Transcript GI as Georgian Exports Marketing Instrument Dr. Andrei Maximov

“BRANDING STRATEGIES” REGIONAL CONFERENCE
Georgia, Tbilisi, 27-28 October, 2016
GI AS GEORGIAN EXPORTS
MARKETING INSTRUMENT
Dr. Andrei Maximov
Kolkhida
Trade LLC
What is First: Production or Sales?
This relates to the well-known logical
paradoxical question: “Which came first, the
chicken or the egg?” Since production was
paramount under the conditions of the
Soviet centrally planned economy (an
economy of supply shortage), the rule at the
time was: “Once a product is manufactured,
a buyer will certainly turn up!”
This attitude was totally blown out of
proportions in Soviet Georgia, since it was a
monopolist for several types of products and
services, in particular for citrus cultures, mineral
waters and medical tourism. Under the
conditions of the market economy, however, it
is the buyer who drives economy—because the
market works this way by definition.
Marketing & Brending are Priorities
Modern Georgia is a democratic state
with a market economy which is still
burdened with a Soviet-style business
mentality—at least, in its traditional
part. Many acting or future Georgian
businessmen still think in terms of
“produce first” and not “sell first”.
Correspondingly, they either ignore or
neglect marketing in their activities.
They also do not understand why is
brand building so important or why
should they invest in creating brands
and promoting them. In other words,
they make a strategic mistake from the
start.
Georgia – a Boutique Country
For me strategically speaking
Georgia is a boutique country. Its
unique competitive advantages
result from great variety of natural
climactic conditions. But all of them
are represented in a miniature,
sliced by very small portions.
Therefore there is no too much
sense in trying to make Georgian
farmers struggle to achieve a
prominent “place in the sun” on the
global markets for mass agricultural
goods.
In Spain, China or France, the areas allocated for vineyards are dozens of times
larger than all of Georgia’s territory, including its mountains and deserts. Potatoes
from Egypt, Israel or Morocco will always be less expensive and of higher quality
than those from Bolnisi. Peaches from Gurjaani cannot compete with those from
Spain in terms of their price to quality ratio. Citrus fruit from the western Georgia
will always be on the losing side when compared to fruit prices and volumes from
China, Egypt or Turkey.
Georgia for Niche
Products
Niche products should dominate in
the future Georgian economy—
that is, one-of-a-kind, expensive
(that is, high value-added),
ecologically clean products which
cannot be produced in other
countries or which are much more
complicated and pricey to produce
elsewhere.
These would be, for example,
ecologically clean mineral waters,
honey from alpine meadows,
medicinal herbs, any organic (or
bio) agricultural products, small
fruit and berry crops with a high
natural sugar content and a rich
content of micronutrient elements.
Any Niche Product Should Be Protected
• Protected Designation of Origin (PDO). To get such
a designation a product must be grown and
processed in its entirety within the boundaries of a
specified territory which guarantees its unique
characteristics.
• Protected Geographical Indication (PGI). If the
water is exported out of the country of origin, it can
still get the PGI designation. This category means
that the product has certain qualities related to its
place of origin. In other words, one can grow or
process a product inside its designated territory,
but its location in its “home country” may be
temporary and not permanent as in the case the
PDO designation.
• Traditional Speciality Guaranteed (TSG). In this case,
it does not matter where exactly an unusual
product was made—what matters is that all
traditional rules of production were adhered to.
NB: The Georgian Law on Appellations of Origin and
Geographical Indications of Goods doesn’t cover
TSG.
PDO & PGI - Elements of Marketing &
Branding Strategies
By themselves PDO and PGI are not sufficient for the
Georgian product to become popular or for the
foreign consumer to be aware of it, in particular in
new markets. They are only an element of
marketing, but all by itself it will not change the
game even in the sphere of intellectual property
protection. One should invest into marketing
abroad. In general three parties could participate in
such investments:
• State
• Manufacturer/Exporter (Brand Owner)
• Dealer/Distributor
1. State Branding
The State should invest in development of
national brands of goods and services. Such as
Georgian wine or mineral water, pilgrimage or
adventure tourism. No private company will be
able to build on its own a brand like, for instance,
“Georgian water for a healthy lifestyle in China”.
The State is active in Georgian wines and tourism
directions and it gives obvious results.
Simultaneously it should protect and assist
producers in fight against falsification and/or
imitation of Georgian brands. Both at bilateral
and international levels. This conference is good
sample of such activities.
Inevitability of Punishment
The PDO/PGI combination can provide an effective
protection for both the producer and the dealer. Yet, a system
of effective response to any cases of adulteration and
counterfeiting must definitely be in place. I was pleased to read
recently that Giorgi Samanishvili, the head of the Georgian
National Wine Agency, is soon to visit Estonia because of the
rising sales of such wine brands as Khvanchkali and Kinzmali.
Last August I could convince my Chinese
partners that it was necessary to start a massive
marketing campaign for Georgian mineral waters
on the Chinese market. They require huge
investment. My Chinese partners came to Georgia
recently, they met all major mineral water
producers here. The Chinese became very
interested in this idea. The only issue preventing
them from making final decisions is that they are
not 100% sure about their legal protection. This is
understandable: no one would want to invest
dozens of millions of dollars in order to build the
brand of Georgian mineral waters and to see later
how all kinds of counterfeiters use the results of
their efforts.
2. Manufacturer – Dealer Relations
Corporate brands must be developed and built by manufacturers (brand
owners) and/or their dealers in foreign markets. Unfortunately, I do not see any
effective efforts in this direction. Manufacturers are not eager to invest in
marketing their products on their own, they prefer to offer this opportunity to
dealers. The latter, for their part, try to minimize their expenses since they are
not very sure of their legal protection. One more reason for regrets: yet, alas,
they do have reasons for being anxious about it. The manufacturer could fight
against a monopoly dealer to minimize prices and maximize volume, but
competing dealers refrained from any marketing efforts as well as from their
fight against counterfeit products.
Bay Leaf Case for Future PDO/PGI
Logistics
Production
Marketing
Appeal for
PDO/PGI
• Starting from logistics services of the West Georgia bay leaf to Russia and Ukraine
• We identified, first, that though it was a mass product of the B-grade category it as an export
commodity with a high export potential due to USP: ecology and quality USP
• Getting into production over the span of two years we created an integrated, full-circle production as a
combination of traditional Georgian and modern technologies based on up-to-date equipment.
• That provided the manufacturing of bay leaves in five quality categories without any loss of unique
consumer qualities of this condiment.
• We started from a specially created Internet site
• With simultaneous active marketing in traditional markets and preliminary in new ones
• Time to create, develop and protect a new brand “Kolkhida (Colchis) Bay Leaf (Daphna)”
• To set up “Georgian Association of Bay Leaf Producers and Exporters” , make necessary preparations
and appeal for PDO or PGI
Daphna Means a Bay Leaf in Georgian and Greek
Daphne was a
Greek nymph
for whom due
to Erot revenge
Apollo felt an
arduous love.
When Daphne got sick of his
advances, she turned to her
parents for help, and they
turned her into a laurel tree. It
is certainly a great story for the
future “Colchis Bay Leaf” GI
designation.
Bay Leaf Project Risks
• Minor risk: as Georgian manufacturers look at
each other as competitors and are not eager to
work as a team. Therefore there are some
organizational complications to set up and
support the Association activities
• Major risk: if/when the way is over and PDO/PGI
registered, all manufacturers will start using this
protection sign. Quality control immediately
becomes crucial in this aspect. It is very easy to
destroy future reputation. But I hope that the
control procedures developed in the EU will help
to escape the risk.
Promoting and Making PDO/PGI Popular
I never envied lawyers, as they
should read and understand huge
law texts. But when you’re doing
business, you need everything in a
short, clear and immediate way,
better yesterday. Such conferences
are a great instrument to promote
GI in Georgia.
But in addition I’d like to
recommend to do some “comic
book” of childish pictures for 4-8
pages maximum to explain GI
essence and how Georgian
medium and small businessmen
could use it for their favor.