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 François 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.
Marianna Grigoryan is a freelance reporter based in Yerevan and editor of MediaLab.am.