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Georgian Beer Magnate Looks West

Anti-American brewing entrepreneur plans to take US drinks market by storm.
By Gennady Abarovich

A Tbilisi businessman known to be fiercely critical of Washington is preparing to conquer the United States – by slaking the thirst of the Georgian diaspora.


The first two containers of Gogi Topadze’s product, Kazbegi beer, left the Black Sea port of Poti on August 6 bound for Philadelphia, where the US importer Fantasy Shoes Inc. will take over local distribution of an estimated 90,000 bottles.


“Such exports to the US mainly target expatriates from the former Soviet Union,” analyst Mikhail Alkhanishvili told IWPR. “Research suggests that this diaspora could have as many as 18 million consumers.”


However, Topazde has been a trenchant critic of America and the International Monetary Fund, IMF, for some time - accusing them of ignoring Georgian domestic produce in favour of imported goods.


But some argue that he should actually thank the IMF for allowing his own business to prosper. Vladimir Papava, chief analyst with the International Foundation for Economic Studies, told IWPR, “The IMF has been propagating a competitive market environment in Georgia to impel local producers to make more competitive products that they could export.


“In this case, in competition with imports, Kazbegi began producing quality beer at affordable prices, which has, by now, left little or no market ground to imports.”


In Georgia, Kazbegi costs between 70 tetri and one lari (33 to 47 US cents), making it significantly cheaper than either imported Russian or western beer.


Topadze is also an increasingly powerful political figure. In 1999, he co-founded the Industry Will Save Georgia party as a lobbying vehicle for the business community just ahead of parliamentary elections, in which it won several seats. They have been outspoken opponents of the recent US-Georgian treaty, which gave American servicemen exceptional rights within the republic.


Industry Will Save Georgia was also instrumental in drafting a new simplified tax code - which has now stalled in parliament, despite widespread approval from economists and experts.


Topadze’s party is now using his beer to canvas votes in upcoming parliamentary elections. The party is also playing the patriotic card by promising to donate one tetri for each bottle of Gagra beer (named after a town in Abkhazia) sold to Georgian refugees from the war in Abkhazia.


While Georgia has a very poor record in foreign investment - something analysts attribute to a punitive tax system, universal corruption and excessive government regulation - firms such as Kazbegi are now prospering and moving into the international marketplace.


However, Kazbegi is the only Georgian firm to date that has reaped immediate benefits from the US war in Iraq.


Under an export contract signed with the Turkish company TETA, Kazbegi will ship 30 trailers - around 1.4 million bottles of beer and soft drinks - to Iraq every month. “The company will receive 19 cents per bottle for its Kazbegi Clasikuri (lager) brand, and 12 cents for a bottle of Tsivi Tchai (cold tea),” explained Giya Tsagareishvili, head of Kazbegi’s legal department.


“We are currently negotiating with the Turkish partner to expand the range of products we export to Iraq. Some recent additions to our export portfolio are two million packs of Kazbegi cigarettes, and Borjomi and Mitarbi mineral water. We have not yet finalised the prices.”


Topadze used to be director of Tbilisi’s main beer factory and bought it up through Georgia’s privatisation scheme after independence. He turned the brewery into the Kazbegi company - but this, he says, was only the start of a long battle to make it viable.


“From the start Kazbegi had to overcome numerous barriers created by the government,” Topadze told IWPR. “At first, the company was unable to operate successfully due to suffocating taxes and ubiquitous counterfeiting.” It took him nearly two years to drive counterfeit competitors out of the market.


The Kazbegi Group, which now incorporates 38 companies and employs upwards of 4,000 workers, is a rare business success in Georgia. It produces 10 brands of beer, 12 of iced tea, and six of soda. Some group member companies are engaged in the tea growing, food, and timber industries and Kazbegi also produces perfumes and cigarettes.


It currently exports more than 20 per cent of its output to Armenia, Russia, Ukraine, Azerbaijan, Austria and Iraq. As well as the move into the US market, the company is currently negotiating exports with Uzbekistan and Turkmenistan.


Alkhanishvili attributes this success to a range of factors. “First of all, a firm’s success is driven by its chief executive officer’s business acumen and, secondly, the business needs to be protected from both government pressure and various criminal rackets,” he said.


The need for political patronage explains why many top Georgian businessmen have decided to go into politics.


As well as Topadze, they include Zurab Tkemaladze, a leading member of Industry Will Save Georgia; the former head of the GWS winery Levan Gachechiladze, and David Gamkrelidze, head of Georgia’s largest insurance company, Aldagi, both of whom have joined the New Rights Party.


Gennady Abarovich is a freelance journalist based in Tbilisi


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