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Brosse Street Journal » Business and Economy:

Market Hype
Western style hypermarket cater to growing number of upscale shoppers

By Aghavni Harutyunyan
Brosse Street Journal
Wednesday, January 26 2005
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Tbilisi's first hypermarket, Goodwill, aims to attract a select market of shoppers: Middle and high-income Georgians and the estimated 8,000 to 10,000 foreigners in the city.

The supermarket, which opened In July and is located near the suburb Didi Diromy, is owned by Goodwill Ltd. The German and Italian partners of this company -- German companies Heinemann, BEST and Eutraco and Italian firm Barilla -- supply products to other Tbilisi markets.

Goodwill Ltd. has been doing business in the city for nine years and has researched the local market, according to General Director Nugzar Mugalaria.

"We prepared Tbilisi's market for the German products," he said. Even now, he said, some local markets buy their products at Goodwill and then resell them.

Everything about the market is on a big scale for Tbilisi. It is a massive building on one floor, with products sorted out in different departments. Each department is as big as the usual market. The market complex covers 1.5 hectares, including the market building itself (5.500 square meters), parking and warehouses where the products are stored.

The actual sales floor in the supermarket covers 4.000 square meters. It carries 12,500 branded products: food, household chemical goods, perfumes, and small-scale electronics for the home. The supermarket employs 120, including 20 in administration.

Mugalaria said that Goodwill's prices are lower by 20 to 30 percent compared with other supermarkets in Tbilisi. But a quick comparison of prices in three supermarkets -- Goodwill, Big Ben on Chavchavadze Avenue and Zemeli on Rustaveli Avenue -- shows that it is somewhat difficult to compare, since the markets carry different brand names of products. The Brosse Street Journal attempted to compare the prices of milk, chicken, toilet paper, sugar and potatoes. (See chart and accompanying story.)

Nata Arabuli was shopping at Goodwill for the first time one day recently.
"I just heard about this supermarket and was suggested to buy German products and now I am trying," she said. She added that the prices seemed high to her, but said she expected to get high-quality products.

But will average Georgians, who live in a country with high unemployment and low wages, patronize Goodwill?
Mugalaria says his firm spent two years surveying the Tbilisi market. The research showed that people are not satisfied with price-quality comparisons. Even with high price, those surveyed said they are not sure if they are buying a product with good quality.

Another shopper, Lia Nikoleishvili, said she had been in Goodwill twice. She said that the prices are higher for some products, but her family liked the frozen pizzas, and she liked the chemical products for cleaning because of their quality.

She traveled to the market in her car and said she would like to have that kind of supermarket in the city and not far from the center.

Families with more then 500 lari ($278) per month income and Tbilisi's estimated 8,000 to 10,000 foreigners are the target market, he said. According to the general director, "Now company has only 5 per cent of that market".

"We were provider for pipeline structuring staff. Now some of the hotels are our clients; for example, Marriott, Metekhi Sheraton Palace, and we have orders from some humanitarian organizations," Mugalaria said.

The supermarket's location near the suburb Didi Diromy and not in the center of the city is not a negative, according to the general director.

"This place was chosen because here are bedroom communities of Tbilisi -- Didi Diromy, Diromy and Gldani massive. Here is also the route for entering Tbilisi. The supermarket is not far from Vake, almost 10 kilomters. The cost of the land in the center of Tbilisi is much more higher then here and it has no less importance for choosing location."
He also said, the location was chosen because of the owners' strategy for the future.
"We would like to develop the supermarket into a trade center; that is why there is a need for more space. The market has comfortable parking. We have our own laboratory and local providers for meat," he said. "We are going to have our own bakery, workshop of convenience food, and mini-workshop for remaking meat products with European technologies, without preservatives. We have special freezing equipments for keeping frozen products," he said, describing the firm's plans for the future.

The owners also plan to expand the store's inventory from 12,000 products to 20,000.

What about competition?

Mugalaria thinks Goodwill does not have competitors in Tbilisi because of the range of goods it offers and not only because of that.
"We are importers, what defines low prices, and we have 80 local distributors who provide us with a condition that the price here would be the lowest. They agree because of the sales volume", said Mugalaria.

The price for 1 liter of milk varied from 1.85 lari to 2.80 lari, but each supermarket carried a different brand.

The prices for chicken were all for the same brand - Sadia - and each chicken weighed about the same, 1.1 kilo.

Sugar was a Georgian brand, and weighed about 1 kilo.

Each market carried different brands of toilet paper. Packages with eight rolls and what appeared to be similar quality were compared.

Only Good will, of the three markets surveyed, has vegetables. One kilo of potatoes cost 60 tetri -- about equal to the price charged by vendors on the streets of Tbilisi.

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