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Turkey Food and Drink Report Q2 2009
Business Monitor International, April 2009, Pages: 69
The Turkey Food and Drink Report provides independent forecasts and competitive intelligence on Turkey's food and drink industry.
The real macroeconomic effects of the global credit crunch have begun to play out in Turkey, as we expect the economy to continue to tumble in 2009. Nevertheless, as discussed in the Turkey Food & Drink Report for Q209, this sharp economic downturn has not stopped a number of the country’s top retailers from continuing to move forward with their investments.
Although leading mass grocery retail (MGR) operator Migros revealed in February that it had missed its 2008 turnover target, the company stated that it still intended to pursue an aggressive store expansion programme. While the company had targeted sales of TRY5.3bn (US$3.0bn) for 2008, it only managed to reach TRY5.1bn. Moving forward, the retailer, which was acquired by the private equity firm BC Partners in 2008, said that it was targeting growth of 18% in 2009, with a forecast turnover of TRY6bn. Migros plans on achieving such strong growth by opening 8 new stores a week, investing TRY250mn (US$147.9mn) and increasing its store numbers by up to 12,000 in 2009, while also looking for new acquisition opportunities, as it seeks to retain a strong hold on its market leadership position.
Migros is expanding so aggressively in light of the equally bullish expansion plans of its main competitors. Having entered the Turkish MGR sector in 2003 with a chain of just 6 hypermarkets, Tesco Kipa opened its 100th store in Turkey in Q109, as the company focused on the country as one of its key markets. Meanwhile, leading discounter BIM announced in January that it is planning to open 350 new stores in 2009, which follows the opening of 551 new stores in 2008. As more retailers enter the discount subsector, which is growing in popularity along with the economic decline, BIM is looking to shore up its position. Finally, Carrefour also recently expanded its network by acquiring the Samsun-based supermarket chain Pinar Marketçilik as it continues to ramp up its store numbers.
A sustained period of economic growth has fuelled a retail boom in Turkey as retailers have invested aggressively, targeting the rising disposable incomes of Turkey's 71mn population. However, the global financial crisis is badly affecting non-food and drink retailers who are faced with the double-whammy of declining demand and higher input costs as the lira weakens against the dollar. In the non-food and drink retail sector, consumer caution has been the main trend in 2008. Private consumption has been hit by Turkey's vulnerability to external shocks. A reliance on imported oil has seen the current account deficit and inflation soar in 2008. Moreover, a weak lira has not translated into export growth as Turkey's trading partners are also spending less.
Nonetheless, the author has taken a bullish five-year position on Turkey's food and drink market, which we rate as the Middle East's best. Despite this period of economic turmoil we believe that the sector will remain resilient, a view clearly shared by the country’s leading MGR retailers, hence the continued high levels of investment.
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