Russian cognac output drops as Armenian spirit supply is curbed

Restrictions on Armenian spirits ripple through Russian cognac output

Russian cognac production fell sharply in June after restrictions on Armenian shipments disrupted the flow of raw material used to bottle the spirit, according to Andrey Moskovsky, head of the Alkopro guild, whose comments were reported by Kommersant. Domestic plants had too little time to rebuild supply chains for the base ingredient after the curbs took effect, he said.

What was restricted

In the second half of May, Russia's consumer protection watchdog Rospotrebnadzor suspended sales of cognac and still wines from three Armenian producers: Vedi-Alko, the Abovyan Cognac Factory and the wine-and-cognac house Shakhnazaryan. The regulator cited non-compliance with mandatory quality standards approved in Russia as the reason for the temporary ban. The measure removed a set of established supply lines from the market at short notice.

Why the supply chain matters

At the center of the disruption is cognac distillate, the base semi-finished product from which classic cognac is made after ageing in oak barrels. Before it reaches the bottling line, the distillate passes through assemblage — the blending of spirits — and a period of rest in blending tanks. Armenia was one of the most important suppliers of cognac spirits to the Russian market, Moskovsky said, which is why the loss of those shipments fed directly into finished output rather than staying contained upstream.

With only about a month and a half to adapt, Russian producers found it extremely difficult to reroute their sourcing, the analyst noted. Rebuilding relationships with alternative suppliers of raw spirit, and qualifying that spirit for blending, cannot be done as quickly as switching a single input, because the material has to move through ageing, assemblage and resting before it is ready for bottling.

Production figures

The impact showed quickly in the numbers. Russian production of finished cognac fell 26.67 percent in June, according to the figures cited by Moskovsky. Across the first half of the year, output was down 6.6 percent, indicating that a single month of steep decline was heavy enough to pull the six-month total into negative territory.

• June output: down 26.67 percent
• First-half output: down 6.6 percent
• Producers restricted: three (Vedi-Alko, Abovyan Cognac Factory, Shakhnazaryan)
• Restriction imposed: second half of May

What it means for trade

For importers and distributors, the immediate consequence is tighter domestic supply of finished cognac heading into the second half of the year, as producers work through the gap in raw-spirit inventories. The three named Armenian companies are shut out of Russian sales while the quality dispute stands, which reshuffles which suppliers can serve the market. For exporters of cognac spirits outside Armenia, the disruption opens a window to fill a supply role that Armenian distillate has traditionally covered, provided their material meets the mandatory Russian standards that triggered the original suspension. How long the shortfall persists depends on how fast Russian plants can qualify new sources of distillate and whether the Armenian producers can bring their products back into compliance.