ISET

In August 2016, the average cost of cooking one standard Imeretian khachapuri increased to 3.15 GEL, which is 4.8 % higher month-on-month (m/m, that is compared to July 2016), but 9.6% lower year-on-year (y/y, compared to August 2015).

The most interesting finding emerging from the August data concerns price dispersion across Georgia’s major cities. Our data come from Batumi, Kutaisi, Tbilisi and Telavi, and, as is easy to see on the chart, not only are prices in all locations moving in tandem over time (this is nothing unusual), but also the gap between the cheapest and the most expensive cities (for khachapuri lovers, that is) reached an all-time minimum of 10-15 tetri per one khachapuri portion. This is far lower than the 40-50 tetri gap we have been observing through much of the Khachapuri Index history.

Why is this an important finding? Price conversion across space is a key indicator of economic development. The fact that prices for the same food products become more or less equal in different cities suggests that Georgia as a whole is becoming a single, well-integrated market. And an integrated market is a boon for everybody. In an integrated market, both consumers and producers benefit from lesser price fluctuations and fewer interruptions to the supply and sales of food and other products.

Incidentally, road infrastructure and market integration were the subject of a recent presentation by the Georgian PM, Giorgi Kvirikashvili. Indeed, the simplest way to promote market integration is to build better roads, reducing the cost of transportation from one market segment to another. Yet, improved road infrastructure is not a sufficient condition for full market integration. Once physical infrastructure is there, Georgia will also need an effective trade network spanning the entire country: a network of interconnected logistics, distribution, wholesale and retail operators able to quickly react to changes in local demand and supply conditions. Something to worry about in the future.

 

More Khachapuri Index Articles

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    In May 2017, the average cost of cooking one standard Imeretian khachapuri declined to 3.14 GEL – a 5.4% decrease month-on-month (compared to April 2017). In annual terms (compared to May 2016), however, the Index gained 8.5%. Deflation of the index was caused by the sharp seasonal decline in price of Imeretian cheese, which went down last month by 10.1%. The Khachapuri Index reached its lowest value (2.86 GEL) in Kutaisi. The magnitude of the Read More
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    In April 2017, the average cost of cooking one standard Imeretian khachapuri decreased to 3.32 GEL, which is 2.5% lower month-on-month (m/m, that is, compared to March 2017), but 4.9% higher year-on-year (y/y, compared to April 2016). The monthly decline in the price of khachapuri is driven by the seasonal adjustment in the price of milk and cheese. The price of cheese (6.93 GEL) has declined by -5.2% compared to the previous month (March). The Read More
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    ISET’s Khachapuri Index kept declining in April, which is in line with seasonal trends. The average cost of cooking one standard Imeretian khachapuri currently stands at 3.32 GEL, which is 2.5% lower month-on-month (compared to March 2017), and 4.9% above year-on-year (compared to April 2016). The current underdeveloped structure of Georgian dairy sector makes milk prices high and noncompetitive. According to FAO-EBRD data, the farm gate prices of milk differ between commercial farms and smallholders, Read More
  • Great Lent Pushed Prices Down

    In March 2017, the national average price of cooking Imeretian khachapuri declined to 3.41 GEL, which is 6.9% lower compared to the previous month (February 2017), and 4.1% above its value a year ago (March 2016). Such a noticeable monthly decline in the price of khachapuri is driven by the seasonal adjustment in the price of cheese, which stood at 7.31 GEL in March 2017, and is 12.2% below last month’s value (February 2017). As Read More
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