Georgian Wine Industry Corked

Zurab Tkhemaladze believes Georgia's vineyards might be its salvation. An award-winning wine producer, Tkhemaladze reckons the country's dire economic problems could be solved overnight if the industry was allowed to realise its full potential. "Wine by itself could have settled the export-import imbalance," he declares.

Tkhemaladze's Chalice Wines illustrate that unrealised potential. The brand, triumphant in several international competitions, has proved popular in Europe, America and even Japan. But nevertheless sales are depressingly low - so low, says Tkhemaladze, that the vintages are sold more for promotional purposes than actual income.

Georgia's once flourishing wine industry is in a state of decline. From the high point of the last decade of the Soviet era, when sales made up a third of the country's earnings, the industry is struggling as a result of the loss of regional markets, ethnic conflicts, under-funding and rampant bootlegging.

It's all a bitter blow for a nation with such a proud winemaking tradition. Georgians boast that they invented viniculture. The archaeological record throws up some corroborative evidence. Georgian legend plays its part too. Noah, it is said, came down from Mount Ararat, planted a vineyard, made wine and got drunk. The fact the summit is in neighbouring Turkey doesn't seem to bother the myth-makers.

Over the centuries, Georgian vintages acquired an impressive reputation. "I am confident that there's no other country where such wonderful wines are consumed in such great quantities," wrote a French merchant travelling through the region in the late 17th century.

The foundations of modern viniculture were laid in the 19th century. Producers supplied much of the region and enjoyed a virtual monopoly in the former Soviet Union. Georgian wine was the preferred tipple of the elite - one brand, Kinzmarauli, receiving Stalin's personal endorsement. Then the country boasted 150,000 hectares of vineyards and annually produced nearly 600 tons of grapes.

The industry's fortunes took a dive in the late eighties when president Mikhail Gorbachev introduced a crackdown on alcoholic drinks. Georgia found other eastern European markets, which earned it around $50 million a year. But the Soviet leader intervened forcing winemakers to send their products to Siberia, where they were distilled and used for military purposes. Georgian producers received little compensation.

Worst was to come in the early nineties when ethnic conflicts in Abkhazia and South Ossetia led to economic isolation. Exporting became practically impossible. At the same time, land privatisation broke up large-scale collectives and state-owned wine farms into small peasant holdings. These were unable to sell enough to maintain their vineyards. Many ended up switching to other crops.

More recently, rampant bootlegging and under-investment have further undermined the industry.

Black-market trading has become a dominant feature of the Georgian economy. Legitimate winemakers are undercut by bootlegged vintages - up to a third cheaper - and smuggled low cost foreign brands, mostly from Bulgaria. Their few remaining former Soviet markets are now threatened by bootlegged wines - which in Russia alone generate profits of around $1-1.5 billion a year.

Georgia's long-suffering wine merchants have had their hopes raised by emerging demand in western countries. But they have neither the funds nor the resources to establish themselves there.

Producers grumble that the government does little to help them break into these new markets.

Zurab Tkhemaladze says he's envious of his counterparts in countries like France and Turkey, where exporting activities are supported by large state subsidies. "If I received as much help as my French colleagues I could be challenging them in a few years," he said. "Georgian wines are competitive but it is hard to establish them in new markets."

Tkhhemaladze and others are nonetheless determined to raise the profile of Georgian wines abroad, whether they get government backing or not. Recently Chalice Wines almost secured an order to export two million bottles to the UK. One of its rivals, Georgian Wines and Spirits, had a pavilion at last year's London wine exhibition, Winepolis. It plans to hold a Georgian wine festival at the event later this year.

Such efforts are commendable, but unless producers receive more support from the authorities, they're unlikely to put Georgia back on the winemaking map.

Sozar Subeliani is the editor of Georgia's Kavkasioni newspaper