coffee industry and business opportunities

Investment Opportunity in the Georgian Agriculture Sector

2010

Agriculture Sector Overview
 Over the past four years, average share of agriculture in the economy has been 11%
Nominal GDP (GEL mln) 25 000 Agriculture Sector

20 000
16 994 GEL mln 15 000 11 621 10 000 9 824 13 790

19 070

5 000 1 611 0 2004 2005 2006 2007 2008 1 716 1 544 1 563 1 704

Source: Department of Statistics of Georgia

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

1

Dynamic of Import/Export of Agricultural Food Products
 According to the 2008 data, the export and import of agro food products were US$228 million and US$913 million, respectively  In 2008, main exported products include: nuts, apple, citruses, natural fruit juices, red and white wines, brandy and spirit, herbs, tea, mineral waters, etc. Export
1 000 900 800 700 600 US$ mln 594 500 400 300 200 100 0 2005 2006 2007 2008 2009 340 274 225 228 286 434

Import

• Mostly seasonal disbalance • Opportunity for export promotion • Opportunity in storage investment
913

Exports declined due to the embargo imposed by Russia on Georgian exports in October 2006

762

739

Source: Statistics Department of Georgia, Ministry of Agriculture of Georgia

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

2

Agriculture Export-Import, 2008
Bay leaf & spices; 2.1; 1% Tea; 1.3; 0% Other; 37.6; 17% Apple; 3.7; 2%

Export by Products (US$ mln)
Brandy spirits & chacha; 46.1; 20%

Export by Countries
Italy; 1.2% Turkey; 2.8% Azerbaijan; 8.0% USA; 2.0% Iraq; 1.1% Russia; 1.1% Ukraine; 36.3%

Belarus; 4.3%
Tangerine; 3.7; 2% Sweet soda waters; 7.5; 3% Fruit juice & concentrates; 8.5; 4% Mineral & spring waters; 31.0; 14% Fish; 13.7; 6%

Red & white wines; 36.6; 16% Nuts; 34.8; 15%

Kazakhstan; 10.0%

EU; 15.2% Other; 18.1%

Import by Products (US$ mln)
Wheat 100.0, 11% Tobacco 80.8, 9% Wheat meal 74.8, 8% Sugar 57.6, 6% Chocolate confectionary 62.9, 7%

Import by Countries USA; 3.8% Kazakhstan; 3.8% Azerbaijan; 4.9% Brazil; 7.4% Germany; 2.2% Belarus; 1.6% Armenia; 1.5% Ukraine; 26.3%

Other Vegetables Fruits 281.9, 11.2, 23.4, Beef 31% 1% 3% 11.9, 1% Meat (Pork) 24.1, 3% Wheat Confectionary 27.7, 3% Fish 30.8, Milk and Milk Chicken 3% Products 46.2, Vegetables oil 31.0, 5% 48.0, 4% 5% Source: Ministry of Agriculture of Georgia

Turkey; 9.3%

Russia; 17.7%

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

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4 Reasons for Underdeveloped Agricultural Sector
Fragmented Agro Lands
• New law adapted in 2005 on Privatization of State Agro Land • On sale - 40 000 ha agro-land in sizable lots • Land registry simplified, new cadastre introduced by NAPR

Outdated Technology

• Presidential Program – Machinery for Rural Economy • Agro sector is still craving for new technology

Absence of Storage Facilities

• Concessional Credit Program for building storage facilities in numerous regions

Not Diversified Market

• Dependence on Russian market has been overcome • FTAs and GSP+ with important markets

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

4

Important Snap-Shots
 Main challenges are monocultures and harvest per ha.
• With technology and knowhow average harvest could be tripled
Agro product
Wheat Tomato Potato

Average harvest per ha.
1.8 tn. 10 tn. 10 tn.

Good precedents per ha.
4 tn. 65 tn. 45 tn.

 During the Soviet Era, Georgia used to be main supplier of the Union’s market with selected agro products, which pushed the country into monocultural agro production (ex. grape, citrus, tea and e.t.)
Product Vegetables 1988* 685.5 2007 263.8

Fruit & berry
Grape Citrus Tea

653.0
619.7 436.9 458.7

228.1
227.3 98.9 7.5

* Data for 1988 is exaggerated to some extent due to reporting interests in the centralised system of planning

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

5

Advantages of Investing in Agricultural Sector of Georgia
 Wide-range of climatic zones  Rich and pesticide-free soils - Ideal place for production of organic food

 Rich tradition of winery, growing citrus, grape, sunflower, tea, etc
 0% of property tax on small plots of land (less than 5 ha)  Legal provisions to own (i.a. for foreigners) agricultural land  0% VAT on primary supply of agricultural products  0% export duty + 100% VAT refund  0% of import duty on agricultural and other equipment  100% depreciation allowance on investment  Low-cost and skilled human resource base  Liberal labor regulations  Strategic link from East to high value Western markets; Central Asia becomes attractive market  Well developed transport sector including railway and sea ports essential for effective exports of agricultural goods

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

6

Agricultural Land Overview
 Agricultural land consist of approximately 3 mln hectares: • Residential - 1% • Arable land - 27% • Mowing land - 5% • Perennials crops - 9% • Pastures - 58%

Mowing land; 5%

Perennials crops, 9%

Residential 1%

Arable land; 27% Pastures; 58%

Source: Ministry of Agriculture of Georgia

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

7

Available Agricultural Land through Privatisation
Lands Remaining state-owed, 253,746 Ha (70.5%) Lands already privatised, 106,254 Ha (29.5%)

106,254 Ha (29.5%)

253,746 Ha (70.5%)

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

8

Presidential Initiative –100 New Agricultural Enterprises
Major Millstones:  Selling off some 40,000 ha sizable lots of agricultural land fitting for commercial farming  Transfer of agricultural land to interested investors based on specific investment proposals  Entities willing to establish agricultural processing enterprises will be able to acquire agricultural lands only for 20% of the market price  Georgian state, in case where appropriate, is ready to provide assistance in terms of infrastructure development (roads, electricity)  Primary agricultural processing is free of any taxes (0% tax burden)  Stimulating agricultural export  Supporting to establish new agricultural enterprises

www.agro100.ge
www.georgia.gov.ge Government of Georgia’s Sector Presentation September 2009 9

Strong Integration Into the Global Economy
 FTA agreements with the CIS countries  FTA with Turkey  GSP+ with the EU  GSP with the US
Developments in the nearest future:  FTA with EU  FTA with USA

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

10

Investing in Georgian Agro Business
GSP with US

GSP + 7200 products duty free

•Farming •Processing •Storing

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

11

Grape, Citrus & Apple (e.g.)
Grape
Total Production

Citrus
Total Production • 110 thousand tons

Apple
Total Production • 145 thousand tons

DATA FOR 2007

• 225 thousand tons

2%

35%

37%

1%

53%
45% 54%

11%
62%

Consumption Household production

Consumption and stock Export Processing

Consumption and stock Export

Processing

Processing

Wine export - 11.1 mln bottles
www.georgia.gov.ge

The cost of local produced fruit juice is c.a. 0.62 USD per 1 L.
Government of Georgia’s Sector Presentation September 2009 12

Import Substitution Opportunities (e.g.)
Meat
Local Production
Meat •741 tons Meat •19 351 tons Intermediates •Negligible Sausages •5 745 tons

Fruits & Vegetables (’07)
Import Local Production
Canned vegetables

Juice
Local Production
Fruit & vegetable juice

Import
Canned vegetables

Import
Fruit & vegetable juice

•231 tons Tomato paste •1 500 tons Canned fruits •1 023 tons

•11 505 tons Tomato paste

•4 276 tons Export

•3 680 tons

DATA FOR 2008

Intermediates •523 tons Sausages •8 721 tons

•4 369 tons Canned fruits
•1 052 tons

•1 067 tons

Local Production vs. Import

Local Production vs. Import

Local Production vs. Import

Export
28% 14% 86% 46% 54% 25% 29%

72%

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

13

Import Substitution Opportunities (e.g.)
Pasta
Local Production Import

Cacao, Chocolate and Sugar Pastry
Local Production Import

Cookies & Other Flour Pastry
Local Production Import

Pasta

Pasta

Cacao, chocolate and sugar pastry

Cacao, chocolate and sugar pastry

Cookies & other flour pastry

Cookies & other flour pastry

DATA FOR 2008

•2 007 tons

•10 147 tons

•168 tons

•25 400 tons

•1 566 tons

•14 965 tons

Local Production vs. Import

Local Production vs. Import

Local Production vs. Import

1% 17% 83% 99%

9%

91%

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

14

Import Substitution Opportunities (e.g.)
Vegetable Oils
Local Production Import

Processed Fish (’07)
Local Production Import

Animal Food
Local Production Import

Vegetable oils

Vegetable oils

Processed fish

Processed fish

Animal food

Animal food

DATA FOR 2008

•3 996 tons

•42 516 tons

•457 tons

•3 387 tons

•9 200 tons

•52 790 tons

Local Production vs. Import

Local Production vs. Import

Local Production vs. Import

9%

12%

15%

91%

88%

85%

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

15

Consumption of Agro Products in Georgia (e.g.)
Consumption Chicken meat • 37 888 tons Import Chicken meat • 26 588 tons Beef • 8 326 tons Production Chicken meat • 11 300 tons Beef • 31 300 tons Consumption Butter • 6 584 tons Fishery • 17 588 tons Import Butter • 2 951 tons Fishery • 17 131 tons Production Butter • 3 633 tons Fishery • Negligible

DATA FOR 2007

Beef • 41 326 tons

Eggs
•470 mln units Milk • 626 783 tons

Eggs
• 33 mln units Milk • Negligible

Eggs
• 438 mln units Milk • 625 500 tons

Tomato
• 90 103 tons Garlic • 5 149 tons

Tomato
• 7 203 tons Garlic • 1 949 tons

Tomato
• 226 600 tons Garlic • 3 200 tons

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

16

Consumption of Agro Products in Georgia (e.g.)
Consumption Sunflower oil • 28 276 tons Import Sunflower oil • 27 126 tons Wheat • 559 943 tons Production Sunflower oil • 1 150 tons Wheat • 74 000 tons Consumption Pasta • 14 108 tons Salt • 44 349 tons Import Pasta • 13 030 tons Salt • 44 349 tons Production Pasta • 1 078 tons Salt • Negligible

DATA FOR 2007

Wheat • 633 943 tons

Wheat flour
• 462 991 tons Cheese and curd • 56 648 tons

Wheat flour
• 126 591 tons Cheese and curd • Negligible

Wheat flour
• 336 400 tons Cheese and curd • 55 850 tons

Potato
• 279 208 tons

Potato
• 52 608 tons

Potato
• 226 600 tons

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

17

Investable Agricultural Industries
Wine Sector Mineral and Portable Water Forestry Fishery Citrus Production Intensive Apple Production Fresh Culinary Herbs Off-Season Storage Georgian Beef Fattening Operation Fruit Jam and Sauce Processing Integrated Dairy Production – Collection, Processing and Distribution  Pedigree Poultry Hatching Eggs           

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

18

Success Stories
 Ferrero Group - one of the leading confectionary
producers in the world
• Nutella, Raffaello, Ferrero Rocher

 The Georgian subsidiary of Ferrero Trading Lux S.A., AgriGeorgia LTD, was set up in spring of 2007  At present AgriGeorgia LTD owns 1,215 ha. of agricultural land in Samegrelo area  About EUR 4 mln investment within the next three-four years to install hazelnut drying facilities  Nowadays AgriGeorgia LTD employs on average more than 400 employees

 Hipp
 US$ 6.5 mln investment in juice processing industry  Fruit collection and processing  Mainly producing apple juice; further plans to produce cherry and apricot juice

YOU GONNA BE THE NEXT ONE!
www.georgia.gov.ge Government of Georgia’s Sector Presentation September 2009 19

Contacts
Bakur Kvezereli Minister of Agriculture of Georgia [email protected] Vakhtang Lejava Chief Advisor to Prime Minister of Georgia Head of Advisory Group [email protected] Nodar Kereselidze

David Koberidze Advisor to Prime Minister of Georgia [email protected]

Head of Marketing Research and Strategic Development Division
Ministry of Agriculture of Georgia

[email protected]

www.georgia.gov.ge

Government of Georgia’s Sector Presentation

September 2009

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