Georgia has a rich, 8,000-year history of wine-making and is home to over 500 unique grape varieties. Currently, 40 indigenous types are used commercially and the most popular of them – Saperavi (red) and Rkatsiteli (white) – produce some of the country’s most recognized and sought-after wines, like Kindzmarauli, Mukuzani, and Tsinandali. In the recent past, Georgian wine production was directed mainly at Russian-speaking markets. This led semi-sweet wines, which are not widely consumed in Georgia, to account for about half of Georgian wine exports.
Georgia has the potential to produce over 500mn liters of wine annually, ten times higher than the current volume. This can be achieved if all historically utilized land for vineyards is re-planted and grape yields increase to 5.5t/ha (as in 2007). Over the past 30 years, Georgia’s total vineyard area nearly halved from 90,000ha to 50,000ha and volume output dropped from 125mn liters to 50mn liters. As the fall of the Soviet Union brought an end to government subsidies, demand dropped and infrastructure deteriorated, causing farmers to scrap grape cultivation. Current grape yields are also low at 3 t/ha, around 1/3 of the global average. Technologically unsophisticated production methods, the low yields, and a lack of consistency in price and quality resulted in an underutilization of the country’s wine-producing potential.
A number of semi-sweet and Saperavi-based reds and unique dry whites produced in ancient qvevris (ancient clay casks) have high commercial potential. Semi-sweet reds like Kindzmarauli and Khvanchkara accounted for 60% of all wine exports in 2013. They are especially popular in Russian-speaking countries after having gained a foothold during the Soviet period. In December 2013, the traditional Georgian qvevri wine-making method won a place on UNESCO’s Intangible Cultural Heritage of Humanity list. Qvevri wine, made according to old Kakhetian or Imeretian winemaking traditions, leaves higher tannin content and is considered a natural antioxidant.
Following the Russian embargo in 2006, the Georgian wine industry made major progress in entering more competitive and non-traditional markets. As a result, the wines’ quality and image, as well as the industry’s infrastructure and regulations, improved sharply. Wine exports to Ukraine, Latvia, Poland, and China grew at 19%, 19%, 30%, and 49% CAGRs, respectively, in 2005-2013. These 4 countries accounted for 32% of all wine exports in 2013, leaving room for further growth. In addition, the re-opening of the Russian market in 2013 provided a boost to the Georgian wine industry: up to 23mn bottles (c. 17mn liters) were exported to Russia in 2013 (49% of total wine exports).
The domestic market for bottled wine is another growth driver, with consumption having more than doubled in 2013 to US$ 46mn from US$ 22mn a year earlier. Growth factors include a shift in consumer preference towards bottles over jugs and an increase in the number of international visitors (5.4mn in 2013, up from 1.5mn in 2009). Tourists in Georgia normally drink bottled wines in restaurants and also buy some to take home. Wine tourism has the potential to be a year-round activity that would provide an additional revenue stream for wineries. We conservatively expect 270,000 wine and food tourists to arrive in Georgia’s annually as of 2019, up from 110,000 currently. In March 2014, Tbilisi for the first time hosted the International Wine Tourism Conference, attended by over 250 industry representatives from over 25 countries, and Georgian wine is starting to gain real international recognition and critical acclaim.
The wine sector is once again becoming an attractive part of the Georgian economy, with the value of wine exports doubling y/y in 2013 to US$ 141mn. Wine accounts for 5% of all Georgian exports and holds real potential to grow further. On the demand side, increasing tourism and changing local consumer tastes are pushing demand for bottled wine domestically. Exports will remain strong after Russia re-opened its market in 2013 and as other markets (e.g. Ukraine, China, and the Baltic states) continue to show robust demand. On the supply side, there is significant room to increase production and meet higher demand by re-planting vines and improving grape yields through more advanced farming techniques.
