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Why Georgian Greens Fail to Succeed on Russian Market?

After the 2006 embargo, negotiations on exports of vegetable products to the Russian Federation resumed in 2013.

At the end of May 2014 the Russian market was reopened for Georgia fruits and vegetables. At the first stage, citrus exports was resumed, later fruits, garden plants, including greens, were also admitted to the Russian market. In that period greens production companies were going to penetrate the Russian market through other mechanisms, even more so, the Russian market is famous for its instability.

Several months have passed since then. What has changed? Have Georgian entrepreneurs returned the Russian market and what are perspectives of Georgian greens exports perspectives?

Herbia – Greens Production Company

The company has passive period in summer season and exports will be resumed in October, Zurab Janelidze, head of Herbia company, noted.  Currently,  only Bulgaria is recorded in the list of exports countries. This year  huge volume of greens was exported to Bulgaria. As to the Russian market, in parallel regime negotiations are underway with other countries, including Russia and in case of agreement, Georgian greens will be exported. Negotiations with Russia is being conducted for a long period, but the company could not export greens so far. However, at this stage specific proposals were submitted by specific partners and Herbia company will launch greens exports to Russia in autumn, Janelidze noted.

Besides greens, the company also produces several varieties of vegetables and is able to add new varieties in the event of consumer demand. Herbia has managed to succeed on the market thanks to high-quality products, Janelidze noted.

Since summer 2015 the company launched production of cucumber, tomato and bell peppers. In 2015 the company constructed a packing enterprise in Tskaltubo, the Imereti Region, through the Cheap Credit project and employed about 20 persons in addition. The selling price of Herbia products at markets starts from 0.40 GEL.

Georgian Greens company

Georgian Greens company could not enter the Russian market either. The company head Jumber Beltadze said that there are many difficulties with greens exports to the mentioned country. The Russian market is huge, but Georgian companies have already set control over shops, districts and new ones are not let enter the market. «All places are controlled. You cannot enter there and place greens on the counter. You have to give bribe to everybody. If we cannot make profits, the business and exports becomes useless. Therefore, this is useless and I do not try to launch exports to Russia», Beltadze said.

His company carries out growing exports to Ukraine, Moldova and Poland. In the future, exports volume will increase in these directions.

Qvitiri Greens

Goderdzi Shavgulidze, head of Qvitiri Greens, noted that the situation is heavy in the sector, because Georgian businessmen failed to find a niche on the Russian market and they bear losses. Iranian greens are far cheaper compared to Georgian greens and therefore, Georgian products face problems with sales. Similar situation is on other markets too. Therefore, the company has to sell products only on the domestic market, Shavgulidze noted.

Qvitiri cooperative was founded in Kutaisi at the end of 2014. The cooperative employed 5 persons. After foundation of the cooperative, they wrote a grant project and won the ENPARD program and received 80 000 financial support component. The company purchased refrigerator aggregates, generators and other equipment through the mentioned financial component. Investments made by the farmers totaled 55 000 GEL.

“The European Union program has bought all equipment that we needed in that period. If the business goes well, our cooperative will be expanded and we will grow melons and bell peppers”, Goderdzi Shavgulidze noted.

Association of Farmers of Georgia

Greens business is profitable, in general, but in a number of cases problems arise with sales, Nino Zambakhidze, head of the association of farmers of Georgia, said.

“In winter season restaurants have shortage of Georgian greens, including of mint and tarragon, while these products are not produced. There are another party assuring that they have problems with sales. Therefore, I think there is a problem with communication. There is no information about which greenhouse produces this or that greens in this or that region. 

Currently, 13 000 greenhouses have been identified, but activities of farmers are not identified. Lack of information is one of the main challenges. Frequently hotels and restaurants call to us and seek for greens suppliers”, Zambakhidze said.

As to exports, Georgian greens are exported to Europe without problems, Zambakhidze said, but added that she has certain information on problems before exporters. As to Russia, no legal body has expressed pretenses on problems in the direction of the Russian Federation.

-Is Georgian greens business connected with the criminal bosses?

Over the years mass media and social media have been actively discussing that Georgian criminal  bosses control Georgian greens business in the Russian Federation.

It was said that in 2011 on the Moscow Pokrovski greens market the so-called Black Greengrocers appeared, that is, thieves-in-law (including Tariel Potskhveria), who decided to make money by appropriating the greens business.

In that period the Pokrovski greens market with annual 9 billion USD turnover was a serious stake for not only the Georgian criminal world. Even Chechen field commanders (including Shamil Basayev) and Moscow Militia high-ranking officials were fighting to control it. Up to 2012 Azerbaijani thieves-in-law used to control the greens market.

Since 2012 the Kutaisi clan of the criminal world (Tarieli Oniani) took efforts to control the market and the market was assigned to Merab Jangveladze, i.e. Sokhymski. Soon the market was closed and Jangveladze was arrested in Europe. After the market moved to a new place, the war between the Black Greengrocers resumed. In 2013 twenty ordered murders were committed in Moscow. More than 100 persons were killed as a result of bloody clashes.

The Caucasus Business Week (CBW) has tried to clarify whether there is real connection between Georgian greens and criminal bosses. No supplier has made comments on the issue. «This is the issue which is not discussed», they said.