Agro-processing

Armenia’s agro-processing industry has been and is still considered to be one of the most important and highly efficient sectors of the country’s economy since the Soviet era. This sector is also very important with regard to ensuring the rural population’s employment and income and contributes to the formation of the food and economic safety, the agricultural and food market, as well as ensures a guaranteed and stable supply of safe and quality food products to the population.

The organizations operating in the field of agricultural products processing industry of Armenia have set themselves the task of increasing the work efficiency and the competitiveness of the manufactured products and diversifying the production portfolio. Some developing companies are successfully competing in both domestic and CIS member states’ markets, as well as international food markets and making investments for further development of the production process.

The activation of operation of the processing system and the gradual increase of export volumes have specifically contributed to the alleviation of the problem of sale of agricultural products and increase of the marketability level of agricultural farms.

In 2019, the foreign trade turnover of agrifood products, at current prices, increased by 10.7% as compared to the previous year and valued $1,671.7mln. In 2019, agrifood products worth $866.6mln ($805.1mln in 2018) were imported to the country, which is about 15.7% of total imports. Exports amounted to $796.4mln (in 2018 - $696.7mln), which is 30.2% of the total exports. In 2019, the importation of agrifood products increased by about 7.1% as compared to the previous year, while the exportation increased by 12.5%. Fresh fruits and vegetables, beverages, canned food, and fish dominate within the structure of exported agrifood products.

According to the estimates, there are about 1,600 food production enterprises in the Republic of Armenia, including:

  • Fruits and vegetables processing - about 69 enterprises, of which eight are relatively large (Artashat Cannery OJSC, Proshyan Brandy Factory LLC, Yeghegnadzor Cannery LLC, Ararat Food Factory LLC, Ararat Canning Factory LLC, Euroterm CJSC, MAP CJSC, Yerevan Beer CJSC). The total production capacity of processing is about 250,000 tons of fruits and vegetables per year. The average payroll number of industrial production staff is about 2,243 people.
  •  Production of dried food products and spices - about 350 individuals and legal entities, of which six are medium-sized enterprises (Chir LLC, Aveliats LLC, Gyughi Tatik LLC, Armen Manukyan and Hasmik Mirzoyan private entrepreneurs, Vayk Group CJSC), while the rest are microenterprises. The total production capacity of processing is about 15,000 tons of fruits and vegetables per year. The average payroll number of industrial production staff is about 880 people.
  • Grape processing - about 50 enterprises, of which 12 are relatively large (Yerevan Brandy Factory CJSC, Artashat Vinco CJSC, Ijevan Wine Brandy Factory CJSC, Yerevan Ararat Brandy-Wine-Vodka Factory OJSC, Proshyan Brandy Factory LLC, Ararat Wine Factory LLC, Avshar Wine Factory LLC, Wine Brandy House Shahnazaryan LLC, AKZ LLC, Samkon LLC, Armenia Wine Factory LLC, Vedi Alco LLC). The total production capacity of processing is about 265,000 tons of grapes per year. The average payroll number of industrial production staff is about 3,200 people.
  • Milk processing - more than 150 enterprises, of which 12 are relatively large (Pargev LLC, Bonilat LLC, Dustr Marianna LLC, Multi Agro Scientific Production Center LLC, Arzni Kat LLC, Tamara and Ani LLC, Biokat LLC, Chanakh LLC, Dustr Melanya LLC, Igit LLC, Elola LLC, Araks-2 production cooperative and others). The total production capacity of processing is about 490,000 tons of milk per year. The average payroll number of industrial production staff is about 1,552 people.
  • Meat processing - about 74 enterprises, of which 15 are relatively large, including Alex Grig LLC, Bacon Product LLC, Good Samaritan LLC, Natfood LLC, Atenk LLC, AR Delikates LLC, Mush LLC, Bayazet LLC, Ararat production cooperative and others. The total production capacity of processing is about 50,000 tons of meat per year. The average payroll number of industrial production staff is about 2,203 people.
  • Abbatoirs - about 20 slaughterhouses, all being small. Slaughterhouses are almost non-functioning or operate at a very negligible capacity, for livestock butchering at slaughterhouses is not yet mandatory in the country. The average payroll number of industrial production staff is about 90 people.[H1] 
  • Flour milling - about 21 enterprises, of which 12 are large (Alex Grig LLC, Modus Granum LLC, Astafyan Holding LLC, Talgrig LLC, Grand Candy LLC, At Grain LLC, VT Trade CJSC and others) and medium-sized, the others are small. The total production capacity of milling is about 400,000 tons of flour per year. The average payroll number of industrial production staff is about 1,188 people.
  • Fish products manufacturing - 10 enterprises, of which five are relatively large (Unifish LLC, Mkhchyan Fish LLC, Ecofish Trade LLC, BAKSS LLC, Spitak Dolphin LLC). The total production capacity of processing is about 5,000 tons of fish products per year. The average payroll number of industrial production staff is about 145 people.
  • Bread baking - more than 500 bakery enterprises, of which 25 are medium-sized (Bread Factory #4 CJSC, Sevan Bread Factory CJSC, Anahit LLC, David 84 LLC, Khariskh LLC, Hatsagorts Andranik LLC and others), and the remainder are small. The total production capacity of baking is about 500,000 tons of bread per year. The average payroll number of industrial production staff is about 4,515 people.
  • Confectionery and pasta - about 212 enterprises, of which 12 are medium-sized (Grand Candy LLC, A. Avetyani ASA LLC, Mancho Group LLC, Daroink LLC, AAFPC LLC, Shant Plus LLC, Armsweet LLC and others), the remainder are of small and micro size. The total production capacity of manufacturing is about 40,000 tons of confectionery and pasta per year. The average payroll number of industrial production staff is about 4,302 people.
  • Mineral and drinking water and non-alcoholic beverages - more than 60 enterprises, of which 12 are medium-sized (Jermuk Group CJSC, RRR Mineral Water Plant CJSC, Jermuk Mother Plant CJSC, Coca-Cola Hellenic Bottling Company Armenia CJSC, Jermuk Group International Pepsi-Cola Bottler LLC and others), the remainder are of small and micro size. The total production capacity of bottling is about 300mln liters of mineral and drinking water and non-alcoholic beverages per year. The average payroll number of industrial production staff is about 1,791 people.
  • Beer brewing - 10 enterprises, of which three are relatively large (Yerevan Beer CJSC, Gyumri Beer LLC, Kotayk Beer Factory LLC). The total production capacity of brewing is about 150mln liters of beer per year. The average payroll number of industrial production staff is about 994 people.
  • Coffee and tea processing and packaging - about 47 enterprises, of which five are medium-sized (Royal Armenia JV LLC, Rafael Contini Trading Company JV LLC, Alex Grig LLC, Bio Universal LLC, HAM Tea LLC), the remainder are of small size. The total production capacity of processing and packaging is about 25,000 tons of coffee and tea per year. The average payroll number of industrial production staff is about 406 people.
  • Vegetable oil production - six enterprises, of which one is medium-sized (Shogh vegetable oil factory LLC), the others are of small size. The total production capacity is about 5,000 tons of vegetable oil per year. The average payroll number of industrial production staff is about 93 people.
  • Sugar production - two enterprises, of which one is large (Lusastgh-Sugar LLC), the other is medium-sized. The total production capacity is about 250,000 tons of sugar per year. The average payroll number of industrial production staff is about 105 people.
  • Salt production - two large enterprises. The production capacity is about 100,000 tons of salt per year. The average payroll number of industrial production staff is about 294 people.

In 2019, the share of the agricultural products processing industry within the overall gross industrial output was 34.8%, whereas within the processing industry it was 49.8%.

The production volumes of the product assortment generated from processing of agricultural products in 2015-2019 in the Republic of Armenia are provided in Table 1.

The level of production, exportation, and self-sufficiency of the main assortment of products generated from processing of agricultural raw materials and the share of local production within the sales structure in 2017-2019 in the Republic of Armenia are provided in Table 2.

The volumes of acquisition of fruits, vegetables, and grapes by enterprises of the processing industry of the Republic of Armenia in 2015-2019 are presented in Table 3.

 

The assortment of vegetables and fruits for purveyance has significantly increased and become extremely diverse. Nearly the full assortment of vegetables, fruits, and berries growing in Armenia is being purveyed, including beans, okra, black and red pepper, carrot, pumpkin, horse-fennel, lily and other wild plants, nearly the full assortment of berries, pomegranate, quince, plum, cherry, sweet cherry, green walnut, rosehip, mulberry, and others.

In order to increase the level of accessibility of loans provided to the companies operating in the agricultural products processing industry, enhance the contractual relations between the processors and farming enterprises on acquisition of raw materials, provide stable guarantees to farming enterprises on the sale of raw materials and expedite the processing of payments to farming enterprises for acquisition of raw materials, a program of subsidizing the interest rates of the loans provided to the agro-processing sector for purveyance of agricultural raw materials has been implemented since 2017, and within this program’s framework the share (amount) equivalent to up to 9% threshold of the targeted loans provided at a maximum nominal annual interest rate of up to 12% was subsidized, whereby the annual loan interest rate paid by the borrower was 3%. The loans to be subsidized and provided within this program were exclusively targeted towards paying the costs of the purveyed harvest. The program supported the enterprises processing fruits, vegetables, and grapes.

As a result, the program established competitive conditions for processing of payments for raw materials acquired from farming enterprises. For the first time in the last decade the cost of fruits, vegetables, and grapes purveyed in 2019 was fully paid to farming enterprises by the end of December, whereas the amount not paid to farming enterprises by the year-end for purveyance of fruits, vegetables, and grapes in 2017 equaled 1,377.8mln Armenian drams (5.9%), in 2018 - 200.4mln Armenian drams (0.7%), and in 2016 the due amount was 2,048.4mln Armenian drams, of which 110.3mln Armenian drams was due for purveyance of raw materials in 2015.

In 2019-2020, in order to improve the efficiency of the program, the categories of the loans classification within the program framework were supplemented with the new ones: for milk collection and acquisition of farm animals by slaughterhouses.

To mitigate the effects of the Coronavirus pandemic, the interest rate on the loans provided within the program framework was set at 0% until December 31, 2020, the loan repayment period was extended to 1.5 years, and the categories of the loans classification was supplemented with the new ones for purchase of fruits and vegetables and acquisition of glass jars, lids, aseptic bags, and their containers that are used for production of canned fruits and vegetables. The loans to be subsidized and provided are exclusively targeted towards paying the costs of the purveyed harvest.

In order to increase the production volumes of products of agricultural origin and agro-processed products, ensure the quality and safety requirements in compliance with international standards, enhance the competitiveness, and increase the exportation volumes, the RA Government Decree No.893-L dated July 19, 2018 approved the state assistance program for leasing (financial lending) of equipment in the food and agricultural sector of the Republic of Armenia for acquisition of new technologies and equipment through application of leasing mechanisms. Within the program framework, individuals and legal entities operating in the food and agricultural sector can through leasing purchase equipment worth up to 450mln Armenian drams. Leasing is provided for a term of up to eight years, with 20% down payment and 4% interest rate, whereas the businesses operating in the border areas and receiving social assistance have 0% interest rate.

To mitigate the effects of the Coronavirus pandemic, the interest rate on leasing provided within the program framework was set at 0% until December 31, 2020.

Extensive work is being done with regard to implementation of legislative reforms in the agro-processing sector and additional functions arising from Armenia’s membership to the Eurasian Economic Union, particularly legislative and institutional reforms, which will contribute to the development of the sector, rapid integration with the EEU, increase of the level of trust towards the quality and safety of food products manufactured in Armenia and will seriously stimulate the increase of volumes for production and exportation.

 

 

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