TBC Capital has published a research about wine industry in Georgia. According to the research, domestic price for wine has been increasing slower than the general level of prices over the past years, with non-bottled wine price growing faster compared to bottled wine. This can be partially explained by the dwindling local consumption and intense price competition.
From 2011 to 2019, consumer price index (CPI) grew by 27.4%, while bottled and non-bottled wine prices was up 15.5% and 21.2% respectively. The average retail prices for wine grew more than the index itself due to the changing mix of the marketed wines in favor of more expensive products, as well as the rising costs of production.
Market shift to bottled wine affects the price dynamics. TBC Capital believes that the supply side of the market is the primary reason for larger price gain of non-bottled wine compared to bottled wine. Seeking for higher margins, small-scale winemakers are switching to bottled wines, on the expense of reduced supply of non-bottled wine to the market.
The declining USD price trend for exported Georgian wine has reversed. Average export price was up 7.0% YoY to USD 3.14 per litre in 2018, increasing somewhat less to USD 3.18 (+1.3% YoY) in 2019. While up in GEL, an average export price for Georgian wine is still down in USD compared to 2014. Compared to 2014, the average price of an exported litre of wine was down in 2019 by 19% in USD, while up by 14.7% in GEL. On a country level, the USA and Germany export markets are the most attractive in terms of price. Although, high prices express demand for high quality products in these countries, transportation and market entry costs should also be taken into account.
Economic state in trading partners majorly affects export volume and price of Georgian wine. Export price of Georgian wine decreased after 2014 with the currency crisis in main export destination countries, Russia and Ukraine. The weighted average exchange rate of main importing countries to USD displays high correlation (0.82) with the average export price of Georgian wine. For now, TBC Capital observes export price picking up with the stabilized exchange rates in the trading partners. Besides, the volume and value of export proves to be highly correlated (0.94 and 0.87 respectively) with the GDP growth of the key trading partners.
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