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. Last Updated: 07/27/2016

Armenia Uncorks Russia Brandy War

The Armenian government, urged on by a prominent French investor, has demanded that distilleries in Moscow, St. Petersburg and Saratov stop calling their brandy "Armenian."

But the St. Petersburg distillery is bitterly lashing back, saying that discontinuing both the name Armyansky konyak and the image of the famous Mount Ararat on the labels of its bottles would lead to sharp sales losses.

The French firm Pernod Ricard ventured into Armenia a little less than a year ago to buy out the gem of the Caucasus nation's liquor industry, the Yerevan Brandy Factory. France has held the patent on the word "cognac" since the turn of the century to describe a particular kind of brandy, and Russia and the Soviet Union have been allowed to use the word only in Cyrillic.

So far, Pernod Ricard has paid only $2 million of the $30 million it agreed to for the plant , and the delay, said Pierre Larretche, Yerevan Brandy Factory president, is that too many factories around the former Soviet Union are diluting the Armenian brandy name.

The company expects to pay the full $30 million by June and to sign a new agreement with the Armenian government. But Larretche, in a response to questions faxed from Yerevan, said "the decision [on the final agreement with the government] is directly connected to the rights to the brands."

Pernod Ricard's commitment to its Armenian investment remains firm, company officials said, noting it had already invested "several million dollars" in the Yerevan factory and this month pledged to invest $5 million more.

But it also wants control of the Armenian Brandy name and the Mount Ararat image f which are now used freely by factories in Russia, all called Ararat and all once part of the same Soviet-era brandy megacompany.

Legally these independent factories are 100 percent-owned by the Armenian Agricultural Ministry. As such, the ministry is demanding that the Ararat factories in Moscow, Petersburg and Saratov cease making "Armenian" brandy f a demand made at the urging of the Yerevan Brandy Company, according to an executive at the company who asked to remain anonymous.

The Moscow Ararat factory actually complied, de facto, long ago: It has been idle for years.

The Saratov plant said it was using up the last of spirits it had got from Armenia and would not import any more because it had found cheaper sources in Azerbaijan and Crimea. Once it stops using Armenian spirits, the Saratov factory will stop using the Armenian name.

But Valentina Petrash, a spokes-woman for the Ararat factory in St. Petersburg, said the company should be allowed to continue calling its brandy "Armenian" since it has in stock a year's worth of spirits imported from Armenia.

Petrash said the St. Petersburg factory had gone 10 years without producing Armenian brandy f until December, when it received 120,000 liters of spirits from the Armenian ministry. The factory could ignore the order, but the ministry would then have the right to fire the factory's management, she said.

Deputy Agriculture Minister Armen Khachatryan said in a telephone interview that the fact the factory uses Armenian spirits is not enough to authorize it to use the brand name since other quality standards also have to be met.

But brandy from St. Petersburg is the least of the Yerevan Brandy Factory's problems. Suren Kazumian, president of his own premium liquor importing business, the Kazumian Co., said there are many more factories in Armenia itself that produce "Armenian Brandy."

"In a free market, one company cannot have exclusive rights to a category of liquor," Kazumian said. "What else can you call a brandy if it is made in Armenia but Armenian brandy? I don't believe anybody can hold such rights, any court would discard this."

The Russian brandy market has plummeted since the ruble devaluation. Demand for premium brands fell as much as 86 percent between August 1998 and February, according to market researcher Business Analytica Europe.