Armenia - Fast Moving Consumer Goods Sector Armenia - Fast Moving Consumer Goods
Overview
Table: Retail trade in Armenia; Unit Thousand U.S. Dollars
|
|
2015 |
2016 |
2017 |
2018 (Estimated) |
|
Total Trade |
4,774,604 |
4,653,320 |
5,387,437 |
5,957,836 |
|
Retail Trade |
2,748,950 |
2,590,755 |
2,756,513 |
2,996,879 |
|
Foodstuff Imports |
314,900 |
332,000 |
378,200 |
452,000 |
|
Textile Imports |
164,500 |
224,800 |
270,600 |
295,500 |
|
Total Imports from the U.S. |
107,500 |
88,100 |
136,300 |
145,200 |
|
Exchange Rates |
478 |
480 |
483 |
485 |
Data Sources: National Statistic Service: Yearbook 2017, Social Economic Situation in Armenia 2017 January-December, and Central Bank of Armenia.
According to the National Statistical Service, Armenia’s domestic trade in 2017 increased by 14% to about $5.4 billion with money transfers from abroad picking up again. The biggest contributor to Armenia’s domestic trade volume is retail trade, at about $2.8 billion in 2017. According to the Central Bank data, private remittances to Armenia in 2017 sent via banks increased by 12.4% to about $1.495 billion USD. About 76% of that amount came from Russia.
AT Kearney's 2015 Global Retail Development Index (GRDI) ranked Armenia 10th globally for retail opportunities, a drop of four spots compared to 2014 due to weak economic performance. AT Kearney notes that Armenia still has an unsaturated retail market which is shifting rapidly to modern formats. In Yerevan, the country's capital and home to about 80 percent of the country's retail sales, shoppers spend almost $100 million monthly on consumer goods, primarily food. Home improvement, clothing, and furniture are the top non-food categories. Armenia ranks between its neighboring countries on retail trade share of GDP, higher than Turkey but lower than Georgia. The size of the Armenian market is relatively small, but the potential for retail trade is considered to be high.
Retail trade is moving from small and medium stores to large trade centers, including supermarkets. Currently, there are several malls and large stores operating in Yerevan involved in trade of food and consumer products. Supermarkets are the most frequently used stores for FMCG purchases in Yerevan with 369.5 thousand customers daily. Small shops have nearly a third fewer customers.
However the market share of large supermarkets is still only about 39 percent of total value of FMCG trade in Yerevan. The Yerevan Mall opened in February 2014; its major tenants include Inditex Group brands and a Carrefour hypermarket, which finally made its entry into Armenia after working to do so for several years. This development is a solid sign of improvement for the market, whose high levels of corruption and local monopolism have previously hampered the entry of international players. In 2016, a new “Rossia” Mall opened in Yerevan city center. The entire cost of the project was around 15 million USD. The mall is home to the largest jewelry center in Yerevan. In 2017 another shoping center, RIO Mall, opened in Yerevan. In 2018, Carrefour anounced that it will open a new supermarket in the Rossia Mall. Construction of several other malls is underway. FMCG retail trade sector developments in Armenia follow the overall global trend: which is the gradual change to large-scale stores (supermarkets, hypermarkets).
Leading Sub-Sectors
According to AT Kearney’s report the main challenges for Armenia are the small population and strong monopolies in certain sectors. Carrefour’s delayed entrance into the market highlights these difficulties. However, the Government which came to power in May 2018 has announced that all administrative and customs barriers existing previously were removed for new entrants and now encourages all international players to come into Armenia. International retailers can benefit from a market that is shifting towards a western style business management, and from the Government’s efforts to attract international investments. International retailers began moving in when the first western style mall opened in 2012.
The growing number of western franchises in Armenia and the prevalence of copycat shops and restaurants – together with a general premium on name recognition – suggest that U.S. franchises could be successful, especially in Yerevan. Despite the generally low incomes of the population, many entrepreneurs have enough capital to provide startup funds for franchising.
Opportunities
Well-known Western franchises, particularly restaurants, are in demand in Armenia and the sector is showing signs of growth. Although the only current U.S. food franchises in Armenia are Pizza Hut, KFC, Burger King, Tutti Frutti, Nathans and Cinnabon, new pizzerias, restaurants, and sandwich bars appear regularly. High-priced restaurants serving foreign cuisine are also finding success in niche markets. The retail business is also an attractive investment and partnership opportunity for U.S. firms. There are several retail outlets selling U.S brand clothes such as Calvin Klein, Tommy Hilfiger, Polo, GAP, etc. In addition two big fitness chains “Gold’s Gym” and “Orange” have been operating in Yerevan for several years. Franchise offers from well-known American chains might attract substantial interest, both from customers and local investors.
Web Resources
Ministry of Economy and Investments of the Republic of Armenia
Development Foundation of Armenia
Armenia
American Chamber of Commerce in Armenia
Spyur Information System
AT Kearney's 2015 Global Retail Development Index
Business Armenia