The Prime Minister of Georgia, Giorgi Kvirikashvili, at the session of the Government of Georgia, evaluated this year’s vintage and stated: “A total of 178 companies were involved in delivering and processing grapes in Kakheti. More than 100,000 tonnes of grapes were processed with the income of Kakheti’s population exceeding GEL 97 million. In regard to the vintage in Racha-Lechkhumi, 24 companies were in receipt of grapes and a total of more than 500 tonnes of grapes were processed. The income for the population of Racha in terms of this year’s vintage exceeded GEL 2.5 million.”
This year’s vintage was conducted in an uncharacteristically peaceful environment in contrast to the previous year when low grape prices resulted in the discontent of Kakhetian farmers. Grape growers, accustomed to subsidies for many years, found grape prices unacceptable last year with some of them joining in protest rallies.
Ordinance N1440 of the Government of Georgia outlines vintage support measures for this year. One of these measures is the decision to continue grape subsidies throughout 2016 as well. To this end, GEL 40 million was allocated from the budget with the amount of subsidies determined as follows: Kakheti region – 1 kg Rkatsiteli – GEL 0.45, 1 kg Kakhetian Green – GEL 0.45, 1 kg Saperavi – GEL 0.20; Racha-Lechkhumi and Kvemo Svaneti region – 1 kg Mujuretuli/Aleksandrouli – GEL 2.
Of note is that as compared to the previous years, the amount of subsidy per 1 kg of grapes has increased by GEL 0.1 for Rkatsiteli and Kakhetian Green (it was GEL 0.35 in 2014-2015) and by GEL 0.05 for Saperavi (it was GEL 0.15) whilst Aleksandrouli and Mujuretuli have not been subsidised during the last years (since 2012) because these grape varieties already sell for a high price (1 kg for GEL 5-7) with the state deciding that these varieties no longer need government support. Before 2012, the amount of the subsidy for 1 kg of Aleksandrouli/Mujuretuli grapes was GEL 1.
In total, 114,264 tonnes of grapes were processed in 2016 (148,358 tonnes were processed in 2015) with the amount of income for grape growers having reached GEL 100,185,030. Of this amount, 113,590 tonnes of grapes were processed in Kakheti with the income for Kakhetian grape growers amounting to GEL 98,355,204. In Racha, 513 tonnes of grapes were processed with the income for this region’s grape growers exceeding GEL 2.5 million. A total of 178 companies were involved in delivering and processing grapes in Kakheti whilst 24 companies were in receipt of grapes in the Racha region.
In regard to the price of grapes, wine companies paid GEL 0.8 (GEL 1 including the subsidy) for 1 kg of Saperavi grapes and GEL 0.35 (GEL 0.8 including the subsidy) for 1 kg of Rkatsiteli and Kakhetian Green grapes. The price of Mujuretuli/Aleksandrouli grapes, including the subsidy, was GEL 5. Of note is that the price for 1 kg of Saperavi grapes including the subsidy was GEL 0.8 last year whilst prices for Rkatsiteli and Kakhetian Green grapes was GEL 0.7.
Of additional note is that as compared to the previous year, the volume of harvested grapes decreased (by 34,094 tonnes). Grapes in the Kakheti region were infected by a powdery mildew disease which resulted in a decreased volume of grapes. Therefore, there were less grapes harvested this year as compared to the previous year.
One of the reasons for this year’s relatively quiet vintage period is the increase in the volume of wine exports of late. According to the National Wine Agency of Georgia, 32,421418 bottles of wine were exported to different countries of the world according to the statistics of the first nine months of this year which is 35% more as compared to the same period of 2015. In this period, the amount of income received from wine exports reached GEL 74.6 million which is 12% more as compared to the same period of the previous year. The growth in exports is especially notable as concerns EU member states, China and other traditional Georgian wine markets: export to China increased by 154%, to Ukraine by 61%, to the UK by 60%, to Belarus by 51%, to Poland by 47% and to Russia by 36%, among others.
The five top importer countries are as follows: Russia (17,056,936 bottles), China (3,852,245 bottles), Ukraine (3,457,928 bottles), Kazakhstan (2,535,163 bottles) and Poland (1,633,514 bottles).
In Lieu of a Conclusion
In 2016, 114,264 tonnes of grapes were indeed processed in Georgia with the amount of income received by grape growers having reached GEL 100,185,030. Grapes were subsidised again this year (the amount of the subsidy increased as compared to the previous year) which meant that farmers were not dissatisfied with this year’s prices.
Of note is that the government’s grape subsidy has been carried out since 2008 (the goal of the subsidy was to neutralise the negative consequences of Russia’s trade ban). Throughout these years, GEL 170.8 million was allocated from the state budget for grape subsidies. Despite the eight years of state subsidies, problems in the grape growing and wine-making fields still remain.
Considering the circumstances on the ground (the decrease in grape production and supply) and the growth of wine exports (growth of demand), grape prices should have been higher this year corresponding to market logic (the balance between supply and demand). There were good preconditions for the government to stop grape subsidies this year. Moreover, the former Minister of Agriculture, Otar Danelia, frequently noted that subsidisation was not a healthy process and the state had to cease with the subsidies.
Ending grape subsidies was perhaps possible if not for one certain constraint – a politicised vintage. Unfortunately, elections and the vintage are close intertwined in Georgia. During the elections period, politicians are constantly giving out promises in regard to grape prices and this generates excessive expectations among grape growers. The reality, however, is that despite solid subsidies for multiple years, grape growers are still dependent on the subsidies. They do not have sufficient material capacity (money, infrastructure) to produce their own wine whilst the knowledge of business principles among grape growers is very poor.
Specialists believe that grape subsidies are allocated for social purposes and they do not bring tangible results for the improvement of the field.Of important note is that wine is among Georgia’s top ten export goods and occupies the 5th
place. Of the total amount of exports, wine comprises 4.9% (according to the first nine months of 2016). For a comparison, the share of nut exports is 7.7% in total exports which is 2.8% more than the heavily subsidised grape growing field.Considering all of the aforementioned, FactCheck leaves the Prime Minister’s statement WITHOUT VERDICT.