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ARMENIAN WINE AND BRANDY MARKET PROSPECTS
By David Stepanyan
Vestnik Kavkaza
June 1 2012
Russia
After mining products, alcohol (brandy for the most part) consistently
occupies second place in the structure of Armenian exports. However,
after the 2008 economic crisis, the volume of alcohol exports dropped
considerably, although 2011-2012 saw a tendency towards expansion of
this sector of production and export.
However, due to global market trends, several sectors of Armenian
alcohol production have undergone reductions, for example, the
sector of inexpensive wines ($2.5-8 per bottle). On the other hand,
the emergence of new rivals on the global market as well as price
growth due to the increase in excise duty caused the Armenian wine
producers to raise the quality of their product. This increase in
quality makes the Armenian wine competitive to the high-quality import
wines on the local market.
All the abovementioned factors influence only the Armenian domestic
market, but there's still the issue of conformity of Armenian alcohol
products to international standards. The Armenian market is rather
narrow, so the realization of the full potential of the Armenian wine
industry depends on Armenian products being promoted on the foreign
markets. However, Armenian wines still can't compete with their main
rivals on the international market. Of course, Armenian 2.5 Euro wines
could have conquered their segment of the European market, but such
a low-price export is impossible due to the transport blockade. That
is why today only high-price wine production is growing in Armenia:
for example, a new alcohol plant, the Golden Grape Armas, is being
constructed in the Aragatsotnsk district. The company received
a three-year delay in the VAT payments for the imported equipment
from the country's government. Italian colleagues will help Armenian
specialists to produce high-quality wines. The plant will be launched
this summer, and its products are supposed to be exported to Russia
and the USA.
The situation with brandy production is quite the opposite: the last
20 years saw a gradual drop in its quality. Some of the producers lost
their export markets due to the world financial crisis and some of the
vineyards were destroyed. However, the drop in quality didn't affect
brandy exports to Russia due to its relatively low price. Today,
however, due to the increase in the wine prices, this price policy
will no longer be possible to maintain. And if the price difference
between Armenian brandy and French cognac drops to less then 100
rubles, Russian consumers will prefer the French product.
Another problem of the Armenian alcohol production is the same wine
base for both wines and brandies. Even though the grapes for wine
and for brandy should be collected at different stages of ripeness,
the producers are often unable to observe this condition and collect
all the grapes at the same time.
Armenia produces a lot of brandy, but the local market consumes only
the tiniest portion of it, so this production is export-oriented. In
order to coordinate the producers' efforts, as well as to promote
the 'Armenian brandy' brand on the global market, the Association
of Armenian Brandy Producers was created. The major brandy producer
in the republic is the Yerevan Brandy Factory, privatized by the
French Pernod Ricard group in 1998, and its CEO, Ara Grigoryan, is
also the chairman of the Association. The Association creates special
laboratories to control the quality of its members' products and will
award its certificates from 2013.
Brandy production grew by 21.5% in 2011 as compared to 2010, thus
taking the lead over the growth of all other alcohol production
in Armenia. However, Ara Grigoryan explains that it is due to the
restoration of the Russian market after the crisis (and Armenian brandy
was affected by the crisis more than any other Armenian alcohol product
on the Russian market), and not by some major changes in the Armenian
production process. However, experts abstain from making forecasts
for 2012.
Nevertheless, the Armenian government has grandiose plans for this
promising branch of national industry. In 2015 Armenia plans to
increase the volume of brandy exports to $150-180 million, and in
2020 to $250-300 million (in 2010 the figure was $95.2 million). Some
experts are rather skeptical about these plans, as the growth isn't
backed by a proper raw material base. However, the government is
taking certain steps towards diversification of brandy exports.
Experts say that Chinese and other Asian markets could prove to possess
good potential for that. It is noteworthy that this governmental
program also implies a decrease of export share to Russia (from the
current 90% to 65% in 2020).
By David Stepanyan
Vestnik Kavkaza
June 1 2012
Russia
After mining products, alcohol (brandy for the most part) consistently
occupies second place in the structure of Armenian exports. However,
after the 2008 economic crisis, the volume of alcohol exports dropped
considerably, although 2011-2012 saw a tendency towards expansion of
this sector of production and export.
However, due to global market trends, several sectors of Armenian
alcohol production have undergone reductions, for example, the
sector of inexpensive wines ($2.5-8 per bottle). On the other hand,
the emergence of new rivals on the global market as well as price
growth due to the increase in excise duty caused the Armenian wine
producers to raise the quality of their product. This increase in
quality makes the Armenian wine competitive to the high-quality import
wines on the local market.
All the abovementioned factors influence only the Armenian domestic
market, but there's still the issue of conformity of Armenian alcohol
products to international standards. The Armenian market is rather
narrow, so the realization of the full potential of the Armenian wine
industry depends on Armenian products being promoted on the foreign
markets. However, Armenian wines still can't compete with their main
rivals on the international market. Of course, Armenian 2.5 Euro wines
could have conquered their segment of the European market, but such
a low-price export is impossible due to the transport blockade. That
is why today only high-price wine production is growing in Armenia:
for example, a new alcohol plant, the Golden Grape Armas, is being
constructed in the Aragatsotnsk district. The company received
a three-year delay in the VAT payments for the imported equipment
from the country's government. Italian colleagues will help Armenian
specialists to produce high-quality wines. The plant will be launched
this summer, and its products are supposed to be exported to Russia
and the USA.
The situation with brandy production is quite the opposite: the last
20 years saw a gradual drop in its quality. Some of the producers lost
their export markets due to the world financial crisis and some of the
vineyards were destroyed. However, the drop in quality didn't affect
brandy exports to Russia due to its relatively low price. Today,
however, due to the increase in the wine prices, this price policy
will no longer be possible to maintain. And if the price difference
between Armenian brandy and French cognac drops to less then 100
rubles, Russian consumers will prefer the French product.
Another problem of the Armenian alcohol production is the same wine
base for both wines and brandies. Even though the grapes for wine
and for brandy should be collected at different stages of ripeness,
the producers are often unable to observe this condition and collect
all the grapes at the same time.
Armenia produces a lot of brandy, but the local market consumes only
the tiniest portion of it, so this production is export-oriented. In
order to coordinate the producers' efforts, as well as to promote
the 'Armenian brandy' brand on the global market, the Association
of Armenian Brandy Producers was created. The major brandy producer
in the republic is the Yerevan Brandy Factory, privatized by the
French Pernod Ricard group in 1998, and its CEO, Ara Grigoryan, is
also the chairman of the Association. The Association creates special
laboratories to control the quality of its members' products and will
award its certificates from 2013.
Brandy production grew by 21.5% in 2011 as compared to 2010, thus
taking the lead over the growth of all other alcohol production
in Armenia. However, Ara Grigoryan explains that it is due to the
restoration of the Russian market after the crisis (and Armenian brandy
was affected by the crisis more than any other Armenian alcohol product
on the Russian market), and not by some major changes in the Armenian
production process. However, experts abstain from making forecasts
for 2012.
Nevertheless, the Armenian government has grandiose plans for this
promising branch of national industry. In 2015 Armenia plans to
increase the volume of brandy exports to $150-180 million, and in
2020 to $250-300 million (in 2010 the figure was $95.2 million). Some
experts are rather skeptical about these plans, as the growth isn't
backed by a proper raw material base. However, the government is
taking certain steps towards diversification of brandy exports.
Experts say that Chinese and other Asian markets could prove to possess
good potential for that. It is noteworthy that this governmental
program also implies a decrease of export share to Russia (from the
current 90% to 65% in 2020).