In May 2016, the average cost of cooking one standard Imeretian khachapuri declined to 3.08 GEL, which is 2.7% lower month-on-month (that is compared to April 2016), but 7% higher year-on-year (compared to May 2015).

While the national Khachapuri Index is driven down by positive seasonal dynamics in the SUPPLY of Imeretian cheese, the local indices are quite susceptible to sharp variations in local DEMAND conditions. Thus, while Telavi, Tbilisi and Kutaisi see very little differences in the price of Imeretian cheese (ranging between 4.70 GEL/kg in Kutaisi to 5.73 GEL/kg in Tbilisi), Batumi currently stands out as Georgia’s priciest market due to an early start of the summer tourism season. In May, Imeretian cheese traded in Adjara at the exorbitant price of 8.00 GEL/kg (!) which we would normally observe only in the cold and milk-less winter months.

Batumi and Kutaisi are separated by only 150km, and with a price difference of 3.3GEL, one may wonder why Georgian traders aren’t making use of this great arbitrage opportunity. Indeed, any marshrutka driver could easily make quite a few quick bucks by loading a trunkful of cheese in Kutaisi and offloading it in Batumi (and bring cheese prices closer to each other in the process).

Well, cheese smells, which is one reason marshrutka drivers (and their passengers) may be reluctant to engage in cheese “trafficking”. A more serious answer may be concerned with access to Batumi’s wholesale cheese market. It is one thing to transport extra cheese. It is quite another to be able to quickly dispose of it in Batumi. For the moment, it appears that retailers respond to the sharp increase in demand by hiking prices rather than increasing supply.