Why Khachapuri prices converge in winter? 

The FINANCIAL -- In February 2017, the average cost of cooking one standard Imeretian khachapuri declined to 3.66 GEL, which is 0.2% lower month-on-month (that is, compared to January 2017) and 6.2% higher year-on-year (compared to February 2016). 

The monthly small decline in the Index follows the traditional seasonal trend in fresh milk production, which usually starts during this period of the year, and gradually increases. 

It is clear from the graph that in last two months, the Index had nearly identical values all over Georgia, except Kutaisi. The price of khachapuri in Kutaisi is 3.95 GEL, and beginning in December 2016, it shows a divergence to prices with other cities of Georgia. The reasons were explained in a previous publication. Prices in three cities (Tbilisi, Batumi and Telavi) have tended to converge, which offers no arbitrage opportunities in the cheese market. The price of one Imeretian khachapuri in Batumi stands at 3.55 GEL, and 3.53 Gel and 3.59 GEL in Tbilisi and in Telavi, respectively.  

If we look at the price of khachapuri last year in January and February, we see the same trend – the presence of higher market integration - than in other months of the year. One possible explanation could be that in this period of year milk production is very low, and milk powder is substituted more often. The price of milk powder is less variable than the price of milk, so the price of cheese is necessarily more or less same in all Georgian cities.