The agri-food sector of Armenia plays a vital role in the economy of Armenia. For the past 5 years, it has averaged about 23.23% of GDP, providing employment for 34% of the population. The sector is comprised of three subsectors: agriculture, food processing and production of beverages. Agriculture is a major subsector, having registered on average 7% of annual growth rate within the last few years. In 2016, contribution of the agricultural output to GDP was 15.9%, followed by food-processing subsector with 4.2% and beverages subsector with 0.9% contribution. The breakdown of the agricultural areas (2,045,500 ha) in Armenia consists of arable land, perennial grass, plough land, pastures, and other types of land. About 196,000 ha of sown area is cultivated under grains and leguminous plants, 24.2% is under forage crops, etc. Considering the crop production by tons, the highest share belongs to vegetables (968,600 tons yearly), milk (754,200 tons yearly), potatoes (606,300 tons yearly), grains (604,200 tons yearly), and fruits and berries (242,600 tons yearly).the sub-sectors of food processing and the production of beverages play an important role in helping grow and revitalize the agri-food sector in Armenia s economy. Armenia has a deep history and a long-established tradition rooted into the production and processing of food and beverages. In particular, Armenia historically specialized in wine and brandy production. The Armenian wine production has a history of more than 6,000 years, with both large-scale, traditional wineries, as well as small wine producers in the market who make wine from grapes, pomegranates, raspberries, etc. The two main grape producing regions are Ararat and Armavir, with more than 80% of the grape production of the country in 2014. Then follow the regions of Tavoush, Aragatsotn, Areni in Vayots Dzor, Yerevan city and Syunik. There are many varieties, from white and red wines, dry to semi-sweet wines, and sparkling wines. The average export price of the Armenian Brandy (13.4 USD /litre) is still below the global average, but it is slowly growing. Indeed, Armenia is listed in the top ten world spirit exporters. TOP TEN WORLD SPIRITS EXPORTERS France Singapore Honk Kong Spain USA Armenia China Taiwan Malaysia Germany Source: Comtrade 2014 1
WINE AND SPIRITS: GROWING RECOGNITION ON GLOBAL MARKETS SECTOR STRENGTHS The 1st exporter of CIS region; 50% of global brandy exports from CIS countries; winemaking tradition and strong know-how; Solid experience in brandy manufacturing Government support to farmers to improve quality and productivity; Growing production, sales and exports; Wine exports + 63% in 2016; Brandy exports + 14% annual growth (2011-2016); Quality grape raw, with specific characteristics for brandy manufacturing conditioned by climatic factors: number of sunny days, quality of soil and water; Laboratory equipment in a small number of advanced companies; Developed design and printing services; Wine tasting rooms and wine agro-tourism. BOOMING WINE EXPORTS + 115% (2010-2016) In recent years, wine of fresh grapes exports and local wine sales increased. The volumes of wine exports more than doubled from 2010 to 2016 (+115%). The Russian market is the biggest consumer of Armenian wine, followed by the USA. Over the last few years Armenian wine market expanded to Belarus, Lithuania, China and Italy. TOP TEN CLIENTS OF ARMENIAN WINE (2016) Russia 71,7 USA 5,4 Canada Italy Lithuania Ukraine China France Belgium Germany 2,7 1,5 1,5 1,4 1,3 1,2 0,9 0,9 Source: Comtrade 2016 2
+ 14% GROWTH OF BRANDY EXPORTS (2011-2016) Armenian cognac (brandy) is a well-known brand, especially in the post-soviet region. Traditional brandy production has been growing and has become the top selling export product of Armenia. The quality is of high priority, which ensures competitiveness in the foreign market, continued good reputation of the brand, and a steady demand. Armenia is the 6th world exporter of grape brandy and the first exporter of the CIS region. Armenia benefits from a strong comparative advantage for brandy. Armenian brandy exports increased at an average annual rate of 15% per year. Russia is the first client of Armenian brandy (80%), followed by Belarus and Ukraine. Recently, brandy exports have increased significantly in Belarus, Georgia and Kazakhstan. TOP TEN CLIENTS OF ARMENIAN BRANDY (2016) Belarus Ukraine USA Kazakhstan Lithuania Latvia Germany Czech. Rep. Georgia 4,1 2,8 1,7 1,2 0,8 0,7 0,7 0,5 0,3 Russia 83,8 Source: Comtrade 2016 A VARIETY OF QUALITY AGRO-FOOD PRODUCTS Today, Armenia specializes in the production of an abundance of different foods and beverages, including fruit and vegetables cannery, beverages, meat and meat products, milk and other dairy products, and flour and bread. Fresh and dried fruits include apricots, grapes, apples, sweet cherries, peaches, plums, and many more. Armenia also specializes in the production of tobacco and cigarettes. Pertaining to dairy products, Armenia produces products such as yogurt, ice cream, butter, sour cream and many different kinds of cheeses, including goat-feta, Lori and chanakh cheese, mozzarella, camembert, Gouda, and Edam. Cheese can be considered a success story in recent years in the food processing sector. Indeed, the country used to be one of the largest producers of yellow cheeses during the Soviet years. From this perspective, it is very important to increase cheese production and expand the variety which can be done by the introduction of European type cheeses. Armenia produces a plethora of beverages ranging from wines to beers and champagnes, as well as nonalcoholic drinks, including water, mineral waters, and different types of juice. Throughout the years mineral water has become a major player in the production of beverages. Armenia s five reserves of mineral water, Jermuk, Bjni, Arzni, Hankavan, and Dilijan, along with about 8 companies, have shown a great tendency of development and growth in this specific sector. As for different kinds of juice, Armenia provides a vast array of a variety of different kinds of flavoured juice from companies that have become major players. These companies include Noyan, Kilikia Corporation, and Sandora; the latter has recently begun the production of its own juice in Armenia. Sandora s production line is equipped with the latest technologies. Armenia also has a burgeoning organic food production industry that the government has endorsed and 3
supported. The addition of an organic certification body has pushed this growing market forward even more, and as of 2014 there were over 1,100 hectares of certified organic property in the country including arable land and wild collection areas. Organic food production has seen the highest success in honey, fruits, berries and herbal tea. Investment opportunities abound in organic dried fruit, different kinds of juice, dairy and preserves production. Foreign trade in agricultural goods is vital for the growth and development of Armenia. In 2015, Armenia exported about 48 million USD in agricultural goods while importing about 168 million USD in agricultural goods. Main products being traded are non-perennial and perennial crops. In addition, there are great opportunities to develop the export of agricultural products (such as frozen bovine meat, sheep meat, poultry, and apricots) to countries of the region such as Russia, Georgia and Iran, considering their import preferences. IMPORT VOLUMES OF AGRICULTURE EXPORT VOLUMES OF AGRICULTURE Russia 52.3% Russia 75.4% Indonesia 11.9% Georgia 16.6% Iran 5.5% Other 8% Ecuador 4.8% Turkey 4.5% Other 21.0% In 2015, Armenia exported processed food for 60 million USD and beverages for 109 million USD. The main export partner in both the production of beverages and food processing subsectors has been Russia, with corresponding shares of 75% and 67%. Other countries that Armenia has established a relationship with for foreign trade include Georgia, Iraq, Turkey, Lebanon, etc. The main exporting products are spirit beverages (mostly wine and brandy), and dairy products (primarily cheese). Processed and preserved meat is the main import product of the food processing sector, while distilling and blending of spirits provide the main imported beverages. In general, excellent climate conditions, rich history and traditions in agriculture, food and beverage production are the main strengths of agri-food sector. Availability of relatively affordable and skilled labour force is another favourable factor. There have been approximately 14,400 employees working in the Food Processing sector as of 2015 (CAGR over 2010-2015 2.1%) and 5,600 in the beverages sector (CAGR 1.7%). There are several educational institutions which provide vocational and higher education to students. Over the recent 5 years, the number of graduates has been increasing. Armenia offers a variety of tax incentives for companies that are willing to invest depending on the subsector. For example, the profit tax, VAT and the excise tax are not applicable for the agriculture subsector. For other food processing and beverages subsectors the regular profit tax and VAT is 20% and exporting duties are 0%. The excise tax is applicable only for the distribution of alcoholic beverages. Moreover, there are no licenses required for the agri-food sector in Armenia, except for the production of alcoholic beverages. Licenses are issued by the RA Ministry of Agriculture according to the RA Government Decision on Licensing. The period of validity of the license is 3 years. 4
SUCCESS STORIES Yerevan Brandy Company (YBC), founded in 1887 by Nerses Tairyan, a wealthy merchant of the first guild, is the leading enterprise of Armenia for production of alcoholic beverages. Since 1999, the company has been owned and operated by Pernod Ricard, a worldwide leader in the wines and spirits sector. It is fully equipped to carry out the process of brandy production, with the main facility located in Yerevan and three other branches located in different regions of Armenia. Yerevan Brandy Company s products are currently supplied in 25 countries, while 47 countries have registered trademarks for YBC. From 1999 to 2002, Ararat, a brand of Yerevan Brandy Company, was awarded as the Product of the Year in Russia. Some other awards and recognition include about 200 gold, silver, and bronze medals in international tastings and exhibitions. Tierras de Armenia is an Argentinian-Armenian company founded by Eduardo Eurnekian in 2003. It owns and operates 2300 hectares of land in Armavir region of Armenia. Their investments and ability to reshape the land that was previously uncultivated and covered with rocks has now slowly allowed for the company to make way for vineyards, which have been provided by a major wine company Karas. Both international and indigenous varietals are planted in the vineyards, including Chardonnay, Viognier, Sauvignon Blanc, Merlot, and Cabernet Franc. The vineyards of Tierras de Armenia are equipped with modern techniques together with an individual approach for each varietal, aiming to develop the potential of each. In 2014, it produced 400,000 bottles and was planning on producing more than 1 million bottles in 2016. Tierras de Armenia is the only winery in Armenia that works with the highest quality European grape varietals on such a large scale. They have also allowed for the creation of hundreds of jobs in the region. Artfood Artashat Cannery established its first processing site in Artashat in 1958. Currently, with the latest technology for production, which has allowed for the production of ecologically pure and superior quality products, and harmonious with the latest international standards, the cannery and their 60 different products have become a household name in many countries worldwide. The company pride themselves in producing and processing foods in the uttermost natural way. Their products are saturated with organic fertilizers of mountain springs in addition to not including any chemical reagents, while the final process before being processed focuses on the concentration of neutrals and pesticides through microscopic laboratory analysis. Some of Artfood Artashat Cannery s production line includes apricot jam, nut preserves, raspberry preserve, blackberry preserve, mayonnaise, ketchup, black olives, green olives, and many more. 5
Founded in 2000 by Hrant Vardanyan, Grand Candy is the largest enterprise in the food industry in Armenia. In its initial stages, its production consisted of hard candy and chocolates, with employment of 600 people. Today, Grand Candy makes up more than 40% of the confectionary market in Armenia, while producing more than 400 different products and being the only factory in the Transcaucasian region to process cocoa beans. Throughout the years, Grand Candy has equipped themselves with the latest technologies while also being to continuously grow. Since 2001, Grand Candy has introduced the production of a variety of foods, including ice-cream, coffee, pastries, and flour. Although well known for the production of a variety of foods, Grand Candy has also launched its own production of cardboard packaging, as well as opening printing houses, which are equipped with German machinery. Grand Candy operates 29 brand stores in Armenia, 21 of which are located in Yerevan. With more than 3,200 employees, Grand Candy is the largest domestic production company in Armenia. Grand Tabak is an establishment represented by two companies known as Grand Tobacco, established in 1997, and International Masis Tabak, established in 2002. Grand Tabak has a worldwide presence in the tobacco market, as they have their products in more than 20 countries. They have more 15 different types of cigarette brands, including popular brands such as Ararat, Erebuni, and Van. Grand Tabak provides high-quality cigarettes in 12 forms and shapes, including king size, compact size, soft king size, slim size, and etc. In 2010, Grand Tabak started the production of hand-rolled cigars. The cigars come in various shapes, including perla, pyramid, corona, and others. The tobacco leaves are imported from Honduras, Cuba, the Dominican Republic, Mexico and Ecuador. Grand Tabak has continued the Armenian tradition of cultivating rich tobacco. The purchased tobacco goes under heavy inspection by specialists in order to ensure sustainability of the chosen grades. Grand Tabak operates its own curing barns in the regions of Armenia where tobacco is grown in order to control the quality of the tobacco. Tobacco is grown in four regions of Armenia. Grand Tabak also consists of three smoking commissions. One commission controls the blending process throughout the entire process, the other starts the selection of specific tobacco grades, and the last one completes the cigarette evaluation. 6
5 Mher Mkrtchyan Street, Yerevan 0010, Armenia Phone: +374 11 597 808 E-mail: business@dfa.am Web site: www.dfa.am