Petrossian Inc. - Company Profile, Information, Business Description, History, Background Information on Petrossian Inc.

419 W. 13th Street, Floor 3
New York, New York 10014-1104

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Petrossian Tsar Imperial is the title of preeminence we bestow on only those Petrossian caviar--be they our prized Beluga, our incomparable Ossetra or our exquisite Sevruga--that reveal an unmistakable superiority in every essential of taste, texture, color, and size.

History of Petrossian Inc.

Petrossian Inc. is the New York-based subsidiary of family-owned Petrossian S.A., world famous as purveyors of Russian caviar (selling about 50 tons a year) and other fine delicacies. The U.S. operation runs a restaurant and two "boutiques" as well as a mail-order catalog business. In addition to four types of caviar, Petrossian offers specialty and smoked fish, foie gras, pâté, and truffles, as well as chocolates, teas, coffees, and jams. Despite an effort to diversify its product lines in recent years, however, Petrossian remains very much dependent on caviar. An acquired taste, authentic caviar is in reality the eggs, or roe, of select species of sturgeon found in the Caspian Sea, which according to experts offers the best micro-climate. Of the 24 types of sturgeon, only three produce highly prized classes of caviar: beluga, ossetra, and sevruga. Although the quality is essentially the same, the three types of caviar named after these sturgeon vary according to rarity and demand. The most expensive, beluga, is drawn from sturgeon that weigh as much as 1,800 pounds; it offers the most delicate flavor. Ossetra is produced by sturgeon weighing up to 200 pounds, the eggs slightly smaller than beluga and featuring a fruity or nutty flavor. The least expensive of the three caviars, Sevruga, originates in a smaller sturgeon. In addition, Petrossian sells pressed caviar, which is composed of mature eggs likely to break, pressed into a paste and tinned. The sturgeon are caught as they swim upstream to spawn twice a year and require special handling. Because undue stress at death results in the release of a bitter-tasting chemical into the eggs, the fish are systematically stunned by a careful blow to a spot below the head. With the typical sturgeon producing $30,000 worth of caviar, an improperly anesthetized candidate represents a significant financial loss. Once the sturgeon is killed, the eggs are carefully removed by a caviar surgeon, known in the trade as a "master." He sorts the eggs on a cotton sieve and rinses them with water before applying a special salt--a crucial step because too much salt spoils the taste, and too little causes the caviar to spoil too quickly. The color of caviar, it should be noted, is no indication of quality, simply revealing the color of the plankton the fish ate. According to Petrossian, caviar should never be eaten with chopped eggs, onions, or salted crackers--a common practice. Rather, it should either be eaten unadorned with a spoon (but not a silver spoon, which leaves a metallic taste), or served on bland bread, lightly toasted and lightly buttered with unsalted butter. To release the full taste, the eggs should then be broken by the tongue against the roof of the mouth. Cold Russian vodka or champagne are recommended as ideal complementary drinks.

Petrossian Family Enters Caviar Business Following 1917 Russian Revolution

The founders of the Petrossian family business were Armenian brothers, Melkoum and Mouchegh Petrossian. Born on the Iranian side of the Caspian Sea, they were raised in Moscow. In the aftermath of the 1917 Bolshevik Revolution in Russia, the ruling Soviets began to crack down on the Armenian community. As a result, the Petrossian brothers fled to Paris, now home to a large population of Russian émigrés, including aristocrats, artists, and intellectuals, as well as a few charlatans. The young men hoped to continue their studies in medicine and law but were disappointed to learn that they would be unable to transfer credits, and soon had no choice but to cast about for a way to make a living. Taking note that their fellow Russians in Paris were throwing lavish parties minus caviar, they decided to fill the gap. The Petrossians were quite familiar with the caviar business through relatives who ran a Caspian Sea fishery and, moreover, knew how to salt and care for sturgeon eggs. But they had no contacts within the new Soviet government in order to arrange an import deal. In 1920 they simply called the Russian Ministry of Foreign Trade and were soon told to bring cash to the Paris embassy. Taking a chance that the Ministry would actually keep its word, the brothers accumulated the cash and delivered it in two suitcases. Some weeks later the caviar began to arrive and the brothers opened a kiosk to sell their wares.

Although the Petrossians found a ready market for caviar in the displaced Russian community, the delicacy had not yet found acceptance in Europe. They turned to famous hotel magnate César Ritz for help, and although he initially advised them that there was no future in caviar and to simply give up, he eventually agreed to carry it in his prestigious establishments. Nevertheless, the Petrossian brothers would have to persevere for several more years before caviar gained a firm foothold in the world of gastronomy. As part of their marketing efforts they leased a stand at a gourmet-food fair, offering free samples of caviar. Unaccustomed to the taste, many fairgoers quickly spat out the caviar, forcing the Petrossians to provide spittoons to protect the carpeting for the balance of the fair. It was at the 1929 World Exposition held in Paris that they received a major boost. With many important food writers attending the Exposition and taking the opportunity to stop by their booth, the Petrossians were able to convert many of these influential people to the joys of caviar. The subsequent positive press treatment helped to create the reputation of caviar as a luxury item, as evidenced by its growing popularity at the Ritz hotels and among its fashionable guests. The company also began to offer other specialty products, such as smoked salmon in 1935. With business booming, the Petrossians solidified their sources, negotiating through the Soviet Ministry of Fisheries the exclusive right to import caviar into France, as well as Switzerland, the United States, and Canada.

The United States until the early 1900s also had been a major producer of sturgeon caviar, as the country's coastlines and lakes were teeming with the fish. According to Forbes, "Lake Michigan's massive annual harvest was often given away like beer nuts, free with a drink in saloons." By the time Petrossian S.A. had become the sole exporter of Russian caviar to much of the Western world, U.S. fishermen had decimated the sturgeon, which were slow and easy to catch. Limited world supplies of sturgeon simply served to make Caspian Sea caviar even more exclusive and expensive. The Petrossians pressed their advantage in the marketplace and gradually began importing caviar into new regions: Scandinavia, South America, Africa, Asia, and a large portion of the Middle East. Ultimately the company purchased approximately 65 percent of the caviar produced in the Soviet Union each year, becoming its largest customer. Petrossian's relationship with the government became so close that in the mid-1960s Petrossian became the only Western company allowed to participate in the Caspian Sea's twice-annual sturgeon catch and select its own caviar.

Iran's 1950s Challenge to Soviet Caviar

In the 1920s the Soviets signed an agreement with Iran regarding the caviar trade, essentially granting the Soviets the entire Caspian Sea trade. In 1952 that situation changed when Iranian Prime Minister Mohammed Mossadegh decided not to renew the agreement and the country started up its own caviar industry. With the shah reinstated in 1953 to rule the country, backed by the United States, it was Americans who assisted the Iranians in establishing their operations. As a result, U.S. buyers received preferential treatment and prices from the Iranians and the Petrossian trade with the United States diminished. In 1958 the U.S. caviar market was 90 percent Russian, but by 1961 Iranian caviar controlled a 95 percent market share. Iran would continue to dominate until 1979 when political turmoil in the country practically handed the U.S. caviar market to Petrossian. In that year a fundamentalist revolution swept over Iran, the shah was ousted from power, and hundreds of Americans were taken from the U.S. embassy and held hostage for more than a year. A subsequent trade embargo on Iranian goods meant that Iranian caviar had to be smuggled into the country. Iranian caviar producers were further hindered by their own government, which now adhered to a strict interpretation of Islamic law and was hardly supportive of a business that sought to satisfy the refined palates of wealthy, decadent Westerners.

To take advantage of the vacuum in the U.S. caviar market, Petrossian S.A. set up Petrossian Inc. in 1980 to do business in North America. With more Americans traveling abroad and developing a taste for luxury items, the timing of the entry was serendipitous. At first the Petrossian subsidiary opened shops in upscale department stores, Bloomingdale's and Neiman Marcus, where it sold specialties in addition to caviar. In 1984 Petrossian took a major step in the U.S. market when it opened a 70-seat, 3,000-square-foot caviar bar and restaurant in Manhattan, located a block from Carnegie Hall and just four blocks from Lincoln Center, and housed on the ground floor of the historic Alwyn Court Building, an exclusive French Renaissance-style apartment building. Lavishly decorated, the space also included a store where customers could buy caviar, as well as other delicacies, to take home. Although this was the company's first attempt to open a restaurant, and management did not spend an excessive amount of time laboring over the cuisine, management essentially saw the operation as a marketing tool, to make the public more aware of the Petrossian brand. In addition to the ground floor space, the company leased an additional 3,000 square feet to accommodate a prep kitchen, supporting the much smaller upstairs kitchen, as well as house the U.S. wholesale operation, other office space, and a private executive dining room.

By the time Petrossian Inc. was established, a second generation had taken over the management of the parent company. Melkoum died in 1972, followed by Mouchegh in 1981. Seven children of the founders inherited the business, but it was cousins Armen and Christian Petrossian who dominated the group. While Armen served as chairman of the board, Christian was president of the caviar division and in charge of public relations. He was well suited to deal with the press, possessing a flamboyant personality and eager to promote the Petrossian name, the wonders of caviar, and his own unofficial title as "King of Caviar." With the death of the founders, friction developed between him and the other family owners during the 1980s as the company began to place more emphasis on specialty products as part of a diversification strategy. Christian maintained that Petrossian was jeopardizing its prestige and wanted to focus the company on a single product, caviar. In late 1989 he attempted to gain control of the business by buying out his two sisters and four cousins. They resisted and fired Christian as president of the Caviar Petrossian division. The family squabble eventually landed in a French court, where Christian maintained that the seven owners' inability to agree on a business strategy threatened to undermine the firm's future. His request for the court to appoint a legal administrator, however, was rejected. The family then settled the dispute and Petrossian carried on without Christian.

Soviet Union Breakup Threatening Sturgeon Population in the 1990s

With the collapse of the Soviet Union, the decision to expand beyond caviar appeared wise. For decades the fishing grounds of the Caspian Sea had been well policed by the state, which diligently replenished the sturgeon stock by introducing fish from hatcheries. In the chaos that ensued after the breakup of the Soviet Union, those replenishment efforts were abandoned, and because caviar was a small item that could command a price comparable to illicit drugs, a black market developed. As a result the Caspian Sea was overfished, causing declining harvests, which drove up the price of caviar and made it an even more tempting item for the black market. The situation became so dire that by 2000 environmental groups began petitioning the U.S. Fish and Wildlife Service to declare beluga sturgeon an endangered species, a move that would ban the importation of beluga caviar in the United States, which now consumed half of the world's annual supply of beluga caviar. While Petrossian had a vested interest in protecting the sturgeon population, it opposed an all-out ban, suggesting instead a "zero quota" policy. Under this scenario, there would be no harvesting in the Caspian Sea during one or two catches, allowing the beluga sturgeon population an opportunity to replenish. Environmentalists, however, questioned whether such an approach would be enough to stave off extinction of the beluga.

In light of the difficult situation in the Caspian Sea, Petrossian's efforts at diversification took on even more importance. In 1999 the parent company opened a Petrossian Restaurant in Paris, while in the United States Petrossian Inc. opened a 200-seat restaurant and retail boutique in Miami's Bal Harbour in the spring of 2000, and separated the boutique operation from the New York restaurant by opening the Petrossian Café & Boutique at 911 7th Avenue. Later in the year Petrossian took steps to improve the menu at the restaurant in a continuing effort to expand the establishment's reputation beyond caviar. In 2001 Petrossian opened a boutique operation in Los Angeles. With import sanctions finally lifted on Iranian caviar, Petrossian began offering Iranian ossetra and sevruga caviar in 2000. Both the parent company and Petrossian Inc. faced an uncertain future with its caviar business, as the future survival of the sturgeon in the Caspian Sea remained questionable and the possibility remained that the beluga might be listed as an endangered species by the United States. Regardless, the scarcity of the beluga sturgeon had more than doubled the price of beluga caviar from 1989 to 2002, which had a severe impact on the import business. Higher prices also spurred a U.S. comeback in the caviar industry, providing even greater competition for Petrossian Inc. and its efforts in the U.S. markets. The Petrossian name and its branding potential beyond caviar, however, remained a key asset in the future growth of the company.

Principal Subsidiaries: Petrossian Catalogue; Petrossian Restaurant; Petrossian Boutique & Café; Petrossian Los Angeles.

Principal Competitors: Caviar House; Kaviar Kaspia; Stolt Sea Farm Holdings PLC.


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