Feature story

An Armenian success story: The Shen Concern

Subscribe to feature stories email alerts

Related links Armenia homepage

Shen is cashing in on Armenia's property boom

There is huge demand for construction materials in Armenia

From left to right: VP of Shen-Concern - Ara Hasratyan, Nikolay Hadjiyski, Michael Weinstein

Shenk means "building" in Armenian, and Shen Concern, a construction materials company, is energetically living up to its name as Armenia enjoys a property boom.

"The property boom has sent flat prices up threefold in a couple of years, and there's lots of apartment-block building going on everywhere you look," Vice-President Ara Hasratyan says proudly. Shen's projected growth for the first quarter of 2005 is 30 per cent up on the same period last year. "True, the market won't carry on growing at this rate. But (politicians permitting) there'll be steadier growth for another decade."

Success is bringing new opportunities. In December, Shen signed a deal with the EBRD – the first Direct Investment Facility for Armenia to be agreed under the Early Transition Countries initiative. Most of the Bank's equity investment is being spent on a new production facilities which will turn out concrete blocks of different colours for use in both house and road building. The new factory is still a building-site when we visit - with great trenches of earth thrown up at its sides, and metal pillars just going up. But, by June, it will house five new staff and a spanking new €750,000 production line from Spain.

It's clear today that the Shen Concern factory, a few miles outside Yerevan, next to a railway siding and with an enchanting view of Ararat, has grown out of a Soviet behemoth. The site measures a vast five hectares. Echoing warehouses the size of railway stations stretch back from the office – one still containing the giant racks used to store the metals processed here in Soviet times (which are now half-full of brightly packaged paint pots and bags of cement, sand and plaster). But neater, newer buildings have started going up too. Beglaryan and Hasratyan have proved adept at sourcing funding for new production lines from sources as diverse as the World Bank and the wealthy diaspora Armenian Kirk Kerkorian's Lincy Foundation.

Shen - an Armenian pioneer for the ETC initiative

Now two years of talks with the EBRD have borne more fruit – allowing Shen to become an Armenian pioneer for the ETC initiative, launched in 2004, which aims to stimulate market activity in the Bank's seven poorest countries of operations. (As well as Armenia, these are Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan). The ETC initiative uses a streamlined approach and more financing alternatives to find more and smaller projects, while also mobilising more grants for technical assistance and encouraging economic reform. The Bank will accept higher risk in the ETC projects it finances, while still respecting the principles of sound banking.

Sniffing out the best new opportunities is old hat to Hasratyan and Shen's President, Samvel Beglaryan, long-standing friends and colleagues who got to know each other 15 years ago when they were both working at Gossnab, the Soviet supplies agency.

Take their approach to banking, for instance. They're not just waiting to see what shape the government's promised moves to expand Armenia's rudimentary mortgage market – which will give their business another big boost – will take. They're taking action. They've worked out the cost of the average redecorating project in Armenia – about $1,500 – and are already trying to persuade commercial banks to provide loans of this size, on reasonable terms, to Shen clients.

The two entrepreneurs have years of experience at spotting niches in the market. Their first business success was to seize the opportunity offered by the Soviet collapse and the privatisation of state enterprises. By 1995, they'd scraped together every kopek, rouble, dram and privatisation voucher they could lay hands on to buy the closed metal-processing plant. "We knew a bargain when we saw one," says Ara Hasratyan.

At first they traded, importing paints and building supplies from Europe. "But after three or four years we realised trade wasn't as good as production," Ara adds. "So we set about teaching the market to use new kinds of paint."

Shen has 15 per cent of the Armenian paint market

Today, the Bank's figures show that Shen has 15 per cent of the Armenian paint market and sells 65 per cent of all plasters, fillers and adhesives in the country. And it wants more. This year, for the first time, Shen began exporting to neighbouring Georgia. Ara Hasratyan has his eyes on doing more business there.

The company works hard to attract customers' interest. You can look at the materials on offer on the snappy company website. You can virtually "try out" different paint colours online on a model house. The company will deliver your order in vans decked out with its logo – red green and blue stripes – to one of the 50 or more shops that stock their goods nationwide, or even, if necessary, to your home. "We cut out the middle man wherever possible to cut our costs," Ara Hasratyan says. "It's a small country, and it's best to do everything directly."

"The important thing is that people like our products," he adds. "A flat that's smart enough to be decorated with Shen paint is one that people will want to boast about."

Contact: Yerevan Resident Office

10 May 2005