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2018 Beer Market Review: Nikoloz Khundzakishvili

According to the Revenue Service Statistics Georgian beer market grew by 8.3% in 2017.  101,846,540 liters of beer were consumed in 2017 in the country. Despite 8% market growth, the beer market currently is smaller than in 2014.

Market shrank due to rise in excise by 50%. The rule for calculating the excise was changed in 2017. Prior to that, the excise was linked to the volume and equaled 60 Tetris per liter, while according to the new regulation, the alcohol content is taxed. 1% of alcohol contained in beer is taxed with 12 Tetris, which is still 60 Tetris for the most prevalent 5% alcohol containing beers. There are other sorts of beers available on the market with less alcohol, though it is not lower than 4%. For these types of beers, the excise will go down by 12 Tetris. Such a decline in excise was positively reflected in low alcohol beer sales.

Mr. Nikoloz Khundzakishvili, Corporate Director of Natakhtari Company, in his interview with us, reviewed 2018 -year market developments, whether the optimistic expectations of beer producers at the end of 2017 came true and what will be novelties and challenges for beer consumers in 2019:

At the end of 2017 we made quite an optimistic forecast based on the calculation methodology for 2018 and assumed that the market would not decline and, on the contrary, start growing, given all those factors that can be observed in the country, such as tourism growth, better investment environment and even ratings that incentivize investors to come to the country with a higher confidence. There are other factors as well according to which we presume that the market figures will increase along with economic growth, since the latter is one of the preconditions for success of the beer industry. Beer market shrank by 3% in 2018 due to reduction in population’s purchase power and depreciation of national currency; the sales were also negatively impacted by unfavorable weather conditions during a season. It is noteworthy that the decline was noticed not only in sales of locally produced but also in imported beer.

Currently there are several significant players on the Georgian market, such as Natakhtari, Zedazeni, Aisi, Argo and Kazbegi (with a relatively lower share). Georgian beer industry is to be given a credit for reducing the share of imported beer on the market.

We are the leaders on the market, respectively we have higher responsibility than any other representative of this industry. Our products are being exported to 20 countries. This year, we exported approximately 21 million tons (both beer and lemonade), which is higher than the prior year figure by 15%. We are the largest exporters in our industry.

Was 3% market decline determined by transition to a new taxation system, by change in excise in particular?

Transition to a new taxation system, when the excise is calculated based on the alcohol content, entailed significant changes in beer consumption culture and increased sales of so-called “light” beers. The excise per 1% of alcohol equals 12 Tetris, for companies it is more convenient to pay less, therefore, we started production of lower alcohol beers, which was welcomed by population and consumers. Therefore, the market of so-called “light” beers reached 20% compared to past 5%.

What are you expecting from 2019?

We are even more optimistic about new year. There are interesting processes going in the global beer industry; large companies are being merged and it impacts our market as well. These developments urge us to move to premium segment and focus not on a quantitative side of the production, but on increasing the value aspect of it. In addition, the company will introduce several new types of beer, licensed franchises of famous brands, to the market.