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Georgian Wineries Look West in Aftermath of Russian Ban

Prime Minister Zurab Noghaideli speaks about efforts to reach out to the U.S. and U.K. markets to keep the wine flowing

Jacob Gaffney

Posted: Wednesday, May 31, 2006

The wine industry of Georgia has suddenly found itself mired in a major international political dispute. A recent Russian ban on wines from the former Soviet state has left many Georgian winemakers without customers, and now Georgia's pro-Western prime minister, Zurab Noghaideli, is looking for new allies in the United States and United Kingdom to help kick-start sales.

"The Russian government and the private sector are working together against us," said Noghaideli, who was in London last week, attending a Georgian wine tasting at the city's Vinopolis wine center. "We will overcome this obstacle and we will get to markets that are fair."

On May 1, Russia declared a ban on imports of wine from Georgia and Moldova, after the Kremlin claimed that tests found that wines from those countries contained dangerous levels of pesticides and heavy metals, and were, therefore, unfit for human consumption.

But many of the 17 Georgian producers represented at the London tasting believe that Russia's trade blockade is an attempt to, among other things, reign in the free-market ideals of President Mikhail Saakashvili's government, which came to power in 2004. (Russia also banned imports of Georgia's largest mineral water brand, Borjomi.) Georgia has repeatedly tried to build a larger export market outside of the Commonwealth of Independent States, which comprises 12 former Soviet republics, including Russia. The wines had been very popular there, even prestigious enough to spawn extensive counterfeiting.

One winery representative, who asked to remain anonymous to avoid becoming too politically involved in the "wine war," theorized that the wines tested by Russia's health ministry were probably counterfeit bottlings from other nations that "slap a Georgian label on any rubbish and sell it as wine."

So far, the ban is hitting Georgia's 100-plus wineries hard. The country produces more than 50 million liters of semisweet and dry reds and whites annually, according to the Georgia Department of Statistics, and nearly 90 percent, or $63 million worth, was exported to Russia in 2005.

At Khareba winery, one of Georgia's largest producers, with vineyards east and west of the Caucasus, a spokesman said the producer lost more than 70 percent of its business, practically overnight. "Russia was our main buyer, so it's been pretty difficult," said the spokesman, who asked to be identified only as "George." "That's why it is important to make new connections in the U.K. and U.S."

But the producers face some crucial hurdles in those markets. For one, Georgia cultivates 38 different winegrape varieties, but the best known are unfamiliar to most American drinkers, such as the red variety Saperavi, while the labels are potentially confusing, with hard-to-pronounce names such as Rkatsiteli and Mtsvane (both whites). And these must battle for space on retail shelves and restaurant lists with wines from other countries that are increasing their presence in the U.S. market, such as Argentina, Australia, Chile, New Zealand and South Africa.

But the producers remain optimistic. George, whose winery makes 44 different bottlings, said the sheer diversity of Georgia's wines means that they could offer something attractive for almost any drinker. And Llia Beradze, general director of Shevallier, which also poured at Vinopolis, believes top Georgian wines are high enough in quality to win over Americans. "We know that American tastes are very selective," Beradze said, "and wine will not be a exception."

The other major hurdle to overcoming the Russian ban is geographic, said another producer, who also asked for anonymity. Countries to the south of Georgia are Islamic and won't buy wine or, in the case of Azerbaijan and Iran, won’t allow wine to be transported across their land. The best option, though it's expensive, is to transport wine via the Black Sea, which borders Georgia on the west.

Noghaideli said the added expense would eventually be worth it. "The two biggest export markets for wine are the U.S. and the U.K.," he said, "and we've doubled our sales in America in this year alone." Noghaideli believes his country could sell more than 333,000 cases within the United States in 2006.

"I just hope we can have similar success in the U.K.," he added.

© Wine Spectator

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