Turkey food market

by S. C.

With Turkey's economy already showing signs of recovery, a number of major players in the food and drink sector have started to announce future expansion plans, as discussed in BMI's recently published Turkey Food & Drink Report for Q310. We stand by our core view that Turkey will experience a healthy macroeconomic recovery in 2010. As a result of the latest data, we have revised up our full-year 2010 Turkish growth forecast to 4.9%, reflecting our long-held view that Turkey is one of the best positioned economies in Europe to recover quickly and strongly after the global recession.

Bearing this healthy growth outlook in mind, in March Nestle Turkey announced plans to invest TRL75mn in the Turkish market. According to Hans Ulrich Mayer, board chairman for Nestle Turkey, the company posted an annual turnover of TRY1bn for 2009, an increase of 15% over the year before. Nestle has been present in the Turkish market since 1909 and now has 400 products and more than 40 brands, spanning 11 product categories, having introduced more than 50 new products into the market in 2009 alone. Given this strong track record, particularly during the global economic downturn, it is easy to see why Nestle continues to prioritise the Turkish market.

Also in March, Turkey-based food and drink giant Yildiz Holding, owner of the luxury chocolate company Godiva, announced that it is contemplating initial public offerings (IPOs) for some of its core units as it continues to seek out expansion projects. Yildiz benefits from a strong portfolio of food and drink assets headed up by ownership of Ulker, one of Turkey's leading food companies, with assets across the confectionery, dairy and soft drink segments. While the firm has thus far only stated that each of its units has an IPO strategy and has not disclosed which of its units will be among the first to IPO, BMI believes Ulker (already publically traded) will continue to draw in a large chunk of Yildiz's domestic capital expenditure in 2010.

In further Ulker news, in January the firm revealed that it was in talks with US-based firm McCormick & Company regarding a possible partnership in the Turkish market. McCormick produces a range of flavouring products, including spices. According to Ulker spokesperson Zuhal Seker, the two companies are discussing a possible distribution agreement. Ulker has reached similar deals in the past with American cereal and convenience food producer Kellogg's and Swiss food company Hero as a means of diversifying its brand portfolio. With demand growing for new flavouring products, this partnership could place Ulker in a strong position to capitalise on this rising demand.

As arguably emerging Europe's most distinct and promising F&D market, Turkey's hefty population (about 72mn) and strong long-term economic growth prospects distinguishes it from a region that to a large extent suffers from a weak long-term demographic outlook. Nestle's and Yildiz's ability to keep financing expansion through 2010, relative to mid-tier rivals in particular, will likely be a major competitive advantage especially as competition in the sector continues to heat up.

by S. C.
17 May 2010 Teatro Naturale International n. 5 Year 2

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