Armenia’s Drinks Industry in the Doldrums

Grape-growers wait in line at a wine plant in Kaghtsrashen, Armenia, hoping to sell their produce. (Photo: Gayane Mirzoyan/courtesy of Chai Khana.org)
Grape-growers wait in line at a wine plant in Kaghtsrashen, Armenia, hoping to sell their produce. (Photo: Gayane Mirzoyan/courtesy of Chai Khana.org)
Russians are buying less brandy and wine, and farmers and manufacturers don’t have alternative markets.
By Gayane Mkrtchyan

Falling wine and spirits sales in Russia have slashed the incomes of grape-growers in Armenia, prompting calls for urgent action to find new markets.

Russia is the largest export market by far for Armenia’s viniculture sector. Eight out of ten bottles of wine go there, and about nine out of ten for the country’s famous brandy. The rest mostly goes to Belarus, Kazakstan and Kyrgyzstan, the other members of the Eurasian Economic Union which Armenia joined in January.

This year, however, an economic slump in Russia coupled with an unfavourable exchange rate for Armenian exporters has reduced demand for their wine and spirits. During the first eight months of this year, exports of brandy halved and wine sales abroad fell by 42 per cent, according to Armenia’s deputy agriculture minister Garnik Petrosyan.

As wine and spirits manufacturers’ income fell, they had to cut down on purchases of grapes grown by local farmers.

The crisis was made worse because 2015 saw a record grape harvest in Armenia, 30 per cent higher than last year. Avag Harutyunyan, the chairman of the Union of Armenian Winemakers, told journalists that only about two-thirds of total grape production was bought by the manufacturers.

Increased exports of fresh grapes – up by 36 per cent on last year – provided limited solace.

As farmers found themselves with grapes they could not sell, they took to the streets in anger. In September, they parked trucks loaded with unsold grapes to block off major highways in the Ararat and Vayots Dzor regions south of the capital Yerevan and Armavir to the west.

In the village of Kaghtsrashen in Ararat region, two farmers dumped their grapes by the roadside. One of them, Andranik Movsisyan, told IWPR he had thrown away seven tons of grapes which had gone bad after he spent four days queuing at a local wine and brandy factory.

“They took a sample and said they’d gone sour, and that was that,” Movsisyan said. “They told me to get out of the queue and go away.”

He explained how farmers like him were in dire straits, with bank loans to repay and families to support.

“In spring, they’ll have to start cultivating the land again. How can they deal with these problems?” he asked.

In the Armavir region, Karen Malkhasyan from the village of Aratashen in the Armavir region told IWPR how local farmers watched their grape crops go bad as they spent days queuing to make a sale, or driving from one factory to the next in hope of finding a buyer. Those who did manage to sell their produce were often told they would not be paid until 2016.

Malkhasyan was lucky – he had a pre-existing contract under which he was able to shift four tons of grapes.

Some farmers lost their entire crop, others turned it into homemade wine, while others still placed it in cold storage in the hope of making a sale over the winter or next spring.

Falling export sales have increased unsold stocks of wine, in particular, as output increased by five per cent, although brandy production was down nine per cent.

“How many years will it take to sell all this alcohol?” asked economist Mikael Melkumyan. “We must try to diversify the sales market to China and [other] distant Asian countries. With Russia under sanctions, we must shift our focus to other markets.”

Many industry insiders and government officials recognise the need to diversify.

“Without forgetting about European markets, we should also look to others, for instance the Chinese,” Vazgen Safaryan, chairman of the Union of Domestic Manufacturers, told IWPR. “The Chinese want to make brandy part of their culture.”

The agriculture ministry is sending a delegation including wine industry representatives to another large and untapped market, India, this coming February.

More immediately, deputy agriculture minister Petrosyan says the government is trying to negotiate with drinks manufacturers and offer them subsidised loans to keep them in business.

Harutyunyan of the Union of Winemakers thinks the sector should be reorganised into “seven or eight” cooperatives in which growers would be linked together with manufacturers. Farmers could shift to growing exactly the right strains, while factories could say in advance what they needed.

Petrosyan says the government supports the idea.

“We have already drafted a bill on cooperatives, which will be put into circulation soon,” he said.

Gayane Mkrtchyan is a correspondent for ArmeniaNow.com.

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