- - Monday, May 11, 2015

ARTEMOVSK, Ukraine — The booms of artillery and the rumble of tanks never shake the rows of dusty wine bottles in a mine more than a hundred feet below the east-central Ukrainian town of Artemovsk.

That suits those who work here just fine.

“When you are here you are thinking about the work,” said Nina Stovbur, chief production engineer at the Artemovsk Winery. “It’s like an escape.”

But the escape is not total at the sprawling underground winery established by Joseph Stalin after World War II to create presumably nonbourgeois Soviet champagne. The front lines of Ukraine’s civil war are about 12 miles away, and government troops march through the town in combat gear. Buses that used to bring tourists from nearby separatist-held Donetsk no longer run. The winery, which produced 10 million bottles of wine last year — down from 19 million two years earlier — has had to cut shifts even as almost a third of the prewar staff of 700 has fled.

“So many have left — left with young children,” Ms. Stovbur said. “Some of them went to Russia, others to the Kiev region. There was shelling.”



And much of the raw material for the winery now sit behind enemy lines.

While the ingredients go into bottles that come out as Krimart brut sparkling wine and other brands now must travel through a concrete-and-earthworks gauntlet of military checkpoints, the winery is still trying to figure out what the loss of Crimea will mean for future business. The peninsula, annexed by Russia last year, was an important source of grapes for the winery and for the Ukrainian wine industry as a whole.

Though Crimea’s 10,400 square miles were about 4.5 percent of the country’s territory, its vineyards produced about 57 percent of the country’s wine, according to the Association of Winemakers and Winegrowers, a Kiev-based trade association.

“The annexation of Crimea was a serious blow for the wine sector in [the Ukraine],” said association director Sergiy Mykhailechko.

Last year, Ukraine produced more than 6 million decaliters of wine, slightly more than half of what it produced in 2013 when Crimea was included, Mr. Mykhailechko said.

Russia is the biggest consumer market for vodka, and Ukraine is the third-largest, according to the market research firm IWSR. And the shooting war between the two has meant a direct hit to bilateral trade in spirits as well. Russia’s consumer agency last year banned Ukrainian imports of vodka and beer from selected major producers, saying the Ukrainian product was lacking in alcohol content and “organoleptic characteristics.”

The Ukraine News reported that Ukrainian vodka production fell 17.2 percent in August 2014 compared to a year earlier.

New realities

One Ukrainian company, Olimp, has readjusted to the new reality with new wine production in Odessa while keeping its Crimean operation for sales to the Russian market. The Kiev-based company was founded in 2000 and produces vodka, wine, cognac and cider, and used to produce all its wine in Crimea from its own vineyard under the name “Bakhchisaray,” which is the name of the town where it operates a distillery.

“It was, and still is, a difficult situation for our company,” Olimp spokeswoman Svetlana Evdokimenko said. “At the time when Russia took away the Crimea, we had started the development of our products. We had worked very hard on it.”

The company’s wine produced in Crimea had been sold in Ukraine and Russia, but now, Ms. Evdokimenko said, that wine is sold only in Russia, and they’ve rented a facility in Odessa to produce wine for the Ukrainian market.

“We decided not to give up and continue to produce products under the brand ‘Bakhchisaray,’” Ms. Evdokimenko said. “We’re working on it, looking for the best wine materials, the best manufacturers.”

The loss of Crimean grapes didn’t directly affect Dnepropetrovsk-based House of Vintage Cognacs Tavria because it gets its grapes from the Kherson region in southern Ukraine, said spokesman Sergii Martymiuk. But the company began manufacturing wine for the first time last year.

“We started to do wine because Crimean wine was absent in our market, and we had additional grapes,” Mr. Martymiuk said. “It’s because of Crimea and the price of imported wines — that’s why we have possibilities now.”

Mr. Martymiuk said one difficulty Ukrainian alcohol producers now face is that the economic crisis won’t allow them to raise prices. While sales are up, profits are down. The devaluation of the Ukrainian currency, the hryvnia, and inflation — 45.8 percent in March, according to website tradingeconomics.com — mean people have less disposable income.

“The economic crisis has affected the wine industry,” said Mr. Mykhailechko from the Association of Winemakers and Winegrowers. “People have no money.”

One step to save money being considered by the Artemovsk winery is to shift to cheaper synthetic cork to replace more expensive Portuguese cork, but Ms. Stovbur said that her winery never skimps on the bubbly even as they try to survive and even expand in a war zone.

“We are proud of our plant,” said Ms. Stovbur, who has worked at the winery for more than three decades. “We know what we do, and we guarantee the quality.”

Most of Ukraine’s wine was consumed in the country, while most of its exports went to Russia. European Union sanctions against products made in Crimea mean that the peninsula’s famed wineries, such as Massandra, now have a less diverse market, but one that is thirsty for what they make.

“Even with the Crimea, Russia depends on imports,” said Vadim Drobiz, director of the Federal and Regional Alcohol Markets Research Center in Russia. “We need Crimean wines for the domestic market. We have adopted various programs for the development of the wine industry in Russia, in the Crimea.”

Mr. Drobiz said that planned investments by the Russian government of hundreds of millions of dollars over five years would add new vineyards, and renovations would increase productivity.

Mr. Drobiz said, in Soviet times, the Crimea was a very important place for the production of grapes and wine, but a boom may have to wait until the crisis in Ukraine ends.

“Sanctions by the European Union affected Russia and the Crimea,” he said. “Economically, it’s very difficult now; the standard of living is going down. When the standard of living goes up, there will be more consumption of wine.”

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