17%), Mongolia (200%), Belarus (140%) and Azerbaijan (8%).
In the pre-boom period, Georgia's top five wine and spirit export destinations were (in descending order) Russia, Ukraine, Poland, China and Kazakhstan. In terms of the respective weights of these markets, Russian was way out in front, with the country importing more than 10 times the volume of second-placed Ukraine and, in total, four times more than the other top four importers combined.
Looking beyond wine sales, Georgia's spirit exports have also picked up notably in recent years, with the country now selling into 13 overseas markets. The big seller here is Georgian brandy, with 4.2 million half-litre bottles sold in the first two months of 2019 alone – a 90% year-on-year increase. The spirit is particularly popular in Russia and Belarus, where it has a long heritage and a lasting regard stretching back to the heyday of the Soviet Union. Overall, brandy sales virtually eclipse the current level of chacha exports, despite the latter enjoying a 300% year-on-year rise over the same period.
With Georgian wines and spirits already finding a ready market in certain parts of the mainland – notably the northeastern provinces of Heilongjiang, Jilin and Liaoning – there is every possibility that a wider, national demand could be nurtured within a relatively short period of time. Similarly, there is a clear expectation that many of the non-China Asian markets may also prove to be fertile ground for such Georgian exports.
Given the Hong Kong-Georgia FTA link, as well as the SAR's established status as a duty-free port, there is every reason to assume that the city could play a lucrative middle-man role in driving sales of the East European countries' wines and spirits into many of Asia's relatively unexploited territories. Interested parties would do well to contact Georgia's growing number of vineyards and distillers directly or make a note to attend this year's HKTDC Hong Kong International Wine & Spirits Fair (7-9 November), where the country is expected to have a sizable presence.
Leonid Orlov, Moscow Consultant