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Turkey Food and Drink Report Q3 2009
Business Monitor International, June 2009, Pages: 66
The Turkey Food Drink Report provides independent forecasts and competitive intelligence on Turkey's food and drink industry.
The impact of the global economic crisis is being felt in Turkey, due to the fact that a deep recession for the country in 2009 is all but unavoidable, as discussed in this recently published Turkey Food & Drink Report for Q309. With the global economic outlook deteriorating further, and with a protracted credit constriction accentuating waning foreign capital inflows, it is clear that there will be some tough times ahead for the country. Turkey is facing its largest economic contraction in at least two decades, with our real GDP growth forecast revised to -5.7% for 2009, which will have a clear impact on domestic demand, including the food and drink sector.
Already a number of industry leaders have reported poor full-year results for 2008. In April, local drinks major Anadolu Efes reported a fall in net profit despite double-digit sales growth. The company’s net profit dropped by 17% year-on-year (y-o-y) to TRY309.7mn (US$193.4mn) while turnover grew by 21% y-o-y to hit TRY3.67bn (US$2.33bn). Meanwhile, Anadolu Efes’ subsidiary Efes Breweries International (EBI) posted a net loss of US$57.4mn for FY08, despite excellent revenue growth, as sales increased 24.1% y-o-y to US$1.04bn. An adverse foreign exchange climate has hampered both drinks companies. Despite EBI's turnover picking up sharply in FY08, turnover growth slowed down markedly in Q408, reflecting a noticeable deterioration in consumer confidence across EBI's markets, including Russia where it experienced a 5% y-o-y contraction in that quarter.
Meanwhile, Turkey-based soft drinks giant Coca-Cola Içecek (CCI) also announced poor results, as net profit fell by 47% y-o-y, despite strong volume growth. The company attributed this hit to its bottom line to an unfavourable foreign exchange climate. Like EBI, CCI’s international turnover could come under strain in 2009, as its foreign business includes a number of CIS markets that are expected to fall into deep recessions this year. However, we note that while the recession of 2009 will certainly impinge on CCI's turnover potential, the soft drinks industry (particularly the carbonates and bottled water segments) typically performs well during periods of economic strain – as belt tightened consumers are likely to turn to cheaper carbonates ahead of more expensive segments such as juices. CCI's outlook is bolstered further by the fact that it faces fairly limited competition from alcoholic drinks in its predominantly Islamic domestic market.
Another drinks producer which is hoping to do well out of the current crisis in Lipton, the world’s largest tea brand. Unilever, the firm that produces Lipton teas, has said that sales have actually been increasing in the face of the current financial crisis as more consumers entertain at home. As was the case with Turkey's other recessions over the past two decades, we expect a recovery to positive growth in subsequent years. However, we caution that with the external climate likely to remain weak, the recovery will be mitigated, indicating that producers will be facing lower profits for several years to come.
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