Required Report - Public distribution

**Date:** 3/1/2007

**GAIN Report Number:** TU7013

TU7013

**Turkey**

**Retail Food Sector**

**Turkey Retail Sector Market Brief**

**2007**

**Approved by:**

![](media/image1.wmf)Ralph Gifford, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Ibrahim Sirtioglu, Ag Marketing Specialist and Muge Somer, Ag Marketing
Assistant

**Report Highlights:**

The Turkish retail food sector has grown at a remarkable speed during
the last five years. Leading organized food chains in Turkey are
increasing their number of stores and are acquiring smaller chains.
Foreign-owned chains are also investing in Turkish stores to control a
larger share of this growing market. The size of the local retail food
market was estimated at US \$29 billion in 2005.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Ankara \[TU1\]

\[TU\]

Table of Contents

[**I. Executive Summary 3**](#i.-executive-summary)

[II. The Retail Sector Profile 4](#ii.-the-retail-sector-profile)

[A. Trends in Products and Services
5](#a.-trends-in-products-and-services)

[B. U.S. Retail Food Product Exports
5](#b.-u.s.-retail-food-product-exports)

[III. The Actors of the Organized Retail Sector
5](#iii.-the-actors-of-the-organized-retail-sector)

[A. Supermarkets 5](#a.-supermarkets)

[1. Local Supermarket Chains 5](#local-supermarket-chains)

[2. Foreign Supermarket Chains 5](#foreign-supermarket-chains)

[3. Mergers and Acquisitions 5](#mergers-and-acquisitions)

[4. Market Shares of the Supermarkets
5](#market-shares-of-the-supermarkets)

[5. Distribution Channels 5](#distribution-channels)

[6. Draft Law on Supermarkets Regulations
5](#draft-law-on-supermarkets-regulations)

[B. Convenience Stores, Gas Station Mini-Marts, Kiosks, Etc.
5](#b.-convenience-stores-gas-station-mini-marts-kiosks-etc.)

[1. Distribution Channels 5](#distribution-channels-1)

[IV. Actors in Traditional Markets
5](#iv.-actors-in-traditional-markets)

[A. Distribution Channels 5](#a.-distribution-channels)

[V. ROAD MAP FOR MARKET ENTRY 5](#v.-road-map-for-market-entry)

[A. Supermarket Promotion Activities
5](#a.-supermarket-promotion-activities)

[B. Road map to Promotion Activities
5](#b.-road-map-to-promotion-activities)

[1. Establishing Contact With Retailers
5](#establishing-contact-with-retailers)

[VI*.* COMPETITION 5](#vi.-competition)

[VII. BEST PRODUCT PROSPECTS 5](#vii.-best-product-prospects)

[A. Products Now Present in the Market
5](#a.-products-now-present-in-the-market)

[B. Products With Strong Sales Potential Not present Substantially in
the Market
5](#b.-products-with-strong-sales-potential-not-present-substantially-in-the-market)

[C. Products that are not successful in the market
5](#c.-products-that-are-not-successful-in-the-market)

[VIII. POST CONTACT INFORMATION 5](#viii.-post-contact-information)

# I. Executive Summary

The retail sector is one of the leading sectors in the Turkish economy.
Industry sources estimate the total retail 2005 volume as US \$70
billion, 40 percent higher than that of 2000. According to data from
Migros, one of the leading actors in the retail sector, approximately
2.5 million people are working in the retail sector and there are around
170,000 selling points. Of the US \$70 billion, approximately US \$29
billion is the estimated volume for the retail food market. Currently,
traditional food sellers, mainly open-air bazaars and *bakkal*s, are
estimated to control 58 percent of the market, and organized modern
markets compose 42 percent. It is calculated that modern retail stores
are increasing their market share on average about two percent per year
and by the year 2010 modern stores are expected to control the majority
of the market. The still very high share of traditional businesses in
the overall retail sector has resulted in not very reliable turnover
information for the sector. Unregistered economy has been present for a
long time in open-air bazaars and small stores called *bakkal*s
throughout the country.

The Turkish economy has enjoyed non-stop growth for the last five years
since the severe economic crisis of 2001. The inflation rate has dropped
from 29.7 percent in 2002 to 9.5 percent in 2006, and per capita income
reached US \$5,350. In current prices, the GDP for the first three
quarters of 2006 reached US \$290.2 billion, from US \$174 billion in
2002. Positive economic developments, widespread positive perception and
expectations through Turkey, and a significant increase in purchasing
power, have dramatically affected consumption trends. As of November
2006, Turkish consumption/saving rate had changed in favor of
consumption from 86%/13% to 73%/26% of 2003.

The Turkish food retail market has also had robust economic growth
recently. The sales of large food retailers have risen and new hyper and
supermarkets are continuing to open up with great speed. According to
the Turkish Shopping Centers and Retailers Council, by the end of 2006,
the number of modern shopping malls in Turkey reached 129, the majority
of which were built during the last five years. It is also indicated
that there are about 68 new malls under construction all around Turkey
and about 80 are at the project stage. Positive economic conditions
increased the number of car owners, which increased mobility and
contributed to the increase in modern food retail sales. Additionally,
decline in credit card interest rates triggered the utilization of
credit cards in the modern food markets. Moreover, the member discount
cards of modern retailers became very popular since their introduction
in 1998 and have improved buyer's loyalty and have boosted sales.

Although there have been lots of improvements in the economic sector,
various obstacles remain that hinder growth in the retail sector. High
prices for processed food, high food import taxes and unequal income
distribution still continue to be problems that curtail further
increases in modern retail sales. On the other hand, some products show
dynamism and growth potential in Turkish food retail sector. Alcoholic
beverages especially beer and wine, and functional products are some of
the top prospects.

# 

The classification of food retail outlets in this study is based on
outlet size:

Hypermarkets : Over 2,500 square metres (m2),

Large Supermarkets : Between 1000 and 2,500 m2

Supermarkets : 400 to 1000 m2

Small Supermarkets : Less than 400 m2

Markets : 100 to 50 m2

*Bakkal*s : 50 or less m2.

Convenience & gas station stores : Similar in size to *bakkals* and
markets

# II. The Retail Sector Profile

According to trade sources the total number of food retail outlets,
including convenience stores in Turkey were reduced to 167,415 in 2006
compared to 198,500 in 2001. The change is due to modern supermarkets
and discount stores replacing traditional stores, which are grocery
retailers, called *bakkal*s (mom and pop stores).

According to industry sources, in 2005, *Bakkal*s and markets were the
leaders in food sales in 2005 with 43.5 percent market share, followed
by small supermarkets (14 percent), supermarkets (13 percent), large
supermarkets (10.5 percent), and hypermarkets (8 percent). The remaining
11 percent belongs to the specialist food retailers and convenience
stores. Combined, the all supermarkets, including small and hypermarkets
make up almost 46 percent of the market share of food sales.

  ---------------------------- ---------- ---------- ---------- ---------- ----------
  **TURKEY: Market share of                                                
  retailers in food sales                                                  
  (Organized and                                                           
  Traditional)**                                                           

                               **2000**   **2001**   **2002**   **2003**   **2005**

  **Hypermarkets**             8          9.5        9.6        10         8

  **Larger, Medium, Small S.   20         25         27.5       31         37.5
  Markets**                                                                

  **Markets**                  10         9.5        9.4        9          8

  ***Bakkal*s**                48         42         40.5       36         35.5

  **Others (Convenience        14         14         13         14         11
  Stores, Kiosks, gas                                                      
  stations)**                                                              

  Source: Industry sources                                                 
  ---------------------------- ---------- ---------- ---------- ---------- ----------

Based on industry sources, Post estimates that at the end of 2006 there
were 6,500 various size supermarkets in Turkey of which 165 were
hypermarkets. While the number of neighbourhood small grocery shops
(*Bakkal*s) declined to 115,000 in 2006 compared to 165,000 ten years
ago. The number of supermarket and markets estimated to have reached
20,000 from 12,065 during the same period. Even though the number of
hypermarkets increased more than four folds between 1996 and 2005 its
growth rate slowed down in the last five years due to the cost and lack
of availability of land in big cities.

Although the share of *bakkal*s and markets decreased from 76 percent to
35 percent between 1994 and 2005, this segment is still estimated to
boast about US \$9 billion in sales. But the growth in larger outlets is
having an impact on the *bakkal*s, with an increasing number of them
closing. Over the coming few years it is expected that the market share
of *bakkal*s will fall below 30 percent. Similar to the western world in
the future the Turkish retail food sector will be dominated by major
hypermarket and hard discount chains lead by Migros, Carrefour SA,
Metro, BIM, Tesco, Begendik, etc.

+---------------+--------+--------+--------+--------+--------+--------+
| ####          |        |        |        |        |        |        |
| ## TURKEY: Nu |        |        |        |        |        |        |
| mber of Food  |        |        |        |        |        |        |
| Retail Stores |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
|               | **     | **     | **     | **     | **     | **20   |
|               | 1996** | 1998** | 2000** | 2002** | 2004** | 06\*** |
+---------------+--------+--------+--------+--------+--------+--------+
| Hyper-markets | 40     | 90     | 130    | 151    | 152    | 165    |
+---------------+--------+--------+--------+--------+--------+--------+
| **Large,      | 1,275  | 2,045  | 2,850  | 3,855  | 4,660  | 6,500  |
| Medium, Small |        |        |        |        |        |        |
| S             |        |        |        |        |        |        |
| upermarkets** |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| **Markets**   | 10,750 | 12,190 | 13,230 | 13,555 | 15,200 | 14,750 |
+---------------+--------+--------+--------+--------+--------+--------+
| ***Bakkal*s** | 1      | 1      | 1      | 1      | 1      | 1      |
|               | 64,365 | 55,420 | 36,760 | 22,340 | 22,790 | 15,000 |
+---------------+--------+--------+--------+--------+--------+--------+
| **Others (Gas | 22,030 | 24,375 | 26,505 | 23,170 | 29,685 | 31,000 |
| stations,     |        |        |        |        |        |        |
| Kiosks        |        |        |        |        |        |        |
| Connivance    |        |        |        |        |        |        |
| stores,       |        |        |        |        |        |        |
| etc.)**       |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| **TOTAL**     | 1      | 1      | 1      | 1      | 1      | 1      |
|               | 98,460 | 94,120 | 79,475 | 63,070 | 72,487 | 67,415 |
+---------------+--------+--------+--------+--------+--------+--------+
| > \*Post      |        |        |        |        |        |        |
| > estimate    |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+
| > Source:     |        |        |        |        |        |        |
| > Industry    |        |        |        |        |        |        |
| > sources     |        |        |        |        |        |        |
+---------------+--------+--------+--------+--------+--------+--------+

Hard discount stores also grew rapidly since 2001 attracting low-income
groups. In fact, the number of BIM stores, the biggest discount store
chain, reached 1,470 by the end of 2006, from 400 stores in 2000.

# A. Trends in Products and Services

[]{.mark}

Trends in products and services provided by the major chains include
private label food items, phone and Internet purchase and delivery and
membership cards. According to press releases, Turkey is one of the
fastest in the world in the growth of private labels, with an annual
growth of 22 percent and turnover reaching US \$700 million.
Additionally in order to increase their sales, large supermarkets
started various promotion programs and increased their spending on
advertising.

[]{.mark}

As a consequence of the rise in their market share, supermarkets have
strengthened their bargaining power over suppliers of both food and
non-food products and even further established their position through
the recent consolidation process. This shift in balance of power has
also benefited the supermarket customers because the average increase in
prices was only five percent while the national inflation rate was close
to 10 percent in 2006. Retailers benefited even more. Migros, for
instance, whose shares are listed in the stock market, announced that it
increased its activity profit by 218 percent in 2006.

*Bakkal*s are trying to fight back by diversifying services and products
and have moved their product range toward fast moving items such as
candy bars, biscuits, snacks, soft drinks and cigarettes. They also
started to market provincial items from countryside such as local
cheeses, honey and home made ready to consume food items. []{.mark}

# B. U.S. Retail Food Product Exports

Since 2001, consumer-oriented agricultural imports to Turkey have
increased at a modest rate. While imports only account for only about 3
percent of retail food sales, an increasing variety of products are
finding their way onto the shelves. However, Turkish customers tend to
temporarily boycott imports from a particular country in response to
political issues; for instance, consumers recently boycotted Italian and
French products for different political reasons. The economic
repercussions of these boycotts, however, remained very insignificant.

  --------------------- ---------- ---------- ---------- ---------- ------------ ------------
  **Consumer-Oriented                                                            
  Agricultural Imports                                                           
  From All Sources,**                                                            

                        **1996**   **2000**   **2003**   **2004**   **2005\***   **2006\***

  **(US\$ million)**    353.7      415.6      510        700        915          1060

  ***Source: UN Trade                                                            
  Statistics from 1996                                                           
  to 2004\                                                                       
  \*Turkish Statistical                                                          
  Institute for 2005                                                             
  and 2006***                                                                    

                                                                                 
  --------------------- ---------- ---------- ---------- ---------- ------------ ------------

According to UN Data, U.S. retail food product exports had about 6
percent share of total consumer oriented food imports to Turkey in 2006.
Tree nuts, dairy products, snack foods, chocolate and confectionary
goods and sauces were the major U.S. export items. Additionally there
has been significant amount of U.S. rice, oilseeds and products, corn,
nuts, cereals, and pulses exported to Turkey.

The following is a summary of the advantages and challenges facing U.S.
exporters examining the retail food sector in Turkey:

  ----------------------------------- -----------------------------------
  **Advantages**                      **Challenges**

  Increased preference for organized  Customs Union with the EU created
  retail stores leads consumers to    price advantage with lower import
  discover new products, and to       duties and regulatory advantage
  become more aware of imported       with harmonization of regulations
  brands.                             to member countries.

  Some U.S. products are better       European and other neighbouring
  priced than local products, such as countries enjoy freight costs and
  pulses. Lower value of dollar       shipping time advantages in their
  against the Turkish lira in recent  exports to Turkey.
  months made some U.S. products more 
  attractive.                         

  The significant increase in         There are high import duties on
  purchasing power and improvements   many agricultural products.
  in the macro economy combined with  (Between 0 percent to 135 percent
  the good reputation of U.S. food    on bulk agricultural commodity
  products will lead to a constant    products and 0 percent to 170
  increase in U.S.A. agricultural     percent on processed food products)
  sales to Turkey.                    

  International retailers who market  Local food processing sector is a
  a wide range of imported products   well developed one and high quality
  in the sector have positive         goods are sold with competitive
  influence on purchasing patterns.   prices. Rich diversity in
                                      agricultural production provides
                                      ingredients for mainly all
                                      sub-sectors.

  There is a growing demand for       U.S. food products are weakly
  specialized products such as        promoted in Turkey. High shelf fees
  Tex-Mex, diabetic and diet foods,   charged by the large chains lead to
  ready-to-eat foods and frozen food, high costs for introducing new
  which are imported, as well as      products.
  locally produced.                   

  Dynamism in demand is most          Organized retails have reinforced
  significant in functional products. their position against the
  Turkey\'s functional food sector is suppliers with the recent
  expected to reach US\$ 50 million   consolidation process. In the lack
  in 2007 by industry sources.        of a legal infrastructure to
                                      regulate the sector, supermarkets
                                      tend to over charge suppliers for
                                      market entry.
  ----------------------------------- -----------------------------------

# III. The Actors of the Organized Retail Sector

## A. Supermarkets

### 1. Local Supermarket Chains

The biggest supermarket chain in Turkey, Migros A.S., is 100 percent
owned by one of the biggest conglomerates in Turkey, Koc Group. Migros
A.S. is composed of four different store varieties: M Migros stores are
small supermarkets for basic needs and less non-food products; there are
81 of them around Turkey. MM Migros stores are bigger in size and wider
in variety for both food and non-food products. There are 84 of them
nationwide. MMM Migros stores are big supermarkets, where delicatessen
products, electrical household, white goods, dry cleaning services are
also provided. There are 35 MMM Migros stores nationwide. There are 5
Migros Shopping malls in Turkey, which include specialized stores, food
courts, movie theatres and Migros supermarkets.

Macrocenter is another supermarket brand of the group operating only in
Istanbul in the most luxurious neighbourhoods with 8 stores. High
quality delicatessen products, imported processed foods, higher quality
red meat products, wider range of pork and Kosher food products can be
found in Macrocenters.

Migros has acquired its competitor Tansas and its discount store Sok in
2005 and has kept the brands name. Currently there are 354 nationwide
Sok stores and 232 Tansas stores operating in Turkey.

In February 2007, Migros acquired Yonca Supermarket Chain out of two
developed Southern cities: Adana and Mersin. Migros also opened 9 new
stores in the first two months of 2007.

### 2. Foreign Supermarket Chains 

Carrefour, a French chain, came to the Turkish market in 1993 and three
years later became partners with Sabanci Group, Koc's competitor and a
leading conglomerate in Turkey. Together, the Carrefour -- Sabanci
merger became CarrefourSA. Currently, it has 470 outlets and its 2006
volume is estimated as US \$1.7 billion. After its acquisition of Gima
in 2005, CarrefourSA recently acquired a regional supermarket chain
called Metropol Bahar, with 5 stores in Corum, a small city in the Black
Sea Region.

Metro Group of Germany is the first foreign investor in retail sector in
Turkey. The group has been active in Turkey since 1990, with Metro Cash
& Carry and Real Hypermarkets. However, Real Hypermarkets mainly carry
non-food products and specialize in household supplies. Metro Cash &
Carry on the other hand is not a supermarket retailer, rather is only
open to professional commercial customers such as hotel, restaurant and
kiosk operators, caterers and small food retailers. Metro Group's 2005
volume is US \$1.1 billion, almost 30 percent higher than its 2004
volume.

Tesco, a UK company, acquired the small Turkish chain, Kipa, in the
Izmir region in November 2003. Tesco attributes "the growth potential of
the organized retail sector, rather than the economic situation of the
country" as the reason for entering the market at this time. Tesco's
2005 volume is about US \$310 million, and 2006 sales are estimated to
reach US \$700 million due to increase number of stores.

### 3. Mergers and Acquisitions

The Turkish supermarkets chains underwent a rapid consolidation process
in 2005. The acquisitions started when two Fiba Group companies; Gima,
number five chain in Turkey and its discount store brand Endi, entered
the market. Turkey's two biggest group of companies, that were already
involved in the retailing business, Sabanci Group with 40 percent share
in CarrefourSA, and Koc Group, owner of Migros Turk A.S., both wanted to
acquire Gima, even though it was not making any profit at that time.
This unusual competition of the two biggest local conglomerates is a
significant symbol of the retailing sector's growth potential.
Eventually, CarrefourSA acquired 60 percent of Gima and 82 percent of
Endi on May 3, 2005 for US \$135 million. CarrefourSA kept the Gima and
Endi brand names.

The second important merger in the sector was in November 2005 when the
number one chain, Migros purchased Tansas, the number four chain. Migros
acquired 71 percent of Tansas shares for US \$387 million and kept the
Tansas store brands.

There were also mergers and acquisitions among smaller food chains. In
2005, Kiler, a local chain out of Istanbul bought another local chain
Canerler in Ankara. The names of all of the stores were changed to
Kiler. In February 2007, one Ankara based supermarket chain,
Makromarket, acquired another Ankara based supermarket chain, Nazar.
This trend in acquisitions among the supermarket retailers is expected
to continue in the coming years, especially in the stores with 400-1000
m^2^. Industry sources explain that companies are trying to increase
their economies of scale and market penetration by acquiring smaller
retailers rather than opening new stores.

For several years, there has been frequent speculation by the media that
Migros will be acquired by Wal-Mart. Although never confirmed by neither
Koc Group nor Wal-Mart officials, the speculation is that Koc Group and
Wal-Mart started negotiations in 2004, and Wal-Mart asked Migros to
enlarge its market share before the acquisition takes place. It is
further argued by leading Turkish newspapers that this is the main
reason for Migros's acquisition of Tansas. During 2006, especially in
September, there were news reports arguing that the executives of these
companies claimed that the leading banks and foreign investment
consulting companies were in competition to mediate the acquisition**.**

Per leading media sources, Tesco has also expressed interest in
analyzing Migros' company documents for acquisition, and that process is
also under way. Migros Turk A.S. has denied all the news related to
negotiations with both Tesco and Wal-Mart. However, the honorary
president of the group later acknowledged that talks between Koc Group
and Wal-Mart are at the "middle managers level."

Besides the foreign investors growing interest in Turkish retail sector,
Turkish retail company, Migros Turk A.S. currently has 77 outlets
outside Turkey; three in Azerbaijan, 61 in Russia, seven in Kazakhstan,
three in Bulgaria, two in Macedonia, and one in Kyrgyzstan. It is
further argued my media sources that Migros's positive reputation and
popularity in Russia, is one of the reasons for Wal-Mart's interest with
it.

### 4. Market Shares of the Supermarkets 

Currently, Migros holds the biggest share in the Turkish organized
retail sector with a market share slightly exceeding 22 percent. This is
the total turnover for all local Migros, Tansas, Sok, and Macrocenter
stores. Migros' turnover in other countries is not taken into
consideration. Migros is followed by CarrefourSA, whose market share is
15 percent, and by the hard discount store BIM, which takes up 10
percent of the market with its 1470 stores. The share of small and
medium sized, local and national supermarkets is around 40 percent.

![](media/image2.wmf)

Source: Websites of the major supermarkets.

All the leading food chains are increasing their number of stores in a
very aggressive style; for example, Migros opened two stores weekly in
2006 and plans to open an additional 100 stores in 2007. Smaller chains
have also increased their sales during the last few years and now their
total sales value is estimated to reach US \$8 billion. Industry sources
expect other mergers in this group similar to the Kiler--Caner merger.
Among the local chains, Afra, Pehlivanoglu, Begendik, and Yimpas are
reported to have experienced large growth rates, for example Yimpas grew
by 40 percent in 2005. Large western‑style retail outlets continue to
flourish in Istanbul, Ankara and Izmir, and in other large cities such
as Adana, Gaziantep, Bursa, Kocaeli, Konya and Mersin. Leading chains
plan to open stores in every Turkish town with population above 500,000.

As the competition got tougher, some players were forced to leave the
business. Oypa, for instance, had to sell all of its fourteen stores to
other chains, and left the retail food sector completely in 2002.

Below is a list of major supermarkets in Turkey, listed in the order of
their turnover volume.

# 

+---------+----------+-------+---------+---------+--------+---------+
| ##      |          |       |         |         |        |         |
| ####### |          |       |         |         |        |         |
|  Major  |          |       |         |         |        |         |
| Superma |          |       |         |         |        |         |
| rket Ch |          |       |         |         |        |         |
| ains in |          |       |         |         |        |         |
|  Turkey |          |       |         |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| ***C    | ######   | ***Ow | ***Tur  | Number  | **     | ***Purc |
| ompany\ | # Type o | nersh | n-over\ | of\     | *Locat | hasing\ |
| Name*** | f Outlet | ip*** | US\$*** | Outle   | ion*** | A       |
|         |          |       |         | ts-2006 |        | gent*** |
+---------+----------+-------+---------+---------+--------+---------+
| *       | Hyper-3M | Tu    | Total   | 869:    | Nati   | Direct  |
| *Migros | Migros,  | rkish | sales   |         | onwide | &       |
| A.S.**  |          |       | 2006    | 792 in  | &      |         |
|         | Super-2M |       |         | Turkey, | I      | Im      |
|         | Migros,  |       | US      |         | nterna | porters |
|         | D        |       | \$3.3   | 61 in   | tional |         |
|         | iscount- |       | billion | Russia, |        |         |
|         | Sok,\    |       |         |         |        |         |
|         | E-trade- |       | D       | 16 in   |        |         |
|         | Kangu    |       | omestic | CIS,    |        |         |
|         | rum.com, |       | sales   |         |        |         |
|         | Niche    |       |         | B       |        |         |
|         | Market-  |       | US      | ulgaria |        |         |
|         | Macro    |       | \$2.3   | and\    |        |         |
|         | Markets  |       | billion | Ma      |        |         |
|         |          |       |         | cedonia |        |         |
|         |          |       | Foreign |         |        |         |
|         |          |       | sales   |         |        |         |
|         |          |       |         |         |        |         |
|         |          |       | US\$ 1  |         |        |         |
|         |          |       | billion |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| *       | Hyper-C  | F     | US      | 470     | Nati   | Im      |
| *Carref | arrefour | rench | \$1.7   |         | onwide | porters |
| ourSA** |          | 60%   | billion |         |        |         |
|         | Sup      | Tu    |         |         |        |         |
|         | er-Champ | rkish | (CY     |         |        |         |
|         | ion&Gima | 40%   | 2006)   |         |        |         |
|         | Disco    |       |         |         |        |         |
|         | unt-Endi |       |         |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| **BIM   | Hard-    | Tu    | US      | 1,470   | Nati   | Im      |
| A.S.**  | discount | rkish | \$1.5   |         | onwide | porters |
|         | stores   |       | billion |         |        |         |
|         |          |       |         |         |        |         |
|         |          |       | (CY     |         |        |         |
|         |          |       | 2006)   |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| **Metro | Hype     | Ge    | US      | Total   | Nati   | Im      |
| &       | rmarkets | rmany | \$1.2   | 16      | onwide | porters |
| Real**  |          |       | billion |         |        |         |
|         |          |       |         | 9 Metro |        |         |
|         |          |       | (CY     | C&C     |        |         |
|         |          |       | 2005)   |         |        |         |
|         |          |       |         | 7 Real  |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| **Tesco | Hyper    | U.K.  | US      | 22      | Izmir, | Imp     |
| -Kipa** | and      | 93%   | \$700   |         | Konya, | orters, |
|         |          |       | mil.    |         | An     |         |
|         | Express  | Tu    |         |         | talya, | Agents  |
|         | stores   | rkish | (CY     |         | Corlu  |         |
|         |          | 7%    | 2006)   |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| **      | Supe     | Tu    | US      | 110     | Nati   | Im      |
| Kiler** | rmarkets | rkish | \$500   |         | onwide | porters |
|         |          |       | mil.    |         |        |         |
|         |          |       |         |         |        |         |
|         |          |       | (CY     |         |        |         |
|         |          |       | 2006)   |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| **Y     | Hyper &\ | Tu    | US      | 36      | Nati   | Imp     |
| impas** | supe     | rkish | \$450   | -Local\ | onwide | orters, |
|         | rmarkets |       | mil.    | 2-Intl. | &\     |         |
|         |          |       | \*\     | (CIS)   | Intl.  | Agents  |
|         |          |       | (CY     |         |        |         |
|         |          |       | 2004)   |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| **      | Supe     | Tu    | US      | 82      | Aegean | Imp     |
| Pehliva | rmarkets | rkish | \$300   |         | Region | orters, |
| noglu** |          |       | mil.    |         |        |         |
|         |          |       |         |         |        | Agents  |
|         |          |       | (CY     |         |        |         |
|         |          |       | 2006)   |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| *       | Hype     | Tu    | US      | 43      | Konya, | Imp     |
| *Afra** | rmarkets | rkish | \$300   |         | An     | orters, |
|         |          |       | mil.    |         | talya\ |         |
|         |          |       |         |         | S      | Agents  |
|         |          |       | (CY     |         | amsun, |         |
|         |          |       | 2006)   |         | Sudan  |         |
+---------+----------+-------+---------+---------+--------+---------+
| **      | Supe     | Tu    | US      | 12      | Ist    | Imp     |
| Ismar** | rmarkets | rkish | \$250   |         | anbul, | orters, |
|         |          |       | mil. \* |         | Eski   |         |
|         |          |       |         |         | sehir, | Agents  |
|         |          |       |         |         | San    |         |
|         |          |       |         |         | liurfa |         |
+---------+----------+-------+---------+---------+--------+---------+
| **      | Supe     | Tu    | US      | 30      | Konya, | Imp     |
| Adese** | rmarkets | rkish | \$230   |         | Ankara | orters, |
|         |          |       | mil.    |         |        |         |
|         |          |       |         |         |        | Agents  |
|         |          |       | (CY     |         |        |         |
|         |          |       | 2006)   |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| **Beg   | Hyper &\ | Tu    | US      | 12      | K      | Imp     |
| endik** | supe     | rkish | \$100   |         | ayseri | orters, |
|         | rmarkets |       | mil.    |         | 9,     |         |
|         |          |       |         |         | A      | Agents  |
|         |          |       | (CY     |         | nkara\ |         |
|         |          |       | 2006)   |         | Nigde, |         |
|         |          |       |         |         | Ki     |         |
|         |          |       |         |         | rsehir |         |
+---------+----------+-------+---------+---------+--------+---------+
| **PM**  | Discount | Tu    | US      | 74      | Ma     | Imp     |
|         |          | rkish | \$120   |         | rmara\ | orters, |
|         |          |       | mil.    |         | Region |         |
|         |          |       |         |         |        | Agents  |
|         |          |       | (CY     |         |        |         |
|         |          |       | 2004)   |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| Source: |          |       |         |         |        |         |
| Major   |          |       |         |         |        |         |
| supe    |          |       |         |         |        |         |
| rmarket |          |       |         |         |        |         |
| W       |          |       |         |         |        |         |
| ebsites |          |       |         |         |        |         |
| of the  |          |       |         |         |        |         |
| ret     |          |       |         |         |        |         |
| ailers, |          |       |         |         |        |         |
| press   |          |       |         |         |        |         |
| r       |          |       |         |         |        |         |
| eleases |          |       |         |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+
| \*      |          |       |         |         |        |         |
| I       |          |       |         |         |        |         |
| ndustry |          |       |         |         |        |         |
| es      |          |       |         |         |        |         |
| timates |          |       |         |         |        |         |
+---------+----------+-------+---------+---------+--------+---------+

### 5. Distribution Channels

Although distribution options vary depending on the product involved,
the typical product goes through the following stages to reach the
consumer: manufacturer/importer ‑ distribution company/department ‑
large‑scale wholesaler ‑ wholesaler/distributor ‑ retail unit.
Typically, an importer or agent may also be a wholesaler and/or
distributor imports products. A significant number of distributors offer
nationwide service. National distributors distribute the majority of the
total food and other consumer goods. Most hypermarkets import only a
fraction of their total imported products directly; they generally
purchase through other distribution channels. Imported goods constitute
around three percent of the total food products turnover of the retail
sector.

### 6. Draft Law on Supermarkets Regulations

There have been a couple of attempts by the government to slow down the
closure of *bakkals* (small neighborhood grocers) by limiting new
hypermarkets in the downtown areas but neither of the attempts have been
successful. The most important attempt has been the draft law prepared
by the Ministry of Industry and Commerce (MIC) in October 2003. This law
has been at the proposal stage for three years and the organized retail
industry opposes its coming into force. This draft law regulates the
establishments, commercial activities and monitoring of big
supermarkets, defined as stores constituting an area over 400 m^2^. The
envisaged articles make it more complicated for the super and
hypermarkets to re-locate in central places, and aims to move them to
the suburbs.

The draft law proposes standards such as minimum space for parking
areas. The draft also implies the limitation of working hours for the
supermarkets, like closing them earlier in the evenings and during
national holidays. According to the draft, the total turnover of
supermarkets self-branded products can't exceed 40 percent of the total
sales. It also would regulate the payment schedules of supermarkets to
the suppliers. This draft sets forth latest payment dates depending on
the product. In recent years, supermarkets' bargaining power against
suppliers have increased immensely as a result of consolidations and
increased sales. Supermarkets tend to take advantage of this situation
by deferring payments to the suppliers whenever possible. If this law
comes into force, consumers will have further reasons to prefer
traditional retails to supermarkets, because these smaller stores would
not be limited by the restrictive measures regarding location and
working hours.

## 

## B. Convenience Stores, Gas Station Mini-Marts, Kiosks, Etc. 

It is estimated that there are about 5,000 gas station markets in Turkey
and the number is expected to double in five years. Below is a list of
the most popular gas station markets and convenience stores in Turkey.

1.  There are about 500 stores in gas stations belong to BP, some of
    which have fast food chains such as Burger King and McDonald's along
    with a grocers store. BP plans to add about 50 new stores to its gas
    stations annually.

2.  Shell Co. has stores in about 450 of their gas station and plans to
    open up about 30 stores per year.

3.  Local gas company Turcas has stores in about 500 of its gas stations
    and is expected to add 50 new stores per year.

4.  Elf Gas Co. has an agreement with local small market chain Marketing
    Co. and has stores in 150 stations.

5.  Seven Eleven is the leading organized convenience‑type store chains
    in Turkey, since 1995. The new Seven Eleven owner, Opet, plans to
    increase the number of outlets throughout Turkey in coming years as
    well.

### 

### 1. Distribution Channels

Since this category is currently fragmented with limited sales volume,
outlets cannot purchase from first hand distribution units or import
directly. They buy from wholesalers, hypermarkets, as well as importers,
agents and/or distributors.

# IV. Actors in Traditional Markets

*Bakkals*, certain types of convenience stores, and open-air bazaars are
forms of traditional outlets in Turkey. *Bakkal*s are small outlets
around 50m^2^, located in most neighborhoods all over the country. The
majority of daily household and personal care consumption products can
be found in *bakkal*s, yet with few brand alternatives. It is difficult
to know the exact number of *bakkal*s and small markets, and their share
in the economy. Turkish Chamber of *Bakkal*s has 155,000 members but not
all are active in the business. Also *bakkal*s owners tend to name their
outlet "market" to create a modern reputation, and they are then
registered to other Chambers.

Additionally, the unregistered economy's share is significant in
small-scale businesses in the retail sector. The legal infrastructure
enabling to better monitor these establishments has come into force with
law number 5362, on August 2005. Within this framework, the names of the
business are set forth in advance, and the control over the registration
numbers of work places has been reinforced.

Open-air bazaars mainly concentrate on fresh vegetables and fruits.
*Bakkal*s, open-air bazaars, and small convenience stores are still
preferred by the majority of Turkish consumers. Two main reasons for
this preference are: *bakkal*s and convenience stores are in convenient
locations close to home and corner bazaars offer a wide variety of
products, fresh fruits and vegetables, clothing, over-the-counter
products and personal care products at low prices.

## A. Distribution Channels

*Bakkal*s and convenience stores are supplied from various channels
including distributors, agents, wholesalers, small wholesalers, and
hypermarkets. Open-air bazaars obtain supplies from farmers; specialty
wholesalers (vegetables and fruits) and small wholesalers typically deal
with other products.

The sale of imported food items is much lower in traditional markets
than in supermarkets, due to a different customer base. There is little
import of fruit into Turkey, other than tropical products such as
bananas, pineapples, mangos, and papayas. Imported bananas and kiwis are
also available at traditional markets whereas mangos and papayas are
still for luxury consumption, and are only available at big supermarkets
and specialty retail outlets. Turkey has recently started to import
foreign apples as a luxury item.

In *bakkals* and open-air bazaars, only imported bulk commodity products
such as pulses and rice can be found since these traditional retailers
sell basic food products rather than processed goods.

# V. ROAD MAP FOR MARKET ENTRY 

Turkey\'s highly fragmented food‑retailing structure is in a period of
transition, moving from individually‑owned small outlets such as
*bakkal*s, to large outlets. As the industry changes, the supply chain
adapts to the changes. Hypermarkets, major supermarket and hard discount
chains import limited number of their needs directly, whereas smaller
outlets depend on intermediaries like importers, distributors, and
agents for all of their imported supplies. Even though a new-to-market
exporter can directly approach major supermarket chains, interviews with
supermarkets' and hypermarkets' purchasing departments reveal that
organized retails prefer to work with a local importer rather than
importing directly.

Within the framework of their strengthened position, supermarkets are
now less flexible with suppliers in terms of the entrance fees, or
commissions over sales. Industry sources stae that these entrace fees
are paid by almost all new-to-market suppliers but, these prices are
still almost always negotiable. Industry sources also indicated that,
retail stores ask roughly around 30 percent of regular sales from the
suppliers, which is again open to negotiations.

It is therefore very useful to get in contact with importers, especially
those with nationwide distribution services while entering the Turkish
retail market, since their personal relations with the retailers could
create price advantages. Moreover, in order to make sure that the
products are placed in a visible shelf, sales representatives of
companies pay regular visits to supermarkets, and they try to establish
good relations with related floorwalkers. A local partner is therefore
crucial to organize regular visits to the stores like local competitors
do and sustain that the products are visible and replaced in better
shelves if possible.

The general tendency of the Turkish super and hypermarkets is to place
the most demanded products such as grains, pasta, flour, sugar, rice,
baby food, in hard to reach areas so, consumers can notice other
products, and buy them, while looking for their priority needs. So,
products like confectionary, and chocolate bars, breakfast cereals, and
snack food and soft beverages are placed in more central parts of the
stores.

A list of major Turkish food importers can be obtained from TUGIDER
(Association of Food Importers) or from FAS Ankara. TUGIDER has 134
members and represents a majority of Turkish food importers. This
organization can be contacted at (90) (212) 347-2560, via fax (90) (212)
347-2570, or at

DEIK (the Foreign Economic Relations Board) assists Turkish businesses
that are interested in moving into international trade and is also an
affective source to network in the Turkish business community. DEIK can
be contacted at (90) (212) 339-5000, via fax (90) (212) 270-4190, or at
.

U.S. exporters are highly recommended to participate in food shows in
Turkey. The leading food show in Turkey is **FOOD 2007,** which is
organized by CNR ([www.cnr.net](http://www.cnr.net/)). It typically
attracts 35,000 visitors and scheduled to take place during September
2007 in Istanbul.

## A. Supermarket Promotion Activities 

Organizing supermarket promotion activities is higly recommended for
new-to-market companies. Such activities is also useful for companies
who have entered the Turkish market previously for the sustainibility of
product awareness.

According to one survey conducted by Thrace University in 2005 called "
Market analysis of factors influencing Turkey rice trade and
consumption", approximately 80 percent of the 2,000 interviewed
consumers found in-store promotions and taste events very efficient
means to introduce a product and these events were motivating them to
buy or try the product. This survey takes U.S. rice promotion activities
as a case study. It outlines that promotion activities on rice,
conducted in several super and hypermarkets and in several cities
resulted in a 30 percent increase in product awareness. The survey
argues that for rice, consumers do not have brand consciousness, rather,
there are rice type preferences. During U.S. rice promotion activities
for instance, there was an emphasis on the "Calrose logo". Industry
sources indicate that creating an awareness to this logo is very
important, however this awareness should be sustainable by more in-store
activities.

Industry sources that actively participated in these rice promotion
campaigns summarized key points for a successful campaign of an American
food product in Turkey:

-   **Choosing the right staff*:*** Hiring stand stewards, appropriate
    for the promoted product is important. For example, women consumers
    interviewed after a U.S. rice promotion campaign, found young and
    "inexperienced" girls attempts to try to give them cooking recipes
    "antipathetic". Industry sources also emphasized the importance of
    the stand stewards good relations with children when toddler and
    kids products are promoted.

-   **Choosing the right locations:** Turkey's urbanization structure is
    very complex. Neighborhoods are not necessarily distinguished
    depending on the economic situation of inhabitants. It is very
    common to see very luxurious apartment buildings neighboring slum
    houses. As a result, there can very different lifestyles and
    consumer habits in a particular neighborhood. Therefore it may be
    difficult for a new-to-market company to target the matching store
    for the promotion activities of its product.

-   **Choosing the right time:** Studies show that very few people visit
    super and hypermarkets every day. Therefore it is important to stay
    at least two days in the store during promotion campaigns. Turkish
    consumers visit supermarkets mostly during weekends, both Saturdays
    and Sundays. The most crowded hours are between 16:00 to 18:00 local
    time. PR companies encourage suppliers to choose Thursdays through
    Sundays for their promotion activities. The most suitable hours for
    promotions are 14:00-20:00 on weekdays and 11:00 through 18:00 on
    weekends.

-   **Using effective promotion tools:** Announcements from the
    Supermarket intercom during the promotion hours to attract consumers
    is a useful tool. Industry sources recommend distributing give-away
    products such as strainers, consumer bags, bread cutting boards,
    plates et cetera, with the logo or name of the promoted product on
    it, in order to remind consumers of the brand name while using these
    products. Another effective tool to increase sales is to distribute
    discount coupons in the promotion stand. Industry sources explained
    that American rice sales rose when there were in-store promotions
    and when discount coupons were distributed. It is useful to make
    sure that the stock of the product in the retail store be enough for
    an increased demand during promotion days.

## 

## B. Road map to Promotion Activities

According to PR companies, promotion activities were very welcomed by
super and hypermarkets until five-six years ago. The stores were usually
available for the requested promotion date and the promotion could be
held free of charge by the supplier companies. Also, the supermarkets
were not very restrictive about the stands, the colors, symbols and
logos used. However, the situation is different now. First of all, due
to increased demand, it is now more difficult to reserve a stand place
in the supermarkets, especially during weekends, so it is important to
get in contact with the supermarket officials, as early as possible.
Also, organizing in-store events in large supermarkets and hypermarkets
is no longer free. Industry sources state that the prices may vary
depending on the retailer and the neighborhood. Small supermarkets can
still accept these events free of charge. Moreover, the retails are now
more careful with the coherence of the colors and symbols used in the
stands with the logo of the markets. For instance, Migros once opposed
the use of orange because it is the color of Migros' symbol, the
kangaroo. It is therefore recommended to show the equipment which will
be used during the event to the responsible persons in the retail store.

### 1. Establishing Contact With Retailers

All of the big and medium sized supermarket and hypermarket chains have
detailed websites with the contact details of their headquarters, and
sometimes, purchasing department available. Also, a list of stores is
attached to most of the websites.

The purchasing departments of its headquarters are generally in charge
of promotion activities at PM, Kiler, Begendik, Tesco, supermarkets with
significant turnovers but not giants like CarrefourSA and Migros. The
telephone numbers of their headquarters and web addresses can be found
below.

  ------------------ ------------------------------------------------------ ---------------------------
  **List of websites                                                        
  of major Turkish                                                          
  retailers**                                                               

  **Retailer Name**  **Website**                                            **Phone Number (+90)**

  Tesco-Kipa         [www.kipa.com.tr](http://www.kipa.com.tr/)             232-398-8888

  Kiler-Canerler     [www.kiler.com.tr](http://www.kiler.com.tr/)           212-677-5555

  Begendik           [www.begendik.com.tr](http://www.begendik.com.tr/)     312-419-5090

  PM                 [www.pm.com.tr](http://www.pm.com.tr/)                 212-866-6626

  Ismar              [www.ismar.com.tr](http://www.ismar.com.tr/)           212-437-0740

  Pehlivanoglu       [www.pehlivanoglu.com](http://www.pehlivanoglu.com/)   232-864-2020

  Yimpas             [www.yimpas.com.tr](http://www.yimpas.com.tr/)         354-217-2480
  ------------------ ------------------------------------------------------ ---------------------------

Carrefour on the other hand, has authorized each outlet, which they call
"Commercial Center" for the promotion activities to be held in their
store. Below is a list of major CarrefourSa and their supermarket brand
ChampionSA outlets.

+-------------+------------+--------+----------+----------------------+
| **List of   |            |        |          |                      |
| Major       |            |        |          |                      |
| CarrefourSA |            |        |          |                      |
| and         |            |        |          |                      |
| ChampionSA  |            |        |          |                      |
| Outlets**   |            |        |          |                      |
+-------------+------------+--------+----------+----------------------+
| **Hea       | **Contact  | **Tele | **Fax    | ######## E-mail      |
| dquarters** | Person**   | phone\ | (+90)**  |                      |
|             |            | (      |          |                      |
|             |            | +90)** |          |                      |
+-------------+------------+--------+----------+----------------------+
| CarrefourSA | P          | 216-65 | 216-     |                      |
| Sabanci     | urchasing\ | 5-0000 | 655-0050 |                      |
| Tic.        | Department |        |          |                      |
| Merkezi     |            |        |          |                      |
| A.S.        |            |        |          |                      |
+-------------+------------+--------+----------+----------------------+
| #####       | **Contact  | **Tele | **Fax    | **E-mail**           |
| ### Outlets | Person**   | phone\ | (+90)**  |                      |
|             |            | (      |          |                      |
|             |            | +90)** |          |                      |
+-------------+------------+--------+----------+----------------------+
| *           | ** **      | ** **  | ** **    | ** **                |
| *ISTANBUL** |            |        |          |                      |
+-------------+------------+--------+----------+----------------------+
| Icerenkoy   | Ms. Sehnaz | 216-44 | 216-     | <carrefour_icer      |
| CarrefourSA | Altug      | 8-0296 | 448-0298 | enkoy@carrefour.com> |
+-------------+------------+--------+----------+----------------------+
| Umraniye    | Mr. Sertac | 216-52 | 216-     | <carrefour_umr       |
| CarrefourSA | Yegin      | 5-1050 | 525-1053 | aniye@carrefour.com> |
+-------------+------------+--------+----------+----------------------+
| Haramidere  | Mr. Hakan  | 212-85 | 212-     | carrefour_hara       |
| CarrefourSA | Haslamaz   | 3-0177 | 853-0180 | midere@carrefour.com |
+-------------+------------+--------+----------+----------------------+
| Acibadem    | Ms. Deniz  | 216-54 | 216-     | <carrefour_aci       |
| C           | Akar       | 4-4800 | 339-3800 | badem@carrefour.com> |
| arrefourSA\ |            |        |          |                      |
| (Te         |            |        |          |                      |
| peNautilius |            |        |          |                      |
| Shopping    |            |        |          |                      |
| Mall)       |            |        |          |                      |
+-------------+------------+--------+----------+----------------------+
| Maltepe     | Ms. Ozlem  | 212-26 |          |                      |
| Park        | Karaman    | 6-6610 |          |                      |
| CarrefourSA | C          |        |          |                      |
|             | onsultancy |        |          |                      |
|             | Company    |        |          |                      |
+-------------+------------+--------+----------+----------------------+
| Istinye     | Mr.        | 212-27 | 212-     |                      |
| ChampionSA  | Sebastian  | 7-0010 | 277-7110 |                      |
|             | Ponce      |        |          |                      |
+-------------+------------+--------+----------+----------------------+
| Maltepe     | Mr. Erol   | 216-30 | 305-0119 |                      |
| ChampionSA  | Duzuluter  | 5-0285 |          |                      |
+-------------+------------+--------+----------+----------------------+
| Bagcilar    | Mr. Savas  | 212-61 | 212-     |                      |
| ChampionSA  | Oztuk      | 1-9200 | 611-6266 |                      |
+-------------+------------+--------+----------+----------------------+
| **IZMIR**   |            |        |          |                      |
+-------------+------------+--------+----------+----------------------+
| Izmir       | Ms. Dilsad | 212-26 | 212-     | [dilsad@sayman.biz\  |
| CarrefourSA | Simsek\    | 6-2820 | 266-2821 | carrefour_izmir@     |
|             | C          |        |          | carrefour.com](mailt |
|             | onsultancy |        |          | o:dilsad@sayman.biz) |
|             | Company    |        |          |                      |
+-------------+------------+--------+----------+----------------------+
| **ANKARA**  |            |        |          |                      |
+-------------+------------+--------+----------+----------------------+
| Ankara      | Mr. Mithat | 312-27 | 312-     | <carrefour_a         |
| CarrefourSA | Uluturk    | 8-2780 | 278-2781 | nkara@carrefour.com> |
+-------------+------------+--------+----------+----------------------+

Finally, the promotion activities in Migros are coordinated between the
outlet managers and the related product managers located in the general
directorates. Migros officials suggest suppliers to get in contact with
these general directorates first, inform them about the planned
promotion activity, what the product is, which outlets are considered as
the activity place. Depending on the said product, and the location, the
officials can instruct the suppliers on the next steps. Migros has a
very detailed website, also accessible in English, where the contact
details for all the stores are listed. The website of Migros is
[www.migros.com.tr](http://www.migros.com.tr/) and below is the list of
its general directorates.

  ------------------ ----------------------------------------------------
  **Migros General   
  Directorates**     

  **City**           **Phone Number (+90)**

  Istanbul           216-579-3000

  Ankara             312-541-1030

  Izmir              232-277-6060

  Adana              322-394-3600

  Antalya            242-311-2317
  ------------------ ----------------------------------------------------

# VI*.* COMPETITION

Despite the significant economic growth in recent years, low per capita
income, uneven income distribution and high local tariffs decrease the
import demand of consumer ready food items. Moreover, Turkey's processed
food sector is modernized and developed, and capable of manufacturing
high quality in large quantities in various sub-sectors. Imported food
items represent only a fraction (three percent) of domestic food market.
Industry sources estimate that only the top ten percent of the Turkish
population could afford imported food items. Turkish food producers are
flexible and innovative and tend to produce products similar to imported
ones when they see a good opportunity to increase sales and creates
strong competition to imported food items.

According to U.S. Census Trade Data, during calendar year 2006, Turkey
imported about US \$129 million worth of consumer-oriented agricultural
products from the United States, of which US \$65 million of it was
poultry meat transhipped to Iraq. During this period, tree nuts, pet
food, processed fruits and vegetables, seafood, dairy products and snack
foods were among the leading U.S. exports consumed in Turkey. The main
competition for U.S. food products comes from European countries, which
enjoy the advantage of the Customs Union Agreement.

On average, European countries have a two-third share of total Turkish
retail food imports. Customs Union agreement with the EU and investments
of major European hypermarket chains such as Carrefour SA of France,
Metro and Real of Germany, and Tesco of UK have also played a role in
the dominance of European countries in Turkish imports of retail food
products. The majority of imported dairy products, snack foods, cheese,
process fruits and vegetables are traditionally sourced from EU
countries. According to UN Trade Data, Turkey's snack food imports are
around US \$46.5 million, US \$38 million of which comes from the EU.
Out of the US \$19 million worth of imported breakfast cereals, EU sales
to Turkey make up US \$11 million.

# VII. BEST PRODUCT PROSPECTS 

## A. Products Now Present in the Market

The best product prospects for the imported food market are
internationally well-known branded products. Branded products in general
accounted for 30 percent of overall imported food products. These
include cocoa and instant coffee, chocolate and confectionary goods,
cookies and crackers, breakfast cereal, various cheeses, soft drinks &
alcoholic beverages, and sauces. Major imported items break down into
the following categories:

***Cocoa and instant coffee***: Turkey is dependent on imports in this
category, since there is no local production of cocoa and coffee. The
dominance of the Nestle and Jacobs' brands in the instant coffee market
makes it difficult for new entrants to the Turkish market. Recently
however, some discount chains and cash & carries, have commenced the
direct importation of low priced products. But since the arrival of
Starbucks and Gloria Jeans there is a niche market for flavoured gourmet
coffee in the upscale cafes and restaurants as well. The German coffee
shop Tchibo entered the Turkish market in December 2006 and opened six
stores in two months. Different high quality coffee varieties can find a
market in the high-end supermarkets such as Macrocenters or other class
one supermarkets.

***Dry nuts and confectionary items, including chocolate**:* U.S.
Popcorn, roasted corn, almonds and confectionary sunflower seed are
popular among the Turkish consumers and there is a growing market these
items provided they are price competitive. Although there is a very
developed local industry in Turkey, major international brands have the
opportunity to sell small quantities of premium products in high-end
outlets such as delicatessens, hypermarkets and supermarkets. It is
difficult for less known brands to be successful in Turkey.

***Wine**:* Three years ago Turkey adopted new wine import and
distribution regulations to allow importers to import wine directly
rather than going through TEKEL (Turkish Tobacco and Alcohol Monopoly).
This enabled them to price and distribute it freely. Popularity of wine
as an alcoholic beverage increased in recent years and consumption
doubled during the last five years and Turkish consumers are willing to
try new varieties. Please refer to FAS wine report **TU 5004 Market
Brief- Wine market** for more information.

***Flour and flour-based products***: Crackers and cookies, diet breads,
crisp breads and special kinds of pasta are present in the Turkish
market. These products tend to appeal to higher income consumers, and
may only be distributed via upper middle-income retail outlets
(specialty shops, supermarket and hypermarkets).

***Sports Drinks***: The young, wealthy city dwellers favor the
\"sporting\" lifestyle and want the products that goes with it. Turkey
also has some domestic production of "sports" drinks, and existing
brands are continuing to increase sales but there is a chance for new
comers.

***Breakfast Cereals***: Corn flakes, instant oats, muesli, bran fiber
flakes with raisins, mixed fruit and chocolate cereals are becoming
major breakfast items welcomed by Turkish consumers.

***Sauces and syrups**:* Imports of these products continue to grow as
tastes diversify. These products can also be found in smaller
supermarkets and *bakkal*s in the larger cities.

***Ice Cream***: Three brands dominate Turkish ice cream sold through
retail outlets, with many smaller newcomers. Sales are increasing
dramatically (15-20 percent) due to tourism and changing taste and there
is much room for super-premium brands that can adapt to the local taste
preferences or get placement in tourist outlets. See FAS report **TU
6039 Market Brief - Ice Cream** for details.

***Pet food***: The Turkish pet food market has shown great strides and
reached 16,000 MT in 2006 from below 2000 MT in 1998. In 2006, cat and
dog food composed about US \$60 million of the US \$100 million market.
Presently, domestic production meets only 25 percent of the demand and
the rest is imported. Moreover, there is no Turkish private label for
pet food products; fulfilling such a gap in coordination with one of the
leading retailers shows a trade potential.

## B. Products With Strong Sales Potential Not present Substantially in the Market

***Functional foods***: Turkish consumers have been showing a great
interest for functional food since it has been introduced to the market
a few years ago. Consumption of functional food products has been
growing about twenty-five percent per year during the last three years
and the market value is estimated to reach US \$50 million in 2007.
Presently dairy products, such as prebiotic yogurts, margarines, and
health drinks dominate Turkish functional food market. There is also a
significant presence of herbal teas. Functional food additives, toddler
foods and snack foods also show a very good growth potential.

***Beer***: Beer imports also benefited from the recent liberalization
in alcoholic beverage import and distribution regulations. These
legislative changes represent a good opportunity for U.S. beer. Beer
consumption in Turkey is increasing with a higher rate (about 1.4
percent per year compared to zero in the EU) due to an increase in the
young population and foreign tourists (22 million in 2005). Presently,
the majority of the beer consumed in the country is produced locally and
Turkish consumers are open to new products and tastes.

***Ready-to-eat, ready-to-cook meals & canned soup***: The ready-to-eat
and ready-to-cook meals market has a high potential, linked to the
increase in working women and the generally more hectic lifestyles.
There are only a few local companies marketing such products. Foreign
importers, therefore, especially those specializing in Far Eastern,
French, and Tex-Mex cuisines, have a good chance for successful market
entry.

***Gourmet/Foreign Foods***: As Turkish tastes become more
sophisticated, there is growing interest in restaurants featuring novel
foods such as \"Tex-Mex\", \"Chinese\", "Thai" and \"Japanese.\" This
could spread to retail sales. Recently there is a visible increase in
sauce varieties of different cuisines.

***Frozen food***: Though there is a limited amount of imported frozen
food and frozen seafood in the Turkish retail market, importers believe
that there is good potential in this sub sector in coming years.

## 

## C. Products that are not successful in the market

There are a few examples of failed products in the Turkish market, such
as some international brands of chewing gums and chewing candies. It is
not the intrinsic product types that have failed, but the specific
brands imported or the inadequate marketing strategies or expenditures
applied when the product lines were introduced. Adopting products
popular in the west is a large part of the modern Turkish lifestyle.
Internationally known brand names are very useful for this. Exporters
should be particularly sensitive to brand positioning and be ready to
invest in necessary research and marketing for a successful
introduction.

# VIII. POST CONTACT INFORMATION

FOREIGN AGRICULTURAL SERVICE, ANKARA, TURKEY:

-EMBASSY of the UNITED STATES, 110 ATATURK BULVARI, ANKARA, TURKEY

TEL: (90‑312) 455-5555 ext. 2406 FAX: (90‑312) 467‑0056

INTERNET: <agankara@usda.gov>

U.S. CONSULATE GENERAL ISTANBUL, ISTINYE, ISTANBUL

TEL: (90-212) 335 9140/ 335 9068 FAX: (90-212) 335 9077

INTERNET: agistanbul@usda.gov

U.S. (APO) Address:

PSC 97, Box 0002 APO AE 09827-0002

For more information on high value food and other agricultural sector
reports for Turkey or other countries around the world, please refer to
the FAS home page, URL address: