The role of cooperatives in the Georgian wine industry

¹ International School of Economics at Tbilisi State University (ISET), 16 Mikheil Zandukeli Street, Tbilisi, Georgia
² Heilbronn Institute for Applied Market Research, Heilbronn University, Max-Planck-Str. 30, 74081 Heilbronn, Germany

^a e-mail: l.kvariani@iset.ge
^b e-mail: Sophie.ghvanidze@hs-heilbronn.de

Abstract

The potential of the Georgian wine industry is not fully utilized. High fragmentation of agricultural land leads to limited production that restricts farmers' access to capital resources, finances, and markets, and prevents further development of the Georgian wine industry. Grape collectors and wine makers need help to join their capital and efforts, to gain economies of scale in production and marketing by jointly accessing agricultural inputs. This study aims to identify the importance of farmer cooperatives for grape producers in the Georgian wine industry in order to overcome inefficiency in the sector. Furthermore, this research project investigates the barriers and driving forces of smallholder grape farmers or wine makers to join cooperatives. Semi-structured interviews were conducted with stakeholders of the Georgian wine industry in order to assess different perspectives on the importance and benefits of farmer cooperatives in the local context. The interview results permit economic analysis of transaction costs, agency theory and property rights in the context of the nascent cooperative movement in the Georgian wine industry. The interviews revealed that development of agriculture cooperatives in the Georgian wine industry is strongly dependent on both farmer enthusiasm and governmental support.¹