Georgian Mills vs. Monopoly
28 March, 2013
Georgian Mills vs. Monopoly

Georgian mills and wheat traders call on government that the Azeri-based Karmen that is grabbing the market by dumping prices, is supposed to become a monopolist that poses food security risks in the country if anti-trust remedies are not undertaken as soon as possible.


Georgian mills face a problem how to survive the dumping price policy of alleged monopolist comp
any Karmen in the interval of legislative gap, while the anti-trust bill that is under vision at the moment, will become a law. The bill is expected to become a law by end of this spring however the law enforcement related procedures will also take couple of months that cuts much ice with the emerging monopolist: Karmen allegedly covering 50% of the sale market and more than 70-80% of the elevator infrastructure in the country, has plenty of time and resources to go ahead with its dumping prices, hurl small market players away and become a monopolist in wheat and flour market thus undermining the food security of the country. The point is that small mills and traders working on banking loans fixing at least 15% and with restricted elevator access cannot resist Karmen’s predatory dumping policy selling a 50 kilo flour-sack for 41 lari since past December when others have to sell similar sack for GEL 45. In December Karmen [that out of 300 thousand tons of total elevator capacity of the country owns 220 thousand tons of elevator capacity] procured 120 tons of Kazakh wheat for USD 350 per ton that makes three-months reserve for Georgia. The remainder 80% of wheat storing and processing capacity is made by small elevators with mills operating in the country out of which the biggest can handle with the 15 thousand tons. Otherwise nobody can make as big wheat storages as Karmen to compete its pricing. To make equally bigger procurements mills have to refer to Karmen’s elevators that Karmen will either refuse or fix high service prices that will increase the product’s self-price at any rate. Thanks to its huge potential Karmen since December produces around 1350 tons of flour per day that by at least 50 thousand exceeds the Georgian daily consumption of 1200-1300 tons.
Now when wheat price crept to USD 400 per ton Karmen with big reserves in store easily maintains low prices that its competitors cannot afford. Drop in sales put mills on the brim of bankruptcy. To survive mills started importing flour instead of wheat that is cheaper and demands fewer workforces. Commensurately part of labor force is dismissed and Georgian economy is at loss at large as wheat processing, that unlike flour import adds a value in the local economy, reduced.
“All this poses food security risks in the country as Karmen tends to become a monopolist and dictate prices not on flour alone but on locally produced wheat too as impoverished mills cannot buy wheat from local farmers enhancing wheat fields under the state program this year,” Levan Silagava, Head of the Association of Georgian Wheat Producers (AGWP), warns.
Karmen swears it covers just 35% of Georgian market [that is below the 40% legally acknowledged as the benchmark to call a company a monopolist in Georgia] and works on 50% of its capacity. However if it starts working at its full potential [of which the company has full capacity] that will double its market share to 70% and even higher if petty fry will be ousted during its dumping policy. Karmen in its turn accuses Georgian traders in cartel agreement aimed on fixing artificially evened prices that compelled Karmen to leave the AGWP in protest. Silagava assures Karmen quit because the organization discovered Karmen’s monopolist position.
“The point is that since December we discovered that out of around 1200 tons of total daily flour sales in Georgia about 200-250 ton remained in the air and we decided to carry a monitoring to find out who was behind this said volume. Karmen assured it used to sell 300 tons per day however discarded our monitoring idea and quit. Later the owner of the company contacted saying the company sells 600 tons [that actually makes 50% of the entire market daily sales] and plans to sell more,” Silagava explained to Georgian Journal. “That means Karmen with its huge financial and infrastructure resources will become a market monopolist soon as small mills and wheat importers working on expensive banking credits and far smaller capacities cannot compete.”

 

Print
Other Stories
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
The procedures for exportating Georgian wine to Japan will be simplified
According to the National Wine Agency (the NWA), 4 Georgian laboratories have been added to the list of foreign laboratories registered in Japan, which will significantly simplify Georgian wine import procedures in Japan.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
22.09.2018
23.09.2018
USD
1
USD
2.6216
2.6216
EUR
1
EUR
3.0854
3.0854
GBP
1
GBP
3.4584
3.4584
RUB
100
RUB
3.9340
3.9340
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6216
EUR
1
EUR
3.0854
GBP
1
GBP
3.4584
RUB
100
RUB
3.9340