TBC Capital has published a research about wine industry in Georgia. According to the research, in 2014, before the economic crisis in Russia, and after the embargo lifted, the demand for grapes in Georgia was unusually high. To satisfy the demand and boost sales in Russia, Georgian winemakers purchased unusually big amount of grapes back in 2014 and had to pay high prices (1.25 GEL/kg) to grape producers. Since then, until 2019, export volume and grape prices moved in the same direction.
Grape prices stagnated in 2019. Thanks to the fruitful Rtveli 2018, Georgian winemakers have been able to satisfy the wine export demand and at the same time increase the stocks. Thus, the peak price level for grapes in 2019 was 48.3% lower YoY and the expected price for grapes for the year averages 1.11 GEL/kg (+0.9% YoY). Cheaper Rkatsiteli grapes mostly drove the price reduction. Rkatsiteli is mostly consumed domestically and is used in brandy production and we believe that this trend will not change in near future.
Saperavi prices are increasing steadily, as Aleksandrouli and Mujuretuli grapes benefit from the limited supply. Since 2015, prices on the major grape species cultivated in Georgia had been increasing, but in the light of good harvest and abolished state subsidies in 2018, the growth halted into 2019. Nevertheless, with increasing export demand for red wine, Saperavi prices increased by 33.1% YoY in 2018. Price for Aleksandrouli-Mujuretuli averages 5-6 times higher compared to widely spread Rkatsiteli or Saperavi (94% of processed grapes in 2019) as the priors are used for producing high quality PDO wine Khvanchkara and in total only 1,848 tons (0.7% of all processed grapes) of these grapes were processed in 2019.
For a typical bottle of wine, the grapes and the gross margin of the producer are the two largest components of the price. In case of the exported bottle of Saperavi, the grapes accounts for one third of the price. Processing grape into wine contributes to 9.3% of the value. Rest of the cost breakdown is labeling and packaging, which represents the quarter of the price, leaving 37.0% for the gross margin.
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