2019 December-January Analysis

Where’s the beer? Georgia’s fermenting craft culture

Entrepreneurs are brewing a revolution in Georgian beer, as craft beers gain popularity and marketability in a country formerly known only for its wine.

While Georgia has been gaining recognition as a destination for wine and food over the past few years, its beer has remained relatively generic.

If the next generation of Georgian brewing has anything to say about it, though, the country will soon be able to add craft beer to its list of (literally) liquid assets.

In 2016, there were practically zero microbreweries. Three years later, there are at least ten, ranging from garage-based nanobreweries to full-scale operations with strong export sales. Thanks to adventurous young entrepreneurs, rising tourist numbers, increased disposable income, and a strong sense of national pride, the energy behind independent, artisanal operations is building steadily.

In terms of alcohol culture and consumption, Georgia falls into the same category as viticultural countries like Italy and France.

43% of total alcohol consumed in the country is wine, followed by spirits (39%), beer (18%) and a mysterious “other” category (1%). Local brewers, though, see this as more of an asset than a liability, giving them both the ability to tap into generations of related experience and unique ways to differentiate their products on the local and international markets.

Tbilisi’s Megobrebi Brewery, for example, has even been experimenting with brewing its beers in qvevri and creating wine-beer hybrids using Georgian grapes. That’s not something you’re likely to find anywhere else in the world, and that kind of innovation (along with a solid lineup of traditional favorites) could be the signal that Georgia’s beer market is headed for some serious catch-up growth. As Megobrebi’s owner Yar Nigay says, “It is just beginning.”

Craft beginnings

When Zurab Chitaya returned to Tbilisi after over twenty years of working abroad in places where craft beer had already started trending, he was surprised to find that the local brewing scene was almost empty.
“It was a big surprise for me,” he says. “In Russia, it had already been three or four years that craft culture had taken over Moscow, St Petersburg…”

Even the now fairly-ubiquitous Black Lion (Shavi Lomi) had only just started up operations.

Constantine and Ksenia, who prefer to go by first name only in keeping with their business Underground Microbrewery, made the same observation when they arrived in Georgia to work as mining engineers in 2016.

“It’s a problem,” says Ksenia. “Everything is the same. There is no taste – you don’t have a choice.”
Chitaya didn’t waste time going after the opportunity. In 2016, he had opened up Black Dog Bar, serving up craft beer from what they dubbed the Number 8 craft brewery. Number 8’s forays into more full-flavored, hoppy offerings were met with some skepticism:

“Before we started,” Chitaya said, “everybody was telling me that Georgians will never drink it – those IPAs, bitter ales, no way.”That prediction couldn’t have been more wrong-IPAs are now Number 8’s best-selling beer. “Georgians do drink bitter and heavy ales! They love it!” says Chitaya triumphantly.

With that success under their belt, Number 8 expanded into several other locations in Vake, and before the paint was dry on their tap handles, other producers had started stepping up.

Since then, in no particular order, Seahorse, Naturale, 9 Mta, Megobrebi, Underground Microbrewery, Bayo, Krik, and Alkhainadze have either opened up or grown quite a bit – finding a craft beer in Tbilisi is no longer the futile quest it once was.

Cold beer, hot market: who’s drinking and why?

In 2018, Georgia Capital acquired Genuine Brewing Company – the makers of Black Lion (Shavi Lomi) beer, adding to their already-sizable investment in the local beer market through Global Beer Georgia, which brews Icy, Heineken, and Amstel.

While independent brewers have mixed feelings about this acquisition, it’s also a signal that profit-maximizing companies in the beer business see the need to start expanding their portfolio. Big beer companies in the U.S have been quietly buying microbreweries for a long time now for the same reason.

And interest in craft beer is definitely growing. New brands are constantly appearing, trendy beer bars are popping up everywhere, and Georgia-based search queries for craft beer-related terms have shown a steady uptick since 2015.

What’s contributing to the sudden surge in interest? Most brewers point to a few general trends: tourism, young people, increasing disposable income, and a renewed interest in local products.

Of these factors, international travel may be the most important. According to Georgia Capital’s analysis, beer consumption in Georgia tends to be heavily seasonal, rising sharply during peak tourism/vacation times in the summer months. International travelers coming from countries with vibrant beer scenes are increasingly likely to be on the lookout for something interesting and local. As Chitaya points out, why go to another country just to drink a mass-produced beer that’s basically equivalent to what you’d have at home?

It may not be a coincidence, then, that the rise of craft beer in Georgia has coincided with a roughly 250% increase in international visitor numbers between 2011 (5.8 million) and 2018 (14.4 million).

That’s quite significant given that total visitor spending in 2018 was around 7.9 billion GEL ($2.7 billion USD). 29% of that goes to food and drink, and, given that tourists tend to seek out high-quality, local goods and aren’t very price-sensitive, craft breweries are well-positioned to capture some of that spending.

This tourism effect flows both ways: as more Georgians travel abroad to Europe and other destinations, some of them are bound to encounter-and develop a taste for-a higher caliber of beer. “When Georgians go to these countries,” Megobrebi owner Yar points out, “they can see that people drink craft beer. It’s the new trend.”

This cosmopolitan vibe, combined with the unique branding and personality that sets a lot of craft beers apart, is a big draw for younger generations, who are probably the most enthusiastic local craft beer drinkers. “You look at your friend and you see some kind of nonstandard sort of beer they’re drinking, and you look at it and think you’d like to taste it as well. It’s something new”, says Yar.

Chitaya makes the same observation, with the added caveat that older generations aren’t so enthusiastic. “The old school guys-they don’t buy it. They always say the same: ‘You have normal beer?'”

He’s not wrong, at least according to Georgia Capital, which reports that 90% of beer consumed in Georgia falls into the “mainstream and economy” category.

Georgia Capital’s move to acquire Black Lion, however, can be taken as evidence that they expect that ratio to shift towards more premium beers in the long run.

A less-visible force driving the movement forward, though, is the same local pride that has helped lift Georgian wines out of their post-Soviet slump. “When I was growing up,” Chitaya points out, “there was almost no good wine in Georgia. Now we have maybe not hundreds, but a lot of tiny wineries.”

Georgia is already punching above its weight for wine, and breweries like Megobrebi believe that they can help put it on the map for beer as well. That particular brewery already exports up to 80% of their beer to countries like Sweden, Singapore, Taiwan, and Russia, where their most popular beers tend to be those made with unique Georgian ingredients, like glass cucumber and tarragon.

“Using local ingredients, fruits herbs, some combination of Georgian tradition-that’s our market,” says Yar.

A rising tide lifts all beers: what’s the future of craft beer in Georgia?

Currently, craft beer represents a tiny sliver of the market in Georgia-well under ten percent of alcoholic beverages. But as Number 8’s Chitaya points out, Georgia is fast becoming a trendy country for food and wine, and there’s no reason for beer to lag behind.

Starting a business in Georgia is fairly straightforward and low-cost compared to many other countries, as Underground’s founders, originally from Russia, can attest:

“It’s not so easy to start a business in Russia,” says Ksenia. “Here [in Georgia] you should pay taxes, but nobody touches you. You just do what you do.”

Georgia consistently places in the top ten of the World Bank’s Ease of Doing Business Index, and that applies to breweries as much as any other business.

Alcohol regulations are also quite relaxed and none of the big brewers have managed to maintain a monopoly or get restrictive brewing legislation passed, meaning microbreweries are entering a fairly free and unfettered market.

Changing local tastes, skyrocketing tourism and increased export opportunities give microbreweries a lot of room to grow. As of 2019, Georgian craft beer is pretty much exclusively limited to bars. Supermarkets and convenience stores only carry a small selection from one or two local craft brands, and while they may never see the hundreds of varieties one can find in an American beer store, there’s clearly a lot of retail real estate for Georgian craft beer to expand into.

Yar also points out that craft brewers actually have an easier time succeeding in international markets than the big breweries, as they can offer a recognizably different product.

“We have quite the mission in life,” he says. “We would like to be ‘brewery number one,’ in the case of international markets. If someone from the U.S asks, ‘What is the best Georgian craft beer?’ we want them to make an association with our brewery.”

Number 8 is also focused on the issue of international perceptions, but more in terms of Georgia as a place where people are looking for good experiences. “In terms of our food, we are one of the interesting destinations,” Chitaya says. “People come here to eat and drink, so we must raise our bar. Food is great here, but we have to improve in other categories.”

He points out that other traditionally wine-oriented countries like Italy, Spain, and Portugal, where beer culture has historically been lacking, have also seen a craft beer surge in recent years, and believes Georgia is headed in a similar direction. Regardless, he says, “It’s not all about the money. It’s about our wish, our will to push our country forward. It means a lot for us and I know it means a lot for other guys in our community.”

For the duo at Underground Microbrewery, they’re just hoping to brew good beer and eventually create a sustainable brewing operation. “We are still improving,” says Ksenia. “Our main aim is to do our best.”

They plan to stay small-scale in the short run, as, much like the other brewers, they’re not in it to make a quick buck. As they put it, “You don’t want to lose the taste of life.”

The competition: big beer

In terms of raw market share, there’s no competing with the large-scale brewing companies. Even in the original craft beer boom country, the USA, 75% of beer sales are non-microbrews, and, as you might expect, there’s even more concentration in Georgia, where 89% of the beer market is controlled by just four main companies.

Of course, there’s nothing inherently wrong with drinking mass lagers and pilsners, and microbrewers don’t see themselves as competing for the demographics that have a strong preference for standard beers. They’re marketing to the sort of people who say ‘yes’ to new things.

“Some people are curious about the new kinds of beers,” says Constantine. “They have choice, so they’re interested.”

In the long run, it’s a quality vs quantity game: craft beer comes at a higher price point (though it can often be cheaper than premium imports), which means the typical drinker will have to be less price-sensitive than average or view craft beer as providing more value per unit. Tourists and a rapidly-urbanizing younger generation tend to check both of those boxes, and both of those populations are on the rise.

Regardless of how the market pans out, though, craft brewers tend to stick to a philosophy of quality and local support.

Says Yar: “You can earn much more money selling more product with poor quality, or you can be unique, but you will not earn a lot of money. For us, it’s not only the money. It’s our friends, it’s our hobby, it’s our dream-we are Megobrebi because of friends.”