Publication: Monitor Volume: 5 Issue: 103

Pernod Ricard of France, the leading wines and spirits company in the European Union, has acquired the Yerevan Brandy Company (YBC), producer of the famed “Armenian cognac” and an object of national pride in Armenia. Pernod Ricard won the international privatization tender for YBC in June 1998 for US$30 million–a price vociferously denounced as unfair by the Armenian parliamentary opposition but, ultimately, defended successfully by the government of Prime Minister Armen Darpinian.

That controversy and other hurdles had to be overcome before the final signing of the agreement on May 25 in Yerevan by Pernod Ricard president Thierry Jacquillat and Armenian Privatization Minister Pavel Ghaltakhchian. To make that possible, the Armenian government allowed Pernod Ricard to use the term “brandy” instead of cognac, so as to avoid competing with French cognac, and granted the company the exclusive use of the Armenian factory’s brand names, labels and logos, disallowing their use by other Armenian producers or by their affiliates in Russia. Even before the signing of the final agreement, Pernod Ricard took over the management of the company and has already invested US$5 million toward improving the quality of locally produced grapes which are used for producing the brandy. That investment trickles down to the Armenian grape farmers–an almost unique situation in today’s impoverished, investment-starved Armenia.

YBC’s traditional and lucrative market has been Russia. That market has recently dried up somewhat due to competition from other foreign products and to Russia’s financial crisis. The takeover by Pernod Ricard has rescued YBC from a precarious commercial situation. The company will seek not only to recapture market sectors in Russia but to diversify the export outlets. It relies on YBC’s top-of-the line product, the “Ararat,” to make inroads into West European and American markets and to turn the Armenian brandy into an international beverage (Noyan-Tapan, Business Wires, M2 Communications, May 25-26).

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