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

  • May 14, 2018 | Structural Change in the Georgian Dairy Sector?

    The Khachapuri Index kept declining in April, 2018, very much in line with the seasonal trend we observe every year. The average cost of cooking one standard Imeretian khachapuri currently stands at 3.28 GEL, which is 7.4% lower month-on-month (that is, compared to March 2018), and 1% lower year-on-year (that is, compared to April 2017). The main driver of the Index is Imeretian cheese, consequently, the monthly and yearly decrease is associated with the price Read More
  • April 30, 2018 | Early Spring in Kutaisi

    In April 2018, the average cost of cooking one standard Imeretian khachapuri declined to 3.29 GEL, which is 7.4% lower month-on-month (that is, compared to March 2018), and 1.0% lower year-on-year (compared to April 2017). The Khachapuri Index has dropped for all cities in Georgia in April 2018, compared to last month (March 2018). This decreasing trend of Index for all cities has been observed since January 2018. The price decline was greatest in Kutaisi. Read More
  • April 16, 2018 | CPI and Khachapuri Index Slump in February-March 2018

    In March 2018, the average cost of cooking one standard Imeretian khachapuri declined to 3.55 GEL, which is 3.2% lower month-on-month (that is, compared to February 2018), and 4.2% higher year-on-year (compared to March 2017). The monthly (negative) change in the Index follows the traditional seasonal trend for fresh milk production, which gradually starts to decline in January and February. Compared to March 2018, prices decreased for milk and all dairy products (Milk 1.3%, Cheese Read More
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    In March 2018, the average cost of cooking one standard Imeretian khachapuri declined to 3.55 GEL, which is 3.2% lower month-on-month (that is compared to February 2018), and 4.2% higher year-on-year (compared to March 2017). The price of khachapuri has dropped in monthly terms (compared to February 2018) in all Georgian cities. At 3.41 GEL, Telavi has seen the largest drop in the Index (-4.7%), followed by Tbilisi (3.73GEL), which dropped by 4%. Batumi (3.53 Read More
  • March 19, 2018 | Are We Running Out of Milk?

    In February 2018, the Khachapuri Index continued its downward trend and dropped to 3.67 GEL. This is 1.2% lower compared to the previous month (January 2018) and 0.3% higher compared to February 2017 (y/y). The main contributors to y/y Khachapuri Index inflation were butter (4.1%), milk (1.7%), and cheese (0.7%), while the price of eggs and wheat dropped (-3.3% and -2.5%, respectively). Milk and milk product are only drivers of the Khachapuri Index increase in Read More
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