Krush! Summer 2017 Part 1: Industry Report

If you love wine, at some point during your first visit to Armenia you think about growing grapes, making wine and adding to the 6,000-year history of Armenian vintages. For some this daydream has turned into reality. The founders of ArmAs, Highland Cellars, Karas, Van Ardi, Voskini, Yacubian-Hobbs and Zorah were all Diaspora Armenians who made large investments with the goal of creating a modern wine industry in Armenia. They were joined by others who took the existing wine & brandy industries and refocused them on making fine table wines. Together, a new wine making, wine drinking and wine exporting country was created.

The progress that the Armenian wine industry has made in the last few years is remarkable. In 2012 it was hard to find a palatable Armenian dry table wine. Five years later there is an abundance of good to great wine, Yerevan restaurants now feature wine with revamped and expanded their wine lists, and new wineries and wine bars appear on the scene every month.

There are three giants on the Armenian wine scene: ArmAs, Armenia Wine and Karas. All have made tremendous investments in winemaking facilities and vineyards. They are making very good wine in all categories (Red, White, Sparkling & Dessert). Together they produce over 1 million cases of wine per year and have successfully established export markets for Armenian wine (in Russia and Europe). The result is an Armenian wine industry that is stable and growing.

Each of the three has a different approach: ArmAs is focused on Armenian grape varieties most of which are grown on their vineyards planted over the last 10 years, Karas is producing wine largely made from European grape varieties grown on their own vineyards and Armenia Wine is using both Armenian and European grape varieties largely purchased from independent growers (Armenia Wine is also aggressively adding acreage to their own vineyard holdings).

The strength of the big three have created a market that allows the smaller, “Boutique”, wineries to operate, experiment and flourish. Most of the Boutique wineries are focused on creating premium wines, and each new release brings excitement to the growing number of Armenian wine lovers.

Old Bridge and Zorah are the oldest of the Boutiques, each based in Vayots Dzor, each making great wines from their own vineyards. There are Boutique wineries focused on developing new blends, such as Alluria and Koor and others are importing talented winemakers to elevate their products (Yacoubian-Hobbs). Others are finding old vines to hand craft great wines (Voskevaz), some are making great wines using European varietals (Van Ardi) and others are taking grapes grown for centuries to new levels (Kataro). A number of these wines have already received international recognition and many of the Boutiques are regularly exporting to Europe and hope to enter the United States.

However, the Armenian wine industry faces several challenges in the years ahead:

1. Exports are needed to sustain the industry because:

  • There are not enough domestic consumers to support the current rate of growth. While the domestic consumption of wine has grown dramatically, the Armenian population is small and not growing.
  • Domestic consumption is also limited by income. While there is an affluent segment of the Armenian population, the average Armenian wage remains at $400 per month, which doesn’t leave a lot of room for $10 bottles of wine.

2. Armenia’s geo-political situation makes exporting harder than most. Wine needs to leave the country by truck, ideally refrigerated, through Georgia to either Russia or to a Black Sea port. For this reason, and because Armenia is a member of the Eurasian Economic Union, Russia remains the biggest market for Armenian wines. While the Russian market for fine wine is growing, the country is suffering from an economic slowdown and there is growing competition within Russia from its own domestic wine production.

3. The world is awash in good wine. In the last 20 years, wine industries in Argentina, Australia, Chile, New Zealand and South Africa have all matured and established relationships with the wine drinking consumers of the United states and Europe. Europe itself has expanded its portfolio of fine wines from France, Italy, Portugal and Spain. The United States production has increased with the development of new wine areas in Oregon and Washington State. Improved wines from Greece and new entrants from Eastern Europe and Georgia compete for shelf space in the world’s top markets – and future markets (China).

4. Armenian wine does not yet have a story – or a “brand”. While Argentina built its reputation on Malbec and New Zealand on Sauvignon Blanc, Armenia’s industry is too young to know for certain which wines, grapes or styles will prevail in the long run – see our Vines & Wines report for more on this topic.

While this sounds like a lot of negatives, Armenian history is one long story of successful survival despite overwhelming odds. Like the beauty of Mount Ararat on a clear day, we have seen and tasted what Armenian wine has achieved in only five years and have faith that the traditional Armenian values of hard work and determination, combined with innovation and entrepreneurship will ultimately establish Armenia as one of the world’s great wine making countries.

Part 2: Vintages, Vines & Wines