Mineral water is one of those rare products that Armenia does not import. Even though you can sometimes see mineral water made in other countries sold in big shops, this is not imported with the purpose of doing business, but rather with the purpose of increasing reputation.
Armenia is one of those rare countries that imports mineral water. Armenia is rich in water resources. The only thing our state has to do in this field is control water production businesses. According to the national statistics service, in 2005 Armenia bottled 24.215.300 liters of mineral water.
Mineral water sales go up in the summer. On the other hand, this is the time of the year when citizens are suspicious whether to buy these products or not and suspect whether what they buy is artificial.
How is mineral water bottled?
With the purpose of finding out how mineral water is bottled we talked to several companies. “Jermuk Group” company was built directly on water mainspring. After taking water out of the mainspring, they keep it for some time. Later water is filtered without changing its chemical content. “Jermuk is the only place where water comes out of hot mainsprings. Its temperature is over 62 degrees in mainsprings”, says deputy head of “Jermuk Group”, Edgar Ghazaryan. Later they make the temperature go down to 2-4 degrees and bottle it. According to Mr. Ghazaryan, their product is one of those rare types of water products that have natural carbon dioxide. Natural carbon dioxide is taken out of water with the help of special facilities and without keeping it for a long time, it is directly sent to the relevant production line through tubes, where it is mixed with water and is bottled. According to Mr. Ghazaryan this is the reason that their products seem to be more carbonated. As for opening the bottle with comfort, he advises a good method: in order to avoid such things when opening the bottle it should be kept in the same temperature as when being bottled (2 degrees).
Bjni company only uses the mainspring of the second ES. The direct distance between Bjni village and Charentsavan city is 7,7 km. Water is pumped to the factory from here through special tubes, where it is kept for bottling in special conditions. Later water is sent to double filtration, after which it is bottled. “We take the carbon dioxide out of water into special compressor, then mix it with water in the factory. We control all phases of production in order to ensure that all relevant procedures are followed in a duly manner to keep the water clean”, says head of Bjni company that belongs to SIL concern, Sayat Hovhannisyan.
Different bodies control the products of Jermuk, Bjni and Arzni companies. Besides that, generally producers and specialists say that local producers keep the quality of our products very well. As for different Armenian water products, they differ in their special tastes. Armenia only produces medical table mineral water. Besides these quality factors consumers are interested in the quality of bottles and other materials used as well. When using plastic bottles producers buy raw plastic materials and then make bottles from these raw materials by blowing them into shapes. “We wash blown shaped bottles before bottling”, assures Mr. Ghazaryan. “As for glass bottles, we buy them from “Arm Glass” LLC”, says Mr. Hovhannisyan.
What do consumers use?
With the purpose of finding out the abovementioned, we visited several small trade halls as well as asked some consumers. Shops mostly sell the products of Jermuk Group. Sellers say that most citizens buy Jermuk. But when we say Jermuk buyers, we mean only “mineral water”, but not exactly that brand. This brand is very famous in Armenia. The reason is the fact that during the Soviet Union it was decided that the Jermuk company had to supply the local market and the Arzni company had to supply the foreign markets. This is the reason why Jermuk is that famous in Armenia. There are two companies producing mineral water with the Jermuk brand: the main company of Jermuk and Jermuk Group. The most interesting thing is that consumers do not differentiate between these two competing companies and their brands.
Competition
“No one prohibits anyone to sell their products in the market. All companies can find their places in the market. Back in the Soviet Union, people were used to Jermuk and some Bjni brands of mineral water. The other types of mineral water were mostly medical water products. I think the proportion is the same now. There is normal competition and I don’t think any company has problems with moving their products up in the market”, says executive director of Bjni company. Some other small producers agree with this point too. In spite of this, some producers who don’t want to present themselves, don’t think so and think that there isn’t free competition in this market. We asked about this from the director of Jermuk company, but he didn’t say anything concerning the competition in the market. “Don’t you know that there is no free competition in our market?” he said. He probably meant the biggest producer of this market, Jermuk Group. We asked about this from the deputy chief of Jermuk Group, who told us that the only one that can make such estimations in this country is the state body of economical competition protection. As for the information of this body, the market capacity proportion is the following: Jermuk Group – 38,5%, “Jermuk” CJSC – 33,7%, Bjni – 20,8%. The biggest proportion among the other participants doesn’t exceed 3,8%. According to the RA law on economical competition, monopoly is considered business activity, which does not meet any serious competition or competitors and occupies a minimum 1/3 of the market. This means that according to the preliminary information of the commission on protecting economical competition, Jermuk Group is a monopolistic company in this market. “The database of the committee includes only 27 businesses producing mineral water, but in spite of that we know a lot of businesses producing mineral water that are not included in the mentioned database. We asked the committee to postpone their evaluation analysis in order to be able to reflect the whole market in their database. This procedure is in process”, assures E. Ghazaryan. We were informed from the committee that the recommendation of Jermuk Group was considered and is being preceded now. “Besides that, the competition factor of the market does not depend on big share of companies in that market. It depends on companies and their production as well. Often companies have monopolistic share in the market but they do not press on their competitors and do not prevent their growth in any way. As producers, we think that there is good competition in this market. The competition is stronger for us. For instance, Bjni and Arzni don’t have competition, but we do. We compete for the “Jermuk” brand and other companies at the same time”, says E. Ghazaryan. But he says that sometimes there are cases of violations of advertisement principles. “Many producers want to use the blue label of Jermuk Group. For example, last year we sued a company and won it”, says the deputy director of Jermuk Group.
It is not a secret for us that there are other impolite methods of selling products in Armenia and often companies make restaurants and shops buy only their products. As for big mineral water producers, they say that there haven’t been such cases. “We don’t ask anyone to buy our products”, says E. Ghazaryan. Anyway, we would like to propose two scenarios concerning the role of Jermuk Group in this market: either there is a political factor here (the owner of this company is MP Arsen Arsenyan, RA prime minister’s friend), or this company has really gained fame in the market with the help of its brand and has its stable place. We are not in favor of any of these points. Besides that, the state commission on competition protection welcomes any concrete facts witnessing any cases of illegal competition.
Export grows
Armenian mineral water is mainly exported to Russia. Our producers also export their products to Ukraine, Iran, America, Australia and Georgia. Now our producers are trying to enter the European market as well. The problem is that our companies need to have a special license for exporting mineral water to Europe. According to E. Ghazaryan, the only company that has such a license is Jermuk Group. Bjni company is taking some steps in order to get this license too. “Currently Armenia has huge water resources and I think that there will be a rise in exports soon. The geopolitical structure of export is changing day by day. Currently Russia and many other neighboring companies have a lack of mineral water. Armenia doesn’t have such problems and I think the export will grow”, says executive director of Bjni company, S. Hovhannisyan. E. Ghazaryan assures that there is no difference between the products produced for local market and export. In fact, Armenian producers are happy to hear rumors saying that Russia may stop exporting mineral water from Georgia. In this case, Armenia will be given an opportunity to fill the vacancy in the Russian market.
Price regulation policy
From this point of view, there is good competition in the mineral water market. But the prices for mineral water may increase in the future and the reason for that is the increase in gas prices. “The prices for Bjni may increase too, but we will do our best to keep it stable. It depends on how the competitors behave themselves in the market. If they keep the prices stable, we will do the same too. But this is a production process that is directly connected with gas and energy. The prices for glass bottle production may increase as well”, says S. Hovhannisyan. As for E. Ghazaryan, he says that they will not increase the prices for their products anytime soon.
It is worth mentioning that Armenian bottled mineral water products are not sold in drug stores. In regard to this the head of the Armenian institution of SPA and medicative resources analysis, Rita Eminyan says that this is normal because there isn’t any medicative bottled mineral water in Armenia yet (these waters should be sold in drug stores). “Our legislation doesn’t prohibit selling such products in drug stores. But in spite of this we think that this is not the right way of selling our products”, says E. Ghazaryan.