Wine in-depth: Companies Losing Ukraine(3)
Problems in Ukraine
In 2008 Telavi Wine Cellar exported 1,500,000 bottles of wine. From 1,500,000, 600,000 bottles were exported to Ukraine . This year exports to Ukraine seem to be decreasing for the company by on average 10% and this is due to the economic crisis, as mentioned by the General Director.
“In Ukraine distributors are having problems with the selling of the wine that they have imported. For this reason we’ve agreed on 2 weeks postponement of payments from distributors. But so far there have been no cancelations and exports are in operation as planned,” stated General Director of Telavi Wine Cellar.
“This year, in January we exported 100,000 bottles of wine to Ukraine . If we compare 2009’s result with the one in 2008, we’ll see around a 10% increase. Despite this, the crisis in Ukraine is definitely influencing the sales of wines in general,” states Ani Beriashvili, Operations Director of GWS.
“Ukrainian distributor’s sales have decreased by 20% in the last 3 months,” she said.
”I think for GWS and other Georgian wine exporters the main challenge in 2009 will be keeping the market coverage they had in 2008. Increasing the market share will be extremely hard during the economic crunch.”
Today GWS is exporting 95% of its production.
In 2008 GWS exported a total of 1,350,000 bottles, the company informed The FINANCIAL. In 2008 the biggest markets were Belorussia with 350,000 bottles, Kazakhstan with 300,000 and Ukraine with 250,000 bottles. The most popular brands of GWS are Old Tbilisi - Alazani Red, Old Tbilisi - Alazani White, Tamada - Saperavi and Tamada - Kindzmarauli. The market share of these two brands is 52% for Old Tbilisi and 48% for Tamada. Tamada is GWS’s premium brand.
From August 1, 2008, Teliani Valley officially owns 100% of Teliani Trading Ukraine (“TTUA”). TTUA was set up in 2007 as a 50%-50% joint venture between Teliani Valley and Olever, the previous importer and distributor of Teliani Valley products in Ukraine .
According to Liberty Consumer, in Q3 2008, and partially in October 2008, TTUA sold products received from Teliani Valley before August 1, 2008, which had a negative impact on the company’s revenue recognition for Q3 2008.
“The political and economical instability in Ukraine , significantly augmented in Q3 2008 and forecasted to be in force throughout 2009, is expected to impact the company’s sales in this country, as Ukrainian growth slows and consumers are affected by the weakening of the Ukrainian national currency Hryvna (UAH).”
According to the Food and Drink Report of Ukraine private consumption will contract by 2.6% in 2009, and grow by only 2.7% in both 2009 and 2010. This is significantly lower than the 10.1% average annual rate of expansion between 2005 and 2007.
The GDP of Ukraine is expected to shrink by 3.2%, down from the Government’s previous forecast of 2.2%. The ongoing fragility of the domestic banking sector, a weaker local currency and a drastic deterioration in both external demand and credit markets will have effects on food and drink spending.
Badagoni’s main market for export is Ukraine , but according to the local reports Badagoni is experiencing a sharp fall in sales in Ukraine .
