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ARMENIA: CAN FRENCH HYPERMARKET GENERATE GENUINE RETAIL COMPETITION?
EurasiaNet.org
March 25 2015
March 25, 2015 - 2:06pm, by Marianna Grigoryan
After years of controversy, the French-run hypermarket chain Carrefour,
one of the world's largest retail giants, finally opened a store
in Armenia earlier in March. But, for many Armenians, the opening
signified more than just easier access to a vast array of retail
items. Rather, it signaled a potentially significant step for Armenia
toward genuine market competition.
When it comes to competitive pricing of retail goods Armenia ranks
poorly among formerly Soviet states. A 2013 World Bank report ranked
Armenia as the most monopolized economy among the then-11 former Soviet
republics that comprised the Commonwealth of Independent States. Little
evidence exists to suggest that conditions have changed significantly
over the last few years.
"Carrefour's entrance into the market is definitely a positive
step," commented economic analyst Hayk Gevorgian, who works for the
pro-opposition Armenian Times daily.
Political analyst Richard Giragosian agreed. Carrefour's opening in
Armenia "may mark an important turning point in the development of
a more open and competitive market," he said.
President Serzh Sargsyan himself opened the hypermarket's doors on
March 11. The opening was several years in the making. And after such
a long delay between the initial announcement and the actual opening,
Gevorgian and some other observers wondered whether Sargsyan's presence
at the grand opening indicated that the French firm had cut some kind
of deal with the government-connected firm that has long dominated
food imports and retail in Armenia -- Alex Grig.
A company associated with ruling Republican Party of Armenia MP Samvel
Alexanian, Alex Grig ranked in 2014 as the country's third-largest
taxpayer (about 21.57 million drams or nearly $45 million). According
to the State Commission on Protection of Economic Competition of
Armenia, it partially or fully controls local markets for margarine,
chicken, oil, sugar and other food products.
No anti-trust actions have ever been launched against Alex Grig.
Economy Minister Karen Tchshmaritian denied at a December 2014 news
conference that monopolies control Armenia's economy.
At first glance, any food face-off between Alex Grig, via its chain
of 12 Yerevan City supermarkets, and Carrefour might not appear much
of a fight.
Carrefour ranks in size second only to Wal-Mart last year, generating
over 74.7 billion euros (more than $82 billion) in net sales from
stores in 33 countries. The Armenian hypermarket is its second location
in the South Caucasus; another store opened in the Georgian capital,
Tbilisi, in 2012.
Alex Grig, which markets its own items in its Yerevan City
supermarkets, currently dominates grocery sales in the Armenian
capital.
Though small, it is a fiercely defended food fiefdom. In 2013,
after announcements appeared that Carrefour would open in Yerevan's
high-end Dalma Garden Mall, the space instead was taken over by
another Alexanian-family-owned supermarket, Gourmand.
Yet the Armenian government has its own aims, too.
On a 2014 visit to Yerevan, French President Francois Hollande
visited Carrefour's present site and claimed that the hypermarket
would encourage other French companies to invest in Armenia.
That prediction, still unfulfilled, generated lots of attention. At
over $99.1 million, France ranks as the largest European foreign
investor in Armenia, and the second overall after Russia, according
to official data.
Despite its membership in the Russia-led Eurasian Economic Union,
Armenia, beset by a weak economy, remains interested in strengthening
ties with the European Union, of which France is a founding member.
But did the desire to attract more foreign investment prompt President
Sargsyan to push his party's MP, a longtime close political ally,
to tolerate Carrefour's entry into the Armenian market?
No one can say for sure. But Sargsyan recently brought an even more
powerful politician-businessman to heel. In February, Sargsyan publicly
derided Gagik Tsarukian, a big-spending former ally and head of the
opposition Prosperous Armenia Party, as a blight on Armenia, and
removed him from the National Security Council. Tsarukian promptly
resigned from his party post once investigators began to take an
interest in his financial dealings.
Against that backdrop, some believe that Sargsyan made his views
on Carrefour plain to Alexanian, who chose to comply rather subject
himself to the "Tsarukian" treatment. "[T]he mere fact that Armenia
and France became godfathers on a presidential level [to Carrefour
Armenia] means that the two sides came to an agreement," said political
analyst Safarian.
Economic analyst Gevorgian agreed. "Carrefour did not fight much
against the obstacles" that prevented its Dalma Garden opening,
he said. "They came to an agreement. That is why it has opened.
Otherwise, the opening would have been delayed again."
Representatives of Carrefour and Alexanian did not respond to requests
for comment. Alexanian's wife, Shoghine Alexanian, is registered as
the owner of Alex Grig. The MP denies that he owns anything.
The Republican Party in 2012 denied to EurasiaNet.org that Alexanian
had any influence over Carrefour's ability to set up shop in Armenia.
For some shoppers, the prices and overwhelming number of local
products on Carrefour's shelves are "just the same as in every other
supermarket."
Carrefour's office in Yerevan announced that 95 percent of its
food items are sourced locally or from local importers; a rate 22
percentage points higher than the worldwide rate for local sourcing
posted on the Carrefour website.
In Armenia, the volume of these purchases does not always appear to
affect retail prices. The 369 dram (77 cents) price for a kilogram
of Alex-Grig sugar, an import market controlled by Alex Grig, is
the same in both Carrefour's massive hypermarket and a far smaller
downtown Yerevan City supermarket.
A representative of Carrefour's Yerevan office told EurasiaNet.org
the store cannot comment on the reasons for selling this particular
sugar or its pricing since the company has many "different providers."
Such reticence is cause for concern among some analysts that
Carrefour's entry into the market will not have the desired impact
on fostering a more competitive market environment. Said economist
Vahagn Khachatrian, a member of the opposition Armenian National
Congress and former mayor of Yerevan: "We need time to understand
the real face of Carrefour" in Armenia.
Editor's note: Marianna Grigoryan is a freelance reporter based in
Yerevan and editor of MediaLab.am.
http://www.eurasianet.org/node/72711
From: Baghdasarian
EurasiaNet.org
March 25 2015
March 25, 2015 - 2:06pm, by Marianna Grigoryan
After years of controversy, the French-run hypermarket chain Carrefour,
one of the world's largest retail giants, finally opened a store
in Armenia earlier in March. But, for many Armenians, the opening
signified more than just easier access to a vast array of retail
items. Rather, it signaled a potentially significant step for Armenia
toward genuine market competition.
When it comes to competitive pricing of retail goods Armenia ranks
poorly among formerly Soviet states. A 2013 World Bank report ranked
Armenia as the most monopolized economy among the then-11 former Soviet
republics that comprised the Commonwealth of Independent States. Little
evidence exists to suggest that conditions have changed significantly
over the last few years.
"Carrefour's entrance into the market is definitely a positive
step," commented economic analyst Hayk Gevorgian, who works for the
pro-opposition Armenian Times daily.
Political analyst Richard Giragosian agreed. Carrefour's opening in
Armenia "may mark an important turning point in the development of
a more open and competitive market," he said.
President Serzh Sargsyan himself opened the hypermarket's doors on
March 11. The opening was several years in the making. And after such
a long delay between the initial announcement and the actual opening,
Gevorgian and some other observers wondered whether Sargsyan's presence
at the grand opening indicated that the French firm had cut some kind
of deal with the government-connected firm that has long dominated
food imports and retail in Armenia -- Alex Grig.
A company associated with ruling Republican Party of Armenia MP Samvel
Alexanian, Alex Grig ranked in 2014 as the country's third-largest
taxpayer (about 21.57 million drams or nearly $45 million). According
to the State Commission on Protection of Economic Competition of
Armenia, it partially or fully controls local markets for margarine,
chicken, oil, sugar and other food products.
No anti-trust actions have ever been launched against Alex Grig.
Economy Minister Karen Tchshmaritian denied at a December 2014 news
conference that monopolies control Armenia's economy.
At first glance, any food face-off between Alex Grig, via its chain
of 12 Yerevan City supermarkets, and Carrefour might not appear much
of a fight.
Carrefour ranks in size second only to Wal-Mart last year, generating
over 74.7 billion euros (more than $82 billion) in net sales from
stores in 33 countries. The Armenian hypermarket is its second location
in the South Caucasus; another store opened in the Georgian capital,
Tbilisi, in 2012.
Alex Grig, which markets its own items in its Yerevan City
supermarkets, currently dominates grocery sales in the Armenian
capital.
Though small, it is a fiercely defended food fiefdom. In 2013,
after announcements appeared that Carrefour would open in Yerevan's
high-end Dalma Garden Mall, the space instead was taken over by
another Alexanian-family-owned supermarket, Gourmand.
Yet the Armenian government has its own aims, too.
On a 2014 visit to Yerevan, French President Francois Hollande
visited Carrefour's present site and claimed that the hypermarket
would encourage other French companies to invest in Armenia.
That prediction, still unfulfilled, generated lots of attention. At
over $99.1 million, France ranks as the largest European foreign
investor in Armenia, and the second overall after Russia, according
to official data.
Despite its membership in the Russia-led Eurasian Economic Union,
Armenia, beset by a weak economy, remains interested in strengthening
ties with the European Union, of which France is a founding member.
But did the desire to attract more foreign investment prompt President
Sargsyan to push his party's MP, a longtime close political ally,
to tolerate Carrefour's entry into the Armenian market?
No one can say for sure. But Sargsyan recently brought an even more
powerful politician-businessman to heel. In February, Sargsyan publicly
derided Gagik Tsarukian, a big-spending former ally and head of the
opposition Prosperous Armenia Party, as a blight on Armenia, and
removed him from the National Security Council. Tsarukian promptly
resigned from his party post once investigators began to take an
interest in his financial dealings.
Against that backdrop, some believe that Sargsyan made his views
on Carrefour plain to Alexanian, who chose to comply rather subject
himself to the "Tsarukian" treatment. "[T]he mere fact that Armenia
and France became godfathers on a presidential level [to Carrefour
Armenia] means that the two sides came to an agreement," said political
analyst Safarian.
Economic analyst Gevorgian agreed. "Carrefour did not fight much
against the obstacles" that prevented its Dalma Garden opening,
he said. "They came to an agreement. That is why it has opened.
Otherwise, the opening would have been delayed again."
Representatives of Carrefour and Alexanian did not respond to requests
for comment. Alexanian's wife, Shoghine Alexanian, is registered as
the owner of Alex Grig. The MP denies that he owns anything.
The Republican Party in 2012 denied to EurasiaNet.org that Alexanian
had any influence over Carrefour's ability to set up shop in Armenia.
For some shoppers, the prices and overwhelming number of local
products on Carrefour's shelves are "just the same as in every other
supermarket."
Carrefour's office in Yerevan announced that 95 percent of its
food items are sourced locally or from local importers; a rate 22
percentage points higher than the worldwide rate for local sourcing
posted on the Carrefour website.
In Armenia, the volume of these purchases does not always appear to
affect retail prices. The 369 dram (77 cents) price for a kilogram
of Alex-Grig sugar, an import market controlled by Alex Grig, is
the same in both Carrefour's massive hypermarket and a far smaller
downtown Yerevan City supermarket.
A representative of Carrefour's Yerevan office told EurasiaNet.org
the store cannot comment on the reasons for selling this particular
sugar or its pricing since the company has many "different providers."
Such reticence is cause for concern among some analysts that
Carrefour's entry into the market will not have the desired impact
on fostering a more competitive market environment. Said economist
Vahagn Khachatrian, a member of the opposition Armenian National
Congress and former mayor of Yerevan: "We need time to understand
the real face of Carrefour" in Armenia.
Editor's note: Marianna Grigoryan is a freelance reporter based in
Yerevan and editor of MediaLab.am.
http://www.eurasianet.org/node/72711
From: Baghdasarian