Equity Analysis /

Georgia's Wine and Spirit's Sector

    Tatia Mamrikishvili
    Tatia Mamrikishvili

    Analyst - Automotive, Microfinance, Gambling, Tourism

    Galt & Taggart
    13 September 2021
    Published byGalt & Taggart

    Wine & spirits business is one of the most profitable sectors in Georgia. The sector posted 30.2% gross profit and 20.8% operating profit margins in 2019, 1.4x and 1.7x above the business sector averages, respectively. Notably, top 10 companies outperform the sector, with weighted gross profit and EBITDA margins averaging 41.2% and 24.9%, respectively, over 2017-20. Large companies accounted for c.41% of total wine and spirits sector turnover in 2020, up from 12% in 2015 and we see further consolidation potential. The wine & spirits sector showed resilience to Covid-19 crisis, with a turnover down by just 2.1% y/y in 2020 thanks to external demand. Despite pandemic-related market disruption, wine exports reduced by just 5.6% y/y to US$ 210.3mn in 2020, far below contraction level during previous crisis of 2015, when exports almost halved. Meanwhile, brandy exports increased by 6.7% y/y to US$ 113.2mn. Notably in 2020, the wine exports growth continued to new target markets (particularly to Poland, US, UK and Baltic States), partly offsetting export decline to Russia. In 1H21 wine exports growth accelerated significantly, surpassing also pre-pandemic level.