On December 24, 2025, in a sudden yet long-overdue acknowledgment, Georgian Dream Prime Minister Irakli Kobakhidze released a video lamenting the disproportionately high grocery prices burdening Georgian consumers. He suspected possible dishonest, cartel-like practices and called on parliament and law enforcement agencies to investigate the issue.
In the days and weeks that followed, the State Security Service launched a probe, knocking on the doors of supermarkets and distribution chains; the government established a commission to review the matter; the disputed parliament formed its own commission, with plans to hire a foreign consultancy firm from Big Four to prepare a report; and major poultry companies announced they would be reducing egg prices by 5 percent.
The consultancy findings may highlight various factors contributing to food becoming unaffordable for local households. Yet the main force keeping grocery prices up in Georgia is the same one keeping Georgians themselves up at night: the pervasive sense of having no tomorrow.
Ana Kvernadze is a public policy consultant with experience in governance, social policy, and reform.
Ask a Georgian what keeps them awake at night. Their immediate worry is never something abstract, philosophical, or geopolitical. It’s a damning, visceral sense of not knowing whether the salary will stretch to the end of the month.
The cost of feeding a family had already been climbing for years. Then Russia launched its full-scale invasion of Ukraine, and it got worse. What followed between 2022 and 2023 was a peculiar Georgian paradox: the economy grew at double digits, the GEL strengthened, the government celebrated a rare GDP growth success story, and ordinary Georgians watched their rent double.
The wave of Russian and Ukrainian migrants who arrived after February 2022 brought money, skills, and foreign currency. The arrivals also brought competition for a housing stock that was never adequate to begin with. Rental prices in Tbilisi jumped by over 110% percent. in some districts within months. Property that had been modestly priced became an investment vehicle overnight, as reports came that landlords evicted Georgian tenants to rent at two or three times the rate to newcomers. By 2025, many of the migrants had left. The GEL held, GDP numbers remained respectable on paper, but the prices never went back.
The irony is that the government’s own intervention, with its implied threats of criminal investigations and expanded state control, only adds the kind of unpredictability that drives businesses in Georgia to price the way they do.
Once a price floor is established in a market like Georgia’s, there is no natural force to bring it back down. Domestic producers are too few to offer competition, retailers have already adjusted their cost structures upward, and consumers have no choice but to absorb the new normal. Food inflation in Georgia hit 11.9 percent year-on-year in October 2025. The overall inflation rate climbed to 4.8 percent in October 2025, against a National Bank target of 3 percent.
It was into this climate that Irakli Kobakhidze released the video address, comparing local prices with those in French supermarkets to argue that Georgians were being overcharged. He blamed distributors and retailers, cited profit margins of 7, 8, and 14 percent against a European average of roughly 2, and noted that Georgia now has 113 supermarket outlets per 100,000 people, compared to 45 in Germany and 62 in Austria. The rapid expansion of retail chains, he argued, pushes the cost of new stores directly onto consumers.
He promised consultations with retailers and distributors, floated anti-monopoly mechanisms, invited law enforcement to investigate possible cartel deals, and called on parliament to establish a commission. In a political culture where economic grievances have historically been answered with growth figures and optimism, the acknowledgement appeared like a progress of a kind. But do the authorities look into the right places?
The Many Culprits
The retailer-as-villain narrative is politically clean but economically oversimplified. The experts I interviewed identified the following economic factors, some independent of retailers’ greed and others specific to markets like Georgia:
- Small import-dominated market
Georgia imports the majority of what it consumes. The country’s small domestic food production sector covers only a fraction of national demand, meaning that global commodity prices, shipping costs, and exchange rate movements reach Georgian borders before any distributor or retailer touches the product. A nation that buys most of its food abroad is, by definition, a price-taker: it pays what the market demands plus whatever it costs to get the goods here. To this add structural costs of being a small economy: importing a container of goods to Georgia costs more per unit than importing to Germany, not necessarily because Georgian businesses are greedier, but because the volumes are smaller and the financing terms for local importers are less favorable than for large European operators.
- Delayed effects of central bank policies
Then there is the question of money supply. Between 2020 and 2023, the National Bank of Georgia navigated a genuinely difficult period, including pandemic stimulus, the migrant influx, and external shocks. The growth in the monetary base during those years fed into prices in ways that are still working through the system. Central bank policy has a delayed and diffuse effect on consumer prices. By the time it shows up in the cost of bread and cooking oil, the original decision is years in the past, and the link is almost invisible to the naked eye. Experts note that while the National Bank’s primary mandate is price stability, its interventions, including through the refinancing rate, reserve requirements, and open market operations, operate on timelines that politicians often find inconvenient to acknowledge.
- Heavy CPI Weight
Georgia’s Consumer Price Index (CPI) is dominated by food, which carries a 34.5 percent weight. This deviates from the Western European economies, where the heaviest CPI weight usually falls on housing. The high share of food in CPI means that price movements in this category hit the headline inflation number and the lived reality of households harder than they would in a country with more diversified consumption. Even the moderate increase in global food prices may catastrophically hit Georgian families already spending close to half their income on groceries.
- Closed Circle
Georgia’s retail food sector is dominated by five to seven large chains. In a country of fewer than four million people, such concentration may appear natural, yet the question remains: why have more players not entered the market? Unlike other industries that have allowed greater entrepreneurial diversity, such as construction, hospitality, real estate, and tech services, Georgia’s grocery sector has largely remained a closed circle.
Rather than a monopoly in the legal sense and artificial blockages, the above can, again, be explained by the market size. Capital requirements are high, margins are thin by design, and incumbents have already secured supplier relationships, logistics infrastructure, and premium shelf space, sets with which new entrants must compete. In larger economies, these barriers can be overcome with sufficient investment and time. In Georgia, the market is simply not large enough to make the risk worthwhile. The conditions are just too hostile to attract the challengers who would force prices down.
Price of Short-Termism
While the structural factors outlined above contribute to elevated grocery prices, there is another cost embedded in Georgian prices that appears on no invoice, sits in no spreadsheet, and has drawn little government attention. And yet experts who study small, institutionally fragile economies will tell you it does more damage to prices than any supermarket markup. It is called risk, and in Georgia, everyone is paying for it.
That risk is political. A retailer operating in a country where there is little confidence that a contract dispute will be resolved fairly, where a competitor with stronger political connections may receive preferential treatment, and where the rules can change with a phone call, cannot price goods the way a business in a stable legal environment would. The sense that last year’s investment could be rendered worthless by an overnight policy shift carries its own cost.
Experts who study small, institutionally fragile economies will tell you it does more damage to prices than any supermarket markup. It is called risk, and in Georgia, everyone is paying for it.
Unstable and unreliable political and legal environments like Georgia’s do not allow long-term planning. The result is what economists call short-termism. Businesses optimize for quick returns rather than market share, invest less in efficiency, pass costs to consumers rather than absorb them, and resist the kind of price competition that would, over time, bring margins down. When the judiciary cannot be trusted to enforce contracts impartially, each link in the supply chain builds in a buffer. When the regulatory environment is opaque enough that a law enforcement call can arrive without warning, as it did soon after Irakli Kobakhidze’s December video, that buffer widens further.
The irony is that the government’s own intervention, with its implied threats of criminal investigations and expanded state control, only adds the kind of unpredictability that drives businesses in Georgia to price the way they do.
The parliamentary commission will finish its hearings. The consultancy will produce a report on how prices are calculated, yet prices will continue to be the number-one concern of Georgian households. The structural causes of import dependence, monetary dynamics, thin competition, weak supplier protection, and above all, the risk premium that businesses embed in every price when they cannot trust the institutions around them, will remain mostly unaddressed.
Because addressing them in all honesty would require the government to look in the mirror.
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