Merab Vasadze, CEO of confectionery company Sandomi, has highlighted the challenges of working with retail chains in Georgia, particularly around annual cashback demands. Speaking on TV program Business Morning, Vasadze explained that large chains require higher cashback percentages each year, forcing producers to raise product prices to maintain profitability.
“About 70% of our sales come through retail chains,” Vasadze said. “These chains ask for cashback increases of 5–7% every year. Since we don’t have extra profit margins, meeting these demands directly translates into raising prices by around 10%.” He noted that attempts to reduce production costs are limited, making these annual negotiations particularly difficult for the company.
Vasadze traced the issue back to the company’s early years in the market, noting that cashback percentages have steadily risen from the initial 12% to 6–7% above 30%, creating ongoing pressure. Retail chains often channel the extra cashback into their own promotions, meaning producers indirectly bear the cost across all sales channels. Contracts also include penalties for inconsistent pricing, which adds another layer of complexity.
The CEO also addressed the high costs of entering new retail networks. He cited a recent case where a mid-sized chain with 40 stores demanded an entry fee of 100,000 GEL, making the deal unfeasible. “The required upfront costs are simply too high, and negotiations often fail before we even start,” he said, highlighting the structural barriers that smaller businesses face in Georgia’s retail sector.
