Russians in Armenia Boost Demand for Local Wine, Say Domestic Vintners
Russian citizens who've moved to Armenia following Russia’s invasion of Ukraine have acquired at taste for locally made wines, boosting the demand for the "vin du pays".
Gagik Aghababyan, who along with Arsen Drambyan founded a wine factory in the Tavush village of Koghb in 2021, tells Hetq that a recent analysis of their wine sales in Gyumri shows that Russians are the main buyers.
"60-70% of our company's wine buyers in the local market are Russians. Even for our wines displayed in restaurants, managers ask that we provide wine history sheets in Russian and English. The Russians have created a strong demand. During the Yerevan Wine Days festival, we sold many wines, both by the glass and by the bottle, of which 60-70% was bought by Russians," says Gagik Aghababyan.
Aghababyan, nevertheless, says that the local market is not big enough for all producers. “The newly opened factories fight hard to establish themselves in the local market," he says.
According to Armenia’s Statistical Committee, 7.1 million liters of grape wine were produced in Armenia in the first half of this year, an increase of 92.8% compared to the same period last year.
Zaruhie Muradyan, director of Armenia’s Viticulture and Winemaking Foundation, says this growth is due to the increase in the number of wine producers. In addition, the increase in orders received from abroad contributed.
"I think this indicator will increase, because we meet a lot of investors who plan to establish new vineyards in 2024. It is an interesting field, and in recent years our foundation has been introducing Armenian wine in various target markets," Muradyan tells Hetq.
The main export market of Armenian wine continues to be Russia. In 2022, about 79% of exported wine was sent to Russia. The United States accounted for 6%. The remaining 15% went to more than fifty countries, such as Ukraine, the Czech Republic, China, Georgia and Europe.
Muradyan says while most wine in Armenia is produced by large firms, the number of small and medium producers is increasing too.
Muradyan also claims that Russian tourists in Armenia have contributed to the growth of the export of Armenian wines to Russia. "When people come to your country, try the wine and return home, they search for those wines in the shops. In other words, it creates demand there. Exporters are getting new orders," she says.
"We are transitioning from Soviet technologies to new technologies. We are working on our indigenous varieties. We are trying to understand what varieties to grow and how. Exhibitions and festivals are frequently organized, which also produce results," says Muradyan.
According to Armenia’s Customs Service, Armenia exported some 4.8 million liters of wine, valued at US$18.8 million, in 2022. This is an increase of 52% by volume and 62% in value.
There are some seventy-five companies that export wine from Armenia. The most well-known include the Voskevaz Wine Factory, Yerevan Champagne Wine Factory, Armenia Wine Factory, Van Ardi, Proshyan Cognac Factory, Ararat Cognac Factory, Vedi-Alco and Areni Wine.
Winemaker Aghababyan says the main obstacle for exporters in the last two or three years is the appreciation of the Armenian dram against the ruble, dollar and euro. As a result of the depreciation of these currencies, the income of exporters decreases.
Despite the problems, Aghababyan plans to increase exports to France and Russia. The exporter is trying to adapt to current conditions, hoping that there will be no drastic changes in the exchange rate market.
"We only receive payment after two or three months of exporting the product. At the time, the ruble depreciated so much that exports became loss-makers," says Aghababyan.
Aghababyan, says government programs to assist local winemakers have been ineffective. "There is no significant support from the state. Producers must do all the work to find new export markets and manage risks,” he says.
As important as Russia is for Armenian winemakers, it is also unstable due to exchange rate fluctuations.
Unlike large companies, which have accumulated funds and are able to survive during downturns, small and medium-sized producers face several challenges.
First, the Covid-19 pandemic and the 2020 Karabakh war created serious problems for exporters: closed roads, increased freight costs. In the following years, the main obstacle for exporters was the devaluation of the dram against the ruble and the dollar. "Since export markets have become unstable due to fluctuations in the euro, dollar and ruble, this leads to the cancellation of many contracts. Imagine if our exporter is paid in euros from Europe, the price of which has fallen in Armenia, or in rubles from Russia, which has also depreciated against the Armenian dram. And if the Armenian exporter decides to raise the price so as not to suffer too much from the fluctuation of the exchange rate, the orders from abroad will decrease," says Zaruhi Muradyan.
She says wine buyers in Europe does not understand why they should pay thirty euros for Armenian wine, which is not so well-known in their country, if there is a French or Italian brand on the market with a lower price and a well-known brand. That is why Armenian winemakers have broken many contracts with European partners. The same is the case with the US and Russian partners.
"Exports in 2022 would be higher if these obstacles did not exist. That problem still exists today. Producers need state support and subsidies. If the big ones endure under these conditions and increase their exports, it is more difficult for small and medium-sized producers," says Muradyan.
She adds that Armenian winemakers have a problem of ensuring stable quality and quantity.
"No matter how much buyers are impressed, they sometimes complain that the quality of the wine changes every year. This is explained by the fact that we conduct tests every year. Since the grapes are purchased mostly from farms, it is sometimes difficult to control the quality. Many times, it is not in the hands of the winemaker. There is a problem getting high-quality grapes, which will ensure premium-class wine," says Muradyan.