2014-03-24 12:35:24 - New Food market report from Business Monitor International: "Turkey Food & Drink Report Q2 2014"
Featuring a large, youthful population armed with rising spending power, Turkey continues to offer a dynamic consumer base for growth in food and drink sales over the medium term. Bearing in mind that informal independent stores still account for the majority of food sales, the trade-up to organised food retailing forms the backbone of our long-term view on Turkish retail.
Although serious challenges face the Turkish economy over the next several years, we retain a positive view on the long-term convergence prospects for Turkey, with real GDP growth expected to continue outperforming the eurozone through to the end of our 10-year forecast period. We believe economic policy reforms in the medium term will set the ground work for productivity gains beyond
2015. Significant risks will remain, however, especially as underlying social tensions between secularists and moderate Islamists are unlikely to disappear in the next decade. This has contributed to our view that Turkey will not join the EU anytime over our forecast horizon.
Full Report Details at
Headline Industry Data
* 2014 food consumption sales (local currency) growth: +9.9%; compound annual growth rate (CAGR) 2014 to 2018: +7.9%.
* 2014 food consumption per capita sales (local currency) growth: +8.6%; CAGR to 2018: +7.0%.
* 2014 alcoholic drinks value sales (local currency) growth: +9.3%; CAGR to 2018: +7.5%.
* 2014 soft drinks value sales (local currency) growth: +9.9%; CAGR to 2018: +8.6%.
* 2014 mass grocery retail sales (local currency): +11.7%; CAGR to 2018: +9.8%.
Key Company Trends
Turkey's Alcohol Sector Suffers Further Setback: Turkey's alcoholic drinks sector has suffered another setback, following the decision by Prime Minister Recep Tayyip Erdogan's government to impose a 10% tax rise on sales of all forms of alcohol, in place from the beginning of 2014. Such a move will further damage the sector, which is still reeling from the introduction of strict anti-alcohol laws in May 2013. Abraaj-Yorsan Deal Highlights Long-Term Appeal Of Food Sector: It was announced in the week beginning January 20 that Dubai-based private equity firm Abraaj had teamed up with the European Bank for Reconstruction and Development (EBRD) to acquire a controlling stake in the Turkish dairy company Yorsan Group. Abraaj's Selcuk Yorgancioglu, a company partner in Turkey, told the Financial Times that he saw Turkey as 'the next food basket' for both Europe and the Middle East and North Africa (MENA). Yorsan is primarily engaged in the production and distribution of yoghurt, cheese and milk, according to the Financial Times - all areas where growth is coming off a fairly low base. Yorsan already owns a number of well-established brands, and in addition to domestic opportunities, the company will be able to push these brands in the wider MENA region in particular.
Abraaj has clearly identified dairy as an attractive focus area as it makes more investments in fast-moving consumer goods. In 2013, it acquired Ghana's Fan Milk for more than US$300mn in conjunction with France's Danone.
Turkey Confectionery Sector Attracts International Investors: Turkey's confectionery industry is among Europe's most exciting, with great opportunities for growth. This largely explains why Turkey-based Yildiz was confident enough in autumn 2013 to pursue a major share sale of 20% in its confectionery arm Ulker at a time when investors have been generally more cautious over emerging market equities. Confidence in Turkish markets and the lira currency (both selling off of late) has been affected by the prospect of the US tapering off its quantitative easing programme. It is therefore a reflection of the confidence in Ulker's business, its fundamental growth prospects and that of the sector it operates in (confectionery) that the secondary share offer was three times oversubscribed according to the Financial Times - raising about US $430mn in the process.
Key Risks To Outlook
Due to an uncertain and volatile political climate that has the potential to weigh heavily on investor confidence, we see both short- and medium-term risks as weighted primarily to the downside. As evidenced by the Gezi Park protests in the summer of 2013 and the recent graft investigation, bouts of political instability can greatly accelerate selling pressures on the lira. We expect the political situation to remain volatile in the run up to parliamentary elections in 2015, implying significant risk of further destabilising developments.
Furthermore, the trajectory of developed state growth, in particular in the US, will continue to impact demand for the lira. Although the recent rate hike has bolstered the appeal of Turkish assets, a rapid rise in US yields could quickly reverse this sentiment in the coming months.
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