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Georgia, as part of the Deep and Comprehensive Free Trade Area (DCFTA), is open to imported dairy products from the European Union (EU), but is unable to export dairy products to the EU because of food safety and milk quality concerns. 

For the last few years, the European Bank for Reconstruction and Development (EBRD) and the Food and Agriculture Organization of the United Nations (FAO) have been working to help Georgia’s dairy farmers to boost milk productivity and quality.  The second phase of a joint EBRD-FAO project, which began in 2015, is aimed at improving safety, hygiene and efficiency standards in the country’s dairy industry and supporting the country’s producers in remaining competitive.

The dairy industry in Georgia is dominated by small-scale farms, and a lack of coordination between producers makes milk collection more costly and the upgrading of safety and quality standards more difficult. The recently established Georgian Milk Producers' Association is sure to play a significant role in addressing these challenges.

Cooperation and tradition

With a view to exploring alternative approaches, in November a delegation of Georgian producers and representatives of the new Milk Producers’ Association embarked on a study tour in Italy’s Emilia-Romagna region, and then to Des Moines, Iowa in the United States.

In both countries the group visited farms, cooperatives and research facilities to witness the benefits of cooperation, learn how to increase the value of their products, and become familiar with new milk production technologies.

Cooperatives have provided great benefits to producers in the United States, according to FAO economist Andriy Yarmak.

“In the United States,” said Yarmak, “86 percent of all milk produced is collected by cooperatives. Joint milk processing by commercial producers can be replicated in Georgia too, leading to financial gains for producers.”

“In the United States, 86 percent of all milk produced is collected by cooperatives. Joint milk processing by producers can be replicated in Georgia too, leading to financial gains for producers.” 
    Andriy Yarmak an Economist with FAO Investment Centre.

In Italy, the group met with representatives of the Parmigiano Reggiano Consortium in Parma, where they discussed the organizational structure of the consortium, and the roles of cooperatives and associations.

The Consortium plays a key role in protecting and promoting the Parmigiano Reggiano Geographical Indication. Effective value-chain organization has helped the origin-based label achieve an annual turnover of about US$ 2.7 billion. All of the more than 3 000 producers and processors – large and small – enjoy this commercial success.

“New technologies, increased cooperation and innovative marketing strategies all provide food for thought for the delegation,” said Levan Arkania of the Kvareli Baga dairy farm in Georgia, the country’s largest milk producer. “By learning from our Italian and American counterparts, we are full of inspiration and ideas to be implemented on our return.” 

Developing a niche

Georgia has an important dairy heritage and repertoire of traditional products, but those products do not enjoy great market visibility. In Italy and the United States, the group saw how niche markets are developed and exploited.

One Parmigiano Reggiano producer makes kosher and halal cheese. Self-dubbed “Farm 2.0” for its modern marketing techniques, this integrated dairy farm inspired the Georgian visitors with its product diversity and potential to exploit niche markets.

The group also visited an organic dairy plant in Iowa – to see how it markets its products locally, to understand the advantages of exploiting such markets, and to learn how to gain market access.

“Market access – both national and international – is crucial to diversifying producers’ incomes,” said Victoria Zinchuk, Head of Agribusiness Advisory at the EBRD. “We see rising demand for high-quality dairy products in Georgia not only from locals, but also from the booming number of tourists.”

The Georgian travellers returned from their study tour with the new-found confidence to organize and build cooperative structures that can help Georgia’s dairy sector thrive.

The focus of the FAO-EBRD project will now turn to building the capacity of the Georgian Milk Producers’ Association, promoting cooperation in the sector and facilitating dialogue between the private sector and the government.

Another current FAO-EBRD project focuses on strengthening the dairy value chain by developing Geographic Indications (GI). GI products have high market potential, both on local and regional markets.