Yerevan, 2015

Avenue Consulting Group Strategy | Operations | Legal and Tax

Armenian Alcoholic Beverages Market and Industry Overview

Content

Why This Report is Prepared 3Armenian Alcoholic Beverages MarketOverview

4

Wine Production in Armenia 6Wine Consumption in Armenia 7Sparkling Wine Production in Armenia 8Sparkling Wine Consumption in Armenia 9Brandy Production in Armenia 10Brandy Consumption in Armenia 11Beer Production in Armenia 12Beer Consumption in Armenia 13Vodka Production in Armenia 14Vodka Consumption in Armenia 15

Whiskey Consumption in Armenia

16

Gin Consumption in Armenia 17Tequila Consumption in Armenia 18Rum Consumption in Armenia 19Some Interesting Stats 20Sources 22

This Report aims at presenting the structure of alcoholic beverages market of Armenia, and delineatingthe potential of the industry both from export potential and local market development points of view. Itwill serve as a base for deeper analysis of Armenian alcoholic beverages market development trends toreveal its opportunities for Armenian entrepreneurs and guide them in developing or starting theirbusinesses in alcoholic beverages market.

Moreover, the analysis of alcoholic beverages market might be useful for discovering changes inconsumers’ behavior, particularly in their preferences and their paying capacity.

This report includes the description of market structure, especially stressing alcoholic beverages, whichare not only imported, but also produced locally. It also highlights the trends of alcoholic beveragesimport and export and outlines the produced and consumed volumes since 2009 to 2013. Statistics forthe year 2014 are not complete yet, so they are presented only for those alcoholic beverages aboutwhich they are available.

All information presented in report is collected from National statistical service of the Republic ofArmenia, as well as from internal sources of Avenue Consulting Group. Statistics of vodka and cognac(brandy) production, export and import volumes taken from National statistical service of the Republic ofArmenia are figured based on recalculation of measurement unit "100% alcohol content“ into themeasurement unit of " 40% alcohol content“. Therefore there is some extent of approximation.

Why This Report is Prepared

3

Armenia is considered one of the ancient countries known its traditional recipes ofdifferent type of alcoholic drinks. The consumption of main alcoholic beverages(wine, sparkling wine, brandy, vodka, beer, whisky, rum, tequila and gin ) in 2013was more than 44 million liters or more than 245 million US dollars, which iscalculated by the equation

Consumption=Production+Import-Export (if other things equal).It is remarkable that vast majority of consumed alcoholic beverages are locallyproduced. Totally in 2013 in Armenia 56,5 million liters of alcoholic beverageswere produced, 11,8 million liters of them were imported, and 24 million literswere exported.**As statistics about whisky, gin, tequila and rum consumption for 2014 are not available yet, the alcoholicdrinks consumption volumes are presented for 2013.

**As statistics about sparkling wine for 2014 are not available yet, the volumes are presented for 2013.

Armenian Alcoholic Beverages Market OverviewAccording to “spyur.am” business directory, there are 52 alcoholic beverage producers in Armenia, from which

• 18 still light wine producers

• 2 sparkling wine producers

• 13 vodka producers

• 14 brandy producers

• 5 beer producers

Product

2014 January-December

produced (1000 liters)

imported (1000 liters)

exported (1000 liters)

The average retail price (AMD)

(for 0.7l)Wine 6,131 252 2,130 1,780 (0.7l)

Sparkling wine** 634.4 184.1 40.3 -Brandy 9,502 114 18,096 5,551 (0.5l)Vodka 18,726 9,246 2,599 1,375 (0.5 l)Beer 23,717 2,838 1,988 379 (0.5l)

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Armenia imports wine, vodka, gin, tequila, whisky etc. Local production of wine, vodka, beerand brandy are rather developed and consumers mainly use those of local production. As perwhisky, tequila or gin the whole market is occupied by imported goods. Alcoholic beverages aremanly imported from Russian Federation, Spain, Ukraine, Georgia and Finland.

Armenia also exports alcoholic beverages. Russian Federation is the major export market forArmenian producers of alcoholic beverages(in 2013, 80% of all exported beverages). It showsthat Armenia’s export of alcoholic beverages geographically has high level of centralization.

Armenian Alcoholic Beverages Market Overview

Product

2013. January-Decemberproduced

(1000 liters)

imported (1000 liters)

exported (1000 liters)

Wine 6,422 354 1,393Sparkling wine 536 184 40

Brandy 20,284 30 18,304Vodka 9,906 8,374 1,932Beer 19,848 2,730 2,346

72,70 100,60

137,30 174,00

212,90

42,1 52,6 47,5 53,7 56,6 -

50,00

100,00

150,00

200,00

250,00

2009 2010 2011 2012 2013

Total alcoholic beverages import-export from Armenia in million US dollars

Beverages export

Beverages import

Since 2009, the export volumes of Armenian alcoholic beverages has registered CAGR of 24%, while the same indicator for import is only 6%.

5

Wine is among most popular alcoholic drinks in Armenia. Besides large-scale,traditional wineries there are many small wine makers, that produce wine not onlyfrom grapes but also from pomegranate, raspberry, etc.

During last 5 years the production volume of wine has increased by 20,6%. It isnoteworthy that the CAGR level of import for 2010-2014 was (-14,5%), while that ofexport was 18,2%, therefore during 2010-2014 the decrease of import was almostequal to increase of export.

Wine Production In Armenia

More than 6000 years history of wine production.

The CAGR of wine production growth was 3.8% during 2010-2014.

According to “spyur.am” business directory, there are 18 local producers of wine (excluding large number of small producers, who produce wine at home). 5 084

6 178

5 714

6 422

6 131

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

2010 2011 2012 2013 2014

Wine production in 1000 liters

552 620 369 354 252

924 744 1 185 1 3932 130

2010 2011 2012 2013 2014

Wine import and export in 1000 liters

import export

6

During the period from 2010 to2014 the consumption of winehas decreased for 9,7%, whilethe average retail price hasgrown for 34,5%.

Wine Consumption In Armenia

The consumption of wine in Armenia as of 2012 was 1,63 liters per capita. For comparison, in France it is equal to 44 liters, and in Vatican which was considered as largest consumer of wine 72 liters.

Local wine market size is estimated at 26.1 million US dollars or 4.2 million liter in 2014.

The CAGR of wine consumption inArmenia was -2% during 2010-2014, while for average retail priceit is 6,1%.

1 323

1 315

1 669

1 746

1 780

0200400600800

1 0001 2001 4001 6001 8002 000

2010 2011 2012 2013 2014

The average retail price for 0,7l of wine (AMD)

4 711

6 054

4 898

5 384

4 252

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

2010 2011 2012 2013 2014

Wine consumption in 1000 liters

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The production volume of sparkling wine has increased by 39% during last6 years. The average price of a bottle of sparkling wine of local productionas of February 2013 was 1,700 Armenian drams while concerning importedwines it varied from 2,000 to 210,000 Armenian drams.

Sparkling Wine Production in Armenia

The CAGR of sparkling wine production growth was 5.6% during years 2009-2014.

According to “spyur.am” business directory, there are 2 local producers of sparkling wine.

456

618 623

479536

634

2009 2010 2011 2012 2013 2014

Sparkling wine production volumes in 1000 liters

117 99 115184

127

5684

40

2010 2011 2012 2013

Sparkling wine import and export in 1000 liters

import export

8

The consumption of sparkling wine* in Armenia has grown for 1.1 timesand the majority of consumers prefer sparkling wine of local production. In2013 the consumption of sparkling wine was 680 thousand liters, of which536 thousand liters were the sparkling wine of local production.

Sparkling Wine Consumption in Armenia

The CAGR of sparkling wine consumption growth was 2,9% during 2010-2013

The export of sparkling wine during 2009-2013 was only 345 thousand liters.

Local sparkling wine market size is estimated at 3.9 million US dollars (1.8 million US dollars for imported sparkling wine and 2.1 million US dollars for the locally produced) or 0,68 million liter (0.5 million liters for locally produced sparkling wine and 0.18 million liters for the imported) million liters in 2013.

608

667

510

680

0100200300400500600700800

2010 2011 2012 2013

Sparkling wine consumption in 1000 liters

*The statistical data for 2014 about sparkling wine is not available yet.

9

The modern history of Armenian brandy started in 1887, when the firstguild merchant Nikolai Tairov build the first brandy factory in the place ofancient Yerevan fortress.

During 2010-2014 years the production volume of brandy has increased by48,3%. However, in 2014 the volumes of brandy production have a littledecreased comparing with 2013.

Brandy Production in Armenia

The CAGR of brandy production was 8.2% during years 2010-2014, for brandy export – 10.4% and import – 29.2%.

According to “spyur.am” business directory, there are 14 local producers of brandy.

During 2010-2014 only 366,760 liters of brandy was imported, in comparison with the 78,216,160 liters of its export.

12 624

15 342

18 481

20 285

18 726

0

5 000

10 000

15 000

20 000

25 000

2010 2011 2012 2013 2014

Brandy production in 1000 liters

11 041

13 494

17 282

18 304

18 096

0

5 000

10 000

15 000

20 000

2010 2011 2012 2013 2014

Brandy export in 1000 liters

10

Brandy consumption in Armenia during2010-2013 has increased by 10%.Considering that NSS of RA does nottake into account the specificities ofbrandy manufacturing process, theconsumption statistics are based oninternal sources of Avenue ConsultingGroup.

Particularly the NSS of RA does notconsider that the whole producedvolume of brandy is not sold during ayear but during several years. AvenueConsulting Group has considered thisfact and revealed the market size.

During the period 2010-2014, theaverage retail price has grown for 42%.

Brandy Consumption in Armenia

The CAGR of brandy consumption was 2,4% for the period of 2010-2013.

The CAGR of brandy average retail price growth was 7,2% for the period from 2010-2014.

Local brandy market size is estimated at 48,5 million US dollars or 1,8 million liter in 2013.

3 914

4 785

5 247

5 336

5 551

01 0002 0003 0004 0005 0006 000

2010 2011 2012 2013 2014

The average retail price for 0,5l of brandy (AMD)

1 694

1 757 1 836

1 861

1 600 1 650 1 700 1 750 1 800 1 850 1 900

2010 2011 2012 2013

Brandy Consumption in 1000 liters

11

During 2010-2014 the production volume of beer has increased by 54,5%. The CAGR for theperiod is 9,1%. According the pictures presented below, the import volumes have decreasedfor 40%. The CAGR for import is -9.6%.

The export volumes, contrary, have increased since 2010 for 1.4 times. The CAGR is 6,5%.

Beer Production in Armenia

CAGR (2010-2014)

•Beer production 9,1%

•Import – (-9,6%)

•Export – 6,5%

According to “spyur.am” business directory, there are 5 local producers of beer.

15 353

14 744

13 668 19 848

23 717

-

5 000

10 000

15 000

20 000

25 000

2010 2011 2012 2013 2014

Beer production in 1000 liters

4 691 3 299

2 262 2 730 2 838

1 450

1 742 2 795 2 346 1 988

2010 2011 2012 2013 2014

Beer import and export in 1000 liters

import export

12

In 2014 beer consumption volumes has increased for 32% in comparison with 2010,reaching 24,5 million liters. During the same time the average retail price hasincreased only for 24%.

The vast majority of total consumed quantity is beer of local production. The mostpopular brands are Kilikia, Gyumri and Kotayk.

Beer Consumption in Armenia

The CAGR (2010-2014)

•Consumption – 5.7%

•Retail prices – 4,4%

In 2012, in Armenia the beer consumption per capita was 4.4 liters. In Czech Republic, which is the largest beer consumer in the world this indicator was 158.6 liters, in Russia 58.9 liters.

Local beer market size is estimated at 44,8 million US dollars or 24,5 million liter in 2014.

18 594

16 301

13 135

20 232

24 566

0

5 000

10 000

15 000

20 000

25 000

30 000

2010 2011 2012 2013 2014

Beer consumption in 1000 liters

305

305

333

362

379

-50

100 150 200 250 300 350 400

2010 2011 2012 2013 2014

The average retail price for 0,5l of beer (AMD)

13

During last 5 years the production volume of vodka has decreased by 20%. The CAGR ofproduction volumes during 2010 -2014 is -4.4%.

The import volumes has registered a growth during 2010 – 2014. The CAGR for thementioned period is 7.1%.

Vodka’s export has grown for 26.8 times since 2010. The CAGR for the period of 2010-2014is 93.1%.

Vodka Production in Armenia

CAGR (2010-2014)

•vodka production –(-4.4%)

•Import – 7.1%

•Export – 93.1%

According to “spyur.am” business directory, there are 13 local producers of vodka.

11 886

9 106

10 069

9 906

9 502

-

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2010 2011 2012 2013 2014

Vodka production in 1000 liters

6 571 6 248 8 103 8 374 9 246

97 642 1 514 1 932 2 599

2010 2011 2012 2013 2014

Vodka import and export in 1000 liters

import export

14

Vodka is the biggest spirits category in Armenia and is seen as an everyday product.Flavored vodkas have slowed down after initial interest by consumers. Nevertheless,the volumes of vodka consumption have decreased since 2010 reaching the level of16,149 thousand liters in 2014 from 18,359 thousand liters in 2010.

The average retail prices of vodka have registered a growth.

The most popular brands among the consumers are those of local production, that arefollowed by Finlandia, Belenkaya,Cristall Premium.

Vodka Consumption in Armenia

The CAGR (2010-2014)

•Consumption – (-2.5 %)

•Retail prices – 2.4%

In 2012, the consumption of vodka per capita was 5.6 liters. The world’s number one consumer of vodka Russia consumed in 2012 10 liters of vodka per capita.

Local vodka market size is estimated at 107,1 million US dollars or 16 million liter in 2014.

18 359

14 712

16 658

16 349

16 149

0

5 000

10 000

15 000

20 000

2010 2011 2012 2013 2014

Vodka consumption in 1000 liters

1 221 1 350

1 369

1 379

1 375

1 100 1 150 1 200 1 250 1 300 1 350 1 400

2010 2011 2012 2013 2014

The average retail price for 0,5l of Vodka (AMD)

15

Consumption volumes of whisky in Armenia has grown for 1.6 times since2009. In 2013 Armenians have consumed 182 thousand liters of whisky. Asthere is no whisky production in Armenia, the whole amount is imported.The average price of whisky as of February 2013 was 30,000 Armeniandrams. The price varied according to brands starting from 4,000 Armeniandrams to 240,000 Armenian drams.

Whisky Consumption in Armenia

The CAGR of whisky consumption in Armenia for the period of 2009-2013 was 13%.

Whisky is mainly imported from US, Canada and UK.

Local whisky market size is estimated at 13,1 million US dollars or 182 thousand liter in 2013. 2%

8%6%

56%

28%

Whisky import to Armenia shares in 2013

France

Ireland

India

United Kingdom

USA

112 109 124

171 182

2009 2010 2011 2012 2013

Whiskey Consumption 1000 liters

16

The volumes of consumption of gin in Armenia has grown twice since 2009.The consumption of gin in Armenia was equal to 13.5 thousand liters. As incase of whisky, there is no gin production in Armenia, so the wholequantity is imported The average price of gin as of February 2013 was7,000 Armenian drams.

Gin Consumption in Armenia

The CAGR of gin consumption for the period of 2009-2013 was 18.9%.

Local gin market size is estimated at 230 thousand US dollars or 13.5 thousand liter in 2013.

1%

57%27%

1%14%

Gin import to Armenia shares in 2013

Canada

France

Spain

United Kingdom

USA6,75

9,00 11,25 11,25

13,50

2009 2010 2011 2012 2013

Gin Consumption in 1000 liters

17

Tequila is one of least popular beverages in Armenia. However, itsconsumption has grown for 2.8 times since 2009 with CAGR equal to 29.4%.The whole consumed quantity is imported as there is no local production oftequila. The price for tequila as of February 2013 was varying from 5,100Armenian drams to 34,500 Armenian drams. In Armenia is mainly consumedMexican production tequila.

Tequila Consumption

The CAGR of tequila consumption for the period of 2009-2013 was 29.4%.

The whole market is occupied by imported tequila.

Local gin market size is estimated at 1.2 million US dollars or 31.5 thousand liter in 2013.

11,313,5

2729,3

31,5

2009 2010 2011 2012 2013

Tequila consumption in 1000 liters

18

Rum also is not considered popular beverage in Armenia. Its consumptionhas grown for 2.3 times since 2009 reaching 36 thousand liters in 2013. Thewhole consumed quantity is imported as there is no local production ofrum. The price for rum as of February 2013 was varying from 6,200Armenian drams to 23,200 Armenian drams.

Rum Consumption in Armenia

The CAGR for the period of 2009-2013 was equal to 23%.

Local rum market size is estimated at 860 thousand US dollars or 36 thousand liter in 2013.

11%8%

77%

4%

Rum import to Armenia shares in 2013

Cuba

UnitedKingdomUSA

Other countries

15,8

22,5 24,8

31,536

2009 2010 2011 2012 2013

Rum Consumption in 1000 liters

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Some Interesting Stats

25%

17%15%12%

31%

Wine Import Structure by origin

FrenchMoldovanChileanGeorgianOther

84%

16%

Sparkling wine consumption shares by origin

ArmenianOther

58%26%

2%

14%

Whisky consumption shares by quality

ScotchAmericanCanadianIrish

23%

77%

Sales shares by Gin type

PremiumStandard

20

Some Interesting Stats

88%

13%

Beer consumption shares by origin

Armenian

Imported50%

15%

24%

10%1%

Vodka sales by brand type

LocalStandardValueLow priceOther

57%43%

Tequila consumption shares by type

WhiteGold

49%

9%14%

28%

Rum sales by brand type

WhiteDarkFlavouredOther

95%

5%

Brandy consumption shares by origin

ArmenianImported

21

● Reports of national statistical service of republic of Armenia

● Spyur.am business directory

● Internal sources of Avenue Consulting Group

● UN Comtrade Database

Sources

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