Issue of purchase of grape has become very sensitive in Armenia

ArmInfo. The issue of purchase of grape has become very sensitive in Armenia, Director of Yerevan Brandy Company Igor Arakelyan told journalists.

According to him this is related to changed conditions. "18 years ago we jointly with the government launched program of winegrowing development in Armenia to ensure profitability in the field and present brand of Armenian brandy, our heritage. We are obliged today to continue the initiative launched 130 ago.  Guided by these principles we did everything to ensure growth of prices on grape, so that the farmers remained interested in cultivating new vineyards. But today conditions have changed. The level of income has dropped for everyone; consequently winegrowers also bear certain part of burden. We have added a "minimal price" point in our long-term contracts as a guarantee to farmers. Unfortunately, we can not purchase 100% of grape yield in Armenia, but we can guarantee fulfillment of contracts signed by us. It was already last year we faced certain difficulties: our profit reduced 2-fold, but we had kept the purchase prices. We hoped that the situation would change next year. Unfortunately, this did not happen. Instead, there are new conditions now and we have to find new common ground with the winegrowers for joint work. And considering that we have an obligation of paying 130 AMD for 1kg we will reduce the purchase price from 150 to 130 AMD this year. However, we will fulfill our obligation set in the contracts", the Director stated adding that even these 130 AMD will not help the company to be competitive. Today Armenian brandy is the most expensive brandy by its prime cost if compared to Georgian, Moldavian and others. The main component of prime cost is grape, in other words brandy spirit. There is now brandy spirit on the market at the cost of 2.5 dollars for 1 liter. "We purchasing grape at 150 or even 130 AMD get spirit at 4 dollars prime cost for 1 liter", Arakelyan noted.

He agreed that the reason for this is high prime cost of Armenian grape cultivation. "There are countries where vineyards are not covered in winter and they do not need so much water. In our climate conditions farmer has to fill up the vineyards or if the weather is unfavorable to use 2-fold more agents than in other countries and water them 3-fold more often. I do not mention frost and hail. Some farmers have lost 100% of their yield this year because of weather. Considering all the abovementioned we need to find new balance so that vine grower can work with profit and we can purchase grape and sell randy. This is a very complex issue", Arakelyan noted, adding that if this situation continues Armenia may loose winegrowing sector. "This is a challenge not only for us but for the whole country. The government is ready to assist us.  But we have to come with an offer beneficial for everyone. Till now this balance has not been found.  Moreover, as of today foreign currency rate is not beneficial for export. This means, our product is expensive. Prime cost of grape is high. A lot of states introduce subsidy programs. In order to ensure purchase of grape in Armenia its price should be 70-80 drams for 1kg. Practically this is half of the current price. This is impossible. I am sure that the government is concerned over this issue and thinks of solutions.  But I will bring another number. If the government subsidizes purchase of grape for example with 50 drams for 1kg, 5 bln drams in overall will be needed", the Director of the plant stated.