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The average cost of cooking one standard Imeretian Khachapuri in March 2014 was 3.06 GEL, which is 7% lower month-on-month (m/m, that is compared to the previous month), and 3.1 year-on-year (y/y, that is compared to the same month of last year). For foreign currency earners Khachapuri became even cheaper due to the depreciation of Georgian currency against USD and Euro.
GEL depreciated relative to the USD: the average GEL/USD exchange rate in March 2015 was 2.19, which is 0.10 points higher m/m and 0.35 points higher y/y. As a result, when expressed in USD, Khachapuri Index lost -11.4% m/m and -23% y/y.
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As often discussed on this page, seasonal dynamics of the Khachapuri Index are mainly driven by extremely sharp fluctuates in the supply of fresh milk, which directly affects the prices of traditional dairy products such as Imeretian cheese. However, these seasonal fluctuations in the price of cheese are consistently sharper in Kutaisi than anywhere else in Georgia. Year after year, we see the price of cheese in Kutaisi exceeding the national maximum in January and falling below the national minimum in June.
A possible explanation has to do with the fact that Kutaisi sits in the heart of a traditional dairy producing region, with a relatively larger portion of cheese and other dairy products supplied by smallholder farmers. While Tbilisi gets a part of its supplies from all-season quasi-industrial farms, Kutaisi receives almost no fresh milk supply in winter, and has too much of it in spring and early summer, when dairy product prices collapse given excess supply and limited cold storage capacity in the region.
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Khachapuri Index kept declining in March with the average cost of cooking one standard Imeretian Khachapuri reaching 3.15 GEL. This is 7% lower month-on-month (compared to February 2015), and 3.1% lower year-on-year (compared to March 2014). In general, the downward trend in Kh-Index at this time of the year is driven by the seasonal decline in cheese prices (due to increased supply of fresh milk and lower demand during the fasting period). However, while these seasonal factors explain the m/m change in the Index, they do not account for its y/y decline.
If we take a more detailed look at the prices of Kh-Index ingredients (see graph), the main contributors to y/y Khachapuri index deflation in March were cheese (-12%) and eggs (-1%). All other ingredients increased in price: flour (11%), yeast (21%), butter (6%) and milk (12%). As can be easily seen, prices fell y/y for locallyproduced goods (eggs and cheese, made of fresh milk); prices went up y/y for goods that are imported (yeast and butter) or use imported intermediate inputs in their production (flour and milk).
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Khachapuri index kept declining in March with the average cost of cooking one standard Imeretian Khachapuri reaching 3.15 GEL. This is 7% lower month-on-month (compared to February 2015), and 3.1% lower year-on-year (compared to March 2014).
Kh-Index lost height in all Georgian cities. Despite experiencing the largest drop of the Index (of 8.6%), at 3.20 GEL, Georgia's main seaside resort Batumi remains the most expensive city for khachapuri lovers. The Index dropped to 3.15 GEL in Tbilisi and to 3.02 GEL in Telavi, losing 4.8 % and 6.9%, respectively. Kutaisi is the cheapest city at 2.86 GEL (down by 7.7%). The price difference between the most expensive (Batumi) and the cheapest (Kutaisi) cities reached 0.34 GEL.
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