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Turkey Food and Drink Report Q3 2007
Business Monitor International, Nov 2007, Pages: 68
The Turkey Food Drink Report provides independent forecasts and competitive intelligence on Turkeys food and drink industry.
The future of mass grocery retail (MGR) market leader Migros Türk continues to dominate business headlines, as discussed in the recently-published Turkey Food & Drink Report for Q307. The local media began reporting in May that Koç Holding, the countrys top industrial conglomerate, may sell its majority stake in the company after it hired JPMorgan to evaluate sale opportunities for its 51% stake in the retail unit of Migros. The outcome of the sale will inevitably have a significant impact on the retail landscape, and could trigger a major consolidation wave, helping one the leading players pull ahead of the pack.
Speculation has been ongoing regarding the sale, and just who will acquire Migros, with French giant Carrefour widely believed to be the most likely suitor. Although the company initially refused to comment, rumours intensified following its exit from the Swiss and Portuguese mass grocery retailer (MGR) markets as a part of its overarching strategy of divesting its weaker operations. Recently, Carrefour representatives are now saying that they are seriously interested in buying the chain, and are not concerned that competition concerns would stand in the way of the deal. Carrefour has been steadily expanding its Turkish store network in recent years, following reports that Turkey was the companys highest growth market in 2005. Despite a disappointing first quarter in 2007, the company continues to be
dedicated to the Turkish market. There is also the possibility that the separate units of Migros could be split up, with the different store formats going to different operators. For example, there has also been considerable speculation that Turkey’s leading discount operator BIM is interesting in acquiring Migros Türks discount chain Sok, although it has officially denied the reports. Given the company’s consistently strong sales and profits, it could very well be in a position to make such a move.
Given our forecast growth rates for the Turkish MGR sector, it is easy to see why there is so much interest surrounding the Migros sale. We are predicting that value sales through all three major formats in Turkey - hypermarkets, supermarkets and discount stores - will more than double to 2011. Supermarkets and hypermarkets will benefit from their superior store space to improve their in-store offerings, which accounts for growth forecasts of 102.8% and 128.4% respectively. However, the discount format is set to show the most dynamic growth, with a forecast of over 266.5% to 2011. Underpinning this growth is the country’s long-term economic outlook. Although consumer confidence has taken a slight dive in recent month, due in large part to the lead up to the parliamentary elections held in July and the economy is likely to remain uninspiring in the second half of 2007, we are expecting a slight uptick ahead of renewed robust growth in 2008. Despite recent political tensions, the Turkish economy remains on a sound footing. Following the ruling Justice and Development Partys (AKP) resounding victory in Turkish parliamentary elections on July 22, the business environment and economic outlook is expected to continue to improve, making the Turkish market all the more attractive to outside investors.
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