What is holding back winemaking in Azerbaijan? Requiem for the grapevine

According to information from the State Statistics Committee, domestic winemaking is going through difficult times: over ten months, Azerbaijan has seen a significant decline in the production of wine and brandy. Notably, unlike other segments of the alcoholic beverages market, winemaking is largely dependent on export demand. Unfortunately, external shipments of grape-based alcoholic products have also dropped by a quarter in monetary terms. The decline in inbound tourism this year has also contributed to the reduced market demand for local wines. Overall, the sector has faced ongoing issues for several years, including slow growth in vineyard areas and a lack of interest among small farms in cultivating technical grape varieties.

After the barbaric destruction of vineyards in Azerbaijan during Gorbachev’s anti-alcohol campaign and the prolonged stagnation of the sector in the 1990s, positive developments have emerged in the past two decades, allowing this field to be revived. In 2002, on the initiative of the National Leader Heydar Aliyev, the law “On Viticulture and Winemaking” was adopted. Later, at the end of 2011, President Ilham Aliyev approved the state programme “On the Development of Viticulture in Azerbaijan for 2012–2020.”

During this period, a series of measures were implemented to accelerate the establishment of new vineyards, promote privatisation, modernise and build new processing facilities, and increase the production of grapes and their processing into wine products. For comparison, while the area of vineyards at the beginning of the 21st century was just over 3,500 hectares, by 2020, vineyards had been planted on nearly 16,000 hectares.

The more than fourfold increase in vineyard areas for raw material production can undoubtedly be considered an industry success; however, to what extent has this met the targets set out in the State Programme? According to the first State Programme, vineyard areas should have reached at least 50,000 hectares five years ago. Unfortunately, the current figure is roughly a third of that – about 17,000 hectares.

Similarly, the programme’s targets aimed to increase grape production in the country to 500,000 tonnes and wine production to 30 million decalitres. However, current statistics fall significantly short. According to the State Statistics Committee, in January–October 2025, Azerbaijan harvested 206,600 tonnes of grapes, a 3% increase, which is roughly two and a half times below the targets set in the State Programme.

The situation is even worse in the production of the sector’s main products – grape wines and brandy. According to a recent bulletin from the State Statistics Committee, in January–November 2025, Azerbaijan produced 554,700 decalitres of wine, reflecting a 50.1% decline. The picture is equally bleak for brandy, cognac, and whisky: over the same 11 months, the alcoholic beverages industry produced 395,400 decalitres of these spirits, which is 48.2% less than during the same period in 2024.

What is behind the current decline in sectoral performance, and why has growth stalled in viticulture and winemaking, which had a promising start at the beginning of the reforms? There are many reasons, both objective and subjective, but we will focus on the key factors.

In terms of the raw material base, one notable issue is that, for subjective reasons, the vast majority of Azerbaijan’s 17,000 hectares of vineyards are planted with table grape varieties. Technical grape varieties, which are essential for the winemaking industry, cover just over 5,000 hectares, most of which are concentrated in the holdings of around 23 medium and large wineries.

This circumstance is a crucial factor explaining many features of the sector’s development. Despite the adoption of the law on cooperatives and the implementation of several joint programmes with international donors to develop rural communities, all attempts to form sustainable commercial associations of farmers have failed. It is therefore unsurprising that today small individual farms engaged in viticulture can more or less successfully produce table grape varieties, which are largely sold on the domestic market.

In contrast, farmers growing technical grape varieties face serious challenges. Specifically, smallholders not united in cooperatives struggle to cover the substantial costs of vineyard maintenance, pay for agronomic measures, fertilisers, treatments against phylloxera and other diseases, and purchase saplings of high-yield imported grape varieties. In the foothill regions where technical grapes are cultivated, hail is a frequent occurrence, and the system of anti-hail devices that existed in Soviet times has long disappeared.

Most problematic, however, is the absence of a transparent and effective market for raw materials. Large and medium-sized wineries primarily produce wines from grapes grown on their own estates, with purchases from small farms remaining relatively modest. Moreover, small suppliers often face artificially depressed purchase prices. By comparison, in cotton production, regulated minimum procurement prices by grade and quality have been in place for many years, but nothing similar exists in viticulture.

Viticulture in Azerbaijan does benefit from subsidies, particularly for establishing new vineyards. Farmers receive a one-time, non-repayable grant of 8,000 manat ($4,700), followed by an annual subsidy of 650 manat ($382) for four years to support ongoing soil cultivation. However, after this preferential period ends, grape growers often face difficulties selling their produce and contend with unregulated purchase prices.

Another challenge in this segment is crop storage. Specialised refrigerated warehouses for grapes and facilities for producing must are largely controlled by the major winemaking enterprises.

A further limitation is the lack of adoption of successful international practices. Azerbaijan has yet to emulate the models of Italy, France, Spain, Portugal, and Greece—countries celebrated not only for their diverse wine terroirs but also for their family-run or cooperative micro-wineries (domaine, tenuta, castello), which produce small batches of domestic wines, grappa, and brandy.

Among the objective factors reducing domestic demand for wine and brandy is the significant increase in excise taxes in recent years. This trend continues: under the draft law “On the State Budget of the Republic of Azerbaijan for 2026,” from 1 January 2026, excise taxes on wines will increase by 31%, and on sparkling wines by 28%. At the same time, excise duties on brandy and cognac materials will rise from 4.8 ($2.82) to 5 manat ($2.94) per litre, an increase of roughly 4.2%.

These challenges were further exacerbated by the COVID-19 pandemic. In 2020–2021, lockdowns caused a severe market downturn for both farmers and large wineries. Catering establishments were closed, weddings were cancelled, domestic and inbound tourism stalled, and alcohol exports fell—all of which had traditionally accounted for a substantial share of the winemaking sector’s sales.

In subsequent years, to boost sectoral momentum, wine festivals have been held in Shamakhi and other cities across the country, enotourism destinations have been developed to promote the nation’s winemaking regions, and, most importantly, the activities of the Azerbaijan Export and Investment Promotion Agency (AZPROMO) to promote domestic wines and brandy on foreign markets have intensified.

In recent years, thanks to the efforts of AZPROMO, trade representations, and with the support of Azerbaijani trade and wine houses, the share of Azerbaijani wine and brandy exports has noticeably increased in Poland, Latvia, China, as well as in several other Asian countries and the Turkish market. Today, around 15 domestic producers export winemaking products, but only 4–5 leading companies serve as major exporters.

Unfortunately, all these measures do not always deliver the desired effect. According to the State Statistics Committee, over the first ten months of this year, the total export of Azerbaijani grape wine and must amounted to 122,500 decalitres, with a total value of $3.557 million, representing a 22% decline in volume and a 25.6% drop in monetary terms. The decline in external shipments is largely due to the fact that the main market for Azerbaijani winemaking products remains Russia and other CIS countries.

The continued narrowness of export markets is the main vulnerability factor: the recent cooling of Azerbaijani–Russian relations has slowed trade turnover across several sectors, including winemaking. The decrease in wine and brandy production and exports has also been influenced by a 1.8% drop in inbound tourism, primarily from Russia, India, and several post-Soviet states. Foreign visitors have traditionally been a key target group for the winemaking sector, actively tasting local wines and often taking them home as souvenirs.

In light of these challenges, there is reason for optimism that many of the subjective factors holding back the dynamic development of Azerbaijan’s viticulture and winemaking can soon be addressed. The “State Programme for the Development of Viticulture in Azerbaijan for 2018–2025,” initiated by the head of state, outlines a range of measures aimed at accelerating the establishment of new vineyards and expanding processing capacities.

As agricultural lands in Karabakh are cleared of mines and new vineyards are planted across other regions of Azerbaijan, the total vineyard area is expected to surpass 23,000 hectares in the coming years, with annual grape harvests projected to reach 250,000–300,000 tonnes.