After finding its feet in the 1990s, the growth of modern retail in Turkey shows no sign of slowing. The arrival of new foreign players and the modernisation of the supermarket sector are likely to weed out the weaklings in a market with a huge number of players, as CAD-News and Catherine Sleep report.


Turkey lies at the gateway to Europe in the geographical sense – 3% of the country is geographically part of Europe – as well as in the metaphorical sense. Accession to the European Union remains under discussion, and Turkey boasts a number of attractions for foreign investors. As rural communities head to cities, urbanisation is on the up, and customs and consumption patterns are becoming increasingly westernised. Shaken to its core in 2001 by an unprecedented economic crisis, Turkey seems to have regained a steady growth rate (5% in 2003).


In the context of this gradual reconstruction, the retail sector is working hard to drive change. Market share is still highly fragmented: while the joint market share of the three leading retailers in Sweden is 95% and in France 66%, in Turkey it is just 8%.


The might of Migros Türk
Nevertheless, multiple retailing in Turkey dates back almost half a century now. The current market leader, Migros Türk, was founded in 1954 via a partnership between Swiss company Migros and the city of Istanbul. In 1974, Koç Group, a powerful Turkish family-owned company, bought the entire company and secured the Turkish rights to the Migros name.


Ever since, Migros Türk has followed an aggressive strategy of store openings. At the start of 2003, the company operated 450 points of sale spread right across Turkey. Migros Türk operates a number of different formats: 150 stores under the Migros fascia, from supermarkets right up to megamarkets (M, MM and MMM in order of size), 270 Sok shops and online shopping under the Kangurum brand.


The 2001 economic crisis does not appear to have halted the expansion of the company, which went on to open 41 new stores in 2002. Today, Migros Türk has two stated priorities: the first is to develop the market share enjoyed by its own label, created at the time of the country’s economic crisis, in order to offer customers an alternative between branded goods and the very cheapest products. This message got across to customers very quickly. Haluk Yükler, coordinator of external investment at Migros Türk, says that the Migros label, non-existent three years ago, already represents 10% of the fascia’s turnover.


The company’s second key goal is to increase the pace of its international expansion. Migros Türk already has a presence in four neighbouring countries (Russia, Azerbaijan, Kazakhstan and Bulgaria) under the Ramstore banner.


French interests represented by Carrefour
In the face of this market dominance by Migros, the only real opposition at the moment is from Carrefour. In May 2003 the French group opened a new hypermarket in Bayrampasa, a suburb of Istanbul. Carrefour’s 11th hypermarket, the opening was viewed as proof of Carrefour’s success in Turkey.


The French retailer opened its first Turkish outlet almost exactly ten years ago in 1993. In 1995 it entered into a joint venture with Sabanci, a high-ranking family-owned enterprise in Turkey. The chain is now known as CarrefourSA (SA for Sabanci, a logo and brand with which Turkish shoppers could readily identify).


Today the company is second-placed in terms of national turnover. Its progress was accelerated by the 1999 merger of Carrefour and fellow French retailer Promodès, which already operated several Continent stores in Turkey. Since then, CarrefourSA has aimed to overtake Migros in terms of turnover by 2006?.


To achieve this, Carrefour is concentrating primarily on opening ChampionSA supermarkets. Seven are scheduled to welcome their first customers by the end of this year. The French company is helped by the fact that its hypermarkets, supermarkets and DIA discount stores complement each other. Generally located in town centres, the latter offer a smaller sales area but are great in number and growing by an average of four stores each month. Eighty-six at the end of 2001, there were 119 by the end of 2002 and this year should see their total hit 175.


Metro flying the flag for Germany
Apart from Carrefour, the only foreign major multiple to have ventured into Turkey is Metro of Germany. The company’s three banners are all present, with 23 stores in all. Nine of these are Metro cash & carry outlets, seven are Real hypermarkets with sales area in excess of 7500m2 and seven are praktiker home improvement centres.


Metro arrived in Turkey in 1990, but has implemented a far less aggressive campaign than Carrefour. Having opened one Real hypermarket in 2002, the company is now planning to open a new Praktiker by the end of the year.


These foreign retailers face competition from a large number of local operators. Gima (owned by Fiba) operates 77 neighbourhood stores and 42 Endi hard discount stores, while Tansas (owned by Dogus) has 193 neighbourhood stores. BIM, the unrivalled king of hard discount, operates 830 outlets. As if to prove that this profusion of players will fall victim to a process of consolidation, Kipa, owner of five hypermarkets in southern Turkey, recently sold a 30% stake to British giant Tesco.






Overview of the Turkish retail sector
The most recent population census carried out in Turkey, in 2000, indicated that the country had 67 million inhabitants. Turkey’s gross national product of US$2500 per citizen places the country about halfway through the global league table, in the company of, for example, Brazil and Thailand.


Turks are becoming increasingly adept at large-scale retail. Superstores and hypermarkets have been increasing steadily in number since the 1990s and each year they capture further market share from traditional shopkeepers. Between 1999 and 2002, the share of the food retail market dominated by “modern retail”, which is to say stores with sales area in excess of 100m2, rose from roughly 30% to 45%. AC Nielsen puts this figure at 53% by 2005.


Right now Turkish shoppers only have access to supermarkets if they live in or close to cities and go there to take advantage of finding most of the items they need to purchase under one roof. In supermarkets, average spend lies somewhere between $20-26, compared with $55-69 in France.







THE MAJOR PLAYERS


Domestic companies


Migros Türk
Headquarters: Istanbul
The current market leader, Migros Türk is focusing on international expansion (29 stores outside Turkey under the Ramstore brand). At home, the group operates 450 stores ranging from small supermarkets to large hypermarkets (under the banners Sok, M, MM, MMM). 2002 turnover came in at $1bn.


Kipa
Headquarters: Izmir
Founded in 1993 by a group of 100 businessmen in the area around Izmir, Turkey’s third-largest city, Kipa currently operates five hypermarkets in the south of Turkey and generates annual turnover worth $173m.


Gima
Headquarters: Istanbul
The company owns 77 Gima supermarkets and 42 Endi discount stores. Gima also holds the Turkish franchise for Marks & Spencer products. In 2002, turnover was reported at $332m.


Tansas
Headquarters: Istanbul
With 193 stores that together boast sales area of 113 000 m², Tansas has two banners, Tansas and Macrocenter. The first primarily sells own-label products while the second focuses on superior quality imports. In 2002, Tansas reported turnover of $349m.


BIM
Headquarters: Istanbul
A through-and-through neighbourhood discounter, BIM opened its first shop in 1995 and today operates 830 stores selling staple goods with the most basic product presentation. The chain is sometimes referred to as “the Turkish Aldi”. BIM expects to open 1200 shops within the coming five years and claims to be looking to expand abroad. 2002 turnover was not available.


Foreign companies


Metro
Headquarters: Istanbul
Metro operates three banners in Turkey and has a total of 23 stores. The first Metro store in Turkey opened in Istanbul in 1990. Despite reporting a 10% slump in 2002 results, which the group attributes in part to the advent of the euro, Metro has confirmed its determination to expand further. In 2002, Metro generated $559m from its Turkish operations.


Carrefour
Headquarters: Istanbul
Carrefour entered into an alliance with the Sabanci family in 1995. Today the group owns 159 DIA stores, 11 CarrefourSA hypermarkets and four ChampionSA supermarkets. 2002 turnover was not available.


Catherine Sleep translated this article from the French with permission from its authors, French retail news service CAD.