Armenian PM wades into Carrefour row

By bne IntelliNews February 14, 2013

Clare Nuttall in Astana -

The Armenian government says it's set to help Carrefour resolve a dispute that has delayed the French hypermarket giant's entrance to the country, in a bid to prevent the country's investment climate being harmed further by the affair.

As the first international supermarket chain to try to crack the Armenian market, Carrefour is running up against the power of local oligarchs who want to keep control of the lucrative food retail market, say reports. However, Armenian Prime Minister Tigran Sargsyan has come out in favour of the French retailer, which could pave the way for Carrefour to open its first store in Yerevan this year.

On February 7, Sargsyan told journalists that, "Carrefour must be opened in Armenia for sure. I had a meeting with Carrefour representatives, and we discussed all the issues related to the entrance of the network to Armenia and its normal operation here. Armenia is quite interested in providing people with Carrefour's services," Sargsyan told journalists, Arka reported.

Sargsyan said that the company's delayed entrance to Armenia was due to disagreements between "private companies" and that his government had offered to help the company enter the market.

Carrefour's arrival is expected to boost competition, raise demand for agricultural products and help create new infrastructure, Sargsyan said.

Carrefour has another supporter in the form of US ambassador to Armenia, John Heffern, who made his views known over Twitter. "Hear Carrefour wants to open in Yerevan. I used to shop there in Brussels. Would be good for competition here. Hope it happens," Heffen wrote.

However, Carrefour's plans are rumoured to have alarmed the owners of some local chains, which currently dominate the formal retail sector. Because of its larger purchasing power and proprietary supplier network, retailers fear Carrfour will be able to undercut them, potentially putting the handful of local chains that have so far had the market to themselves out of business - or at least slash their fat profit margins.

Earlier in February, Armenian newspaper Zhamanak cited sources as saying that the owner of Dalma Garden Mall, oligarch Samvel Karapetyan, had suspended the agreement to lease space in the mall to Carrefour. There are also reports that the space may be leased instead to Yerevan City, a chain of supermarkets owned by Armenian businessman and MP Samvel Alexanyan, who is also the owner of Fleetfood, Armenia's largest importer of wheat, sugar, alcohol and cooking oil.

Opening day

Carrefour's arrival in Armenia has been anticipated for more than a year, and the first store was expected to open in late October 2012 - a month after Majid Al Futtaim Holding, the operator of the Carrefour brand in the Middle East and Central Asia, launched the first Carrefour in neighbouring Georgia. Carrefour executives have reportedly been trying for several months to meet with top government officials in an attempt to break the impasse.

In an emailed statement, Carrefour's press office told bne that, "in line with its strategy of developing the Carrefour brand, the Majid Al Futtaim group continues to analyze the Armenian market and aims to open its first store in the next 12 months."

Armenia's small retail sector is relatively underdeveloped, and still populated by local players, among them Star, SAS, Galaxy and Yerevan City - all of which have emerged in the last decade. The supermarket and grocery chains have gradually replaced open-air bazaars and street vendors, as Armenia, like other post-Soviet countries, makes its transition to a formal retail sector. However, as of 2012, the level of formal retail was only around 12%.

Retailers also face logistical problems because of the country's geo-political isolation. Hostile relations with Azerbaijan and Turkey mean that two of Armenia's international borders are closed, and Iran is under international sanctions, meaning that around 80% of Armenia's international trade is through Georgia. Combined with relatively low spending power, this has held the international chains out until now.

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