BRANDING STRATEGIES REGIONAL CONFERENCE Georgia Tbilisi 27 28
“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.
- Slides: 14