Food production in Türkiye
• Machines • Technical Articles • South-East European INDUSTRIAL Мarket - issue 3/2022 • 05.10.2022
Food production is a key segment of the Turkish economy. According to official statistics, almost 20% of the country’s GDP is provided by the food and beverage industry and the sector is preparing for further expansion. Turkey benefits from favorable geographical and climatic conditions, which ranks it among the first world’s agricultural countries in terms of production. Thanks to these opportunities, the food industry enjoys a healthy trade surplus and sustained economic growth. Many international firms therefore have chosen Turkey as a manufacturing and export hub. The industry, though, is still facing two major challenges – the dependence on food ingredients and the requirement for advanced processing equipment.
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The Investment office of the Presidency of the Republic of Turkey reports that the number of agricultural enterprises in the country is over 3 million. The country ranks 1st in Europe’s agricultural economy in recent years, and 10th in the global agricultural economy.
The Increase of Turkey’s agricultural product exports for the 2002 – 2020 period amounts to the impressive 408%. The average annual growth rate of the Turkish agriculture sector in 2003 – 2020 is 2,5%. Moreover,?during the 2002 – 2018 period the country’s livestock, animal, and aquaculture product exports grew 7,3 times.
Among the important advantages of the sector are the strong macroeconomic growth with increasing income per capita and a bourgeoning middle-class, the favorable demographics with a dynamic, young, and skilled labor force and the cost-competitive labor prices. Compared to Europe and the rest of the world, the labor costs in the sector are 70% – 80% lower. In addition to that in Turkey there is a combination of strong government support through incentives and a developed industrial and commercial infrastructure.
The country is geographically well-placed to take advantage of trade opportunities in Europe, Middle East, and former Soviet countries. With a growing population of more than 81 million, Turkey is one of the largest markets in the region, The Investment office further informs. The government is said to invest heavily in irrigation projects and in improvements of the infrastructure.
Today, Turkey has a large and sophisticated food and beverage manufacturing sector. The sector, which comprises of over 53 000 businesses, continues to grow in response to steady consumer demand for processed food products. There are more than 500 foreign funded enterprises currently operating in the country. The industry generates USD 360 billion of annual turnover and accounts for 7% of the total exports. USD 180 billion of the turnover are realized in retail trade. The sector offers a total of 320 000 jobs, and 77% of the sales of food products are a result of traditional store chains. The food and beverage sector contributes for 9% of the total economic growth of Turkey.
The production of flour-based products, confectionary and chocolate, milk and dairy products, meat and sausage products, processed fruit and vegetables are among the leading sub-sectors. Currently Turkey ranks 1st in the world’s export of flour and bread. It is the 2nd world’s exporter of pasta and the 7th world’s exporter of biscuits. The manufacture of flour-based products accounts for 22% of the whole agri-food industry with 41,1 million tons annual production, and over 3 million tons being exported annually.
In the confectionary and chocolate segment annual exports amount to USD 2,7 billion, and imports – USD 130,9 million. The total turnover of the subsector is USD 3,5 billion and it equals 5,5% of the world market share held by Turkey with 14,3% annual growth. Over 271 000 tons of chocolate are produced each year and the annual consumption of this product per capita is 3,1 kg.
The turnover for frozen fruit and vegetables is around TRY 450 billion, and the country ranks 11th in the world in the export of tinned fruit and vegetables.
The production of meat and sausage products is another strong segment of the food industry. According to official statistics, in 2018 2,2 million tons of poultry were produced and 1,2 million tons of beef meat. Today the market of sausage products generates over USD 2 billion with more than 100 000 tons annual production capacity.
The dairy industry is another leading pillar of the Turkish economy. The country is the 7th European producer of milk and among world’s Top 10. It is also the 24th world’s producer of cheese. The most consumed product of the segment is the plain yoghurt.
Development and investment opportunities
According to reports by the Investment Office of the Presidency of the Republic of Turkey, the number of companies producing food products in Turkey has slowly but consistently increased in the last five years. “The revenues of these companies (in TRY) increased consistently between 2013 and 2017. However, due to the fluctuations in the exchange rate, their sales volume in USD terms appears to have decreased in 2015 and 2017. According to statistics published by Turkish Statistical Institute (TURKSTAT), there were 47 617 food processing companies in Turkey as of 2017, and 595 companies producing beverages. The food industry made up 14,25% of all manufacturing industry by sales value in 2017 and the beverage manufacturing industry 0,70%. On this basis, the food and beverage producing sector is the second largest manufacturing industry in Turkey after motor vehicles. By the end of 2018, there were 611 instances of direct foreign investment in food and beverages with 101 investors from Germany, 44 from the Netherlands, 33 from France, 31 from the USA, 30 from Italy, 26 from Russia, 25 from Iran and 25 from Switzerland”, official data states.
The country is a regional hub for the production, processing and export of food to large European and Middle Eastern markets. This gives the sector excellent potential, but investment is needed to help farmers update production techniques, boost productivity and cope with climate change. The bountiful possibilities for local production allows Turkey to maintain a significantly positive trade balance thanks to its position as one of the largest exporters of agricultural products in the Eastern Europe, Middle East, and North Africa (EMENA) region. Globally, Turkey exported about 1 800 kinds of agricultural products to more than 190 countries in 2020, accounting for an export volume of USD 18,8 billion.
The country has significant investment opportunities in agribusiness subsectors such as greenhouse production, animal and plant-based proteins, seeds, walnuts and almonds, pet food, infant food, and aquaculture, among others. Turkey is a notable importer of feed for the poultry industry. Some 45% of feed used in the Turkish poultry sector is imported. In the absence of essential regulations in this sector, the need for import will persist.
The country specialises in a number of in-demand products. It leads the world in production and processing of hazelnuts, apricots, figs, cherries, quinces, and raisins, for instances. Tomatoes are also a key commodity – especially on the Russian market. Today Turkey is the world’s 10th largest agricultural producer and is the world leader in the production of figs, hazelnuts, quinces, and apricots. The country is also number one global exporter of quinces, raisins, and flour. Turkey boasted production of 22,9 million tons of milk in 2019, making it the leading milk and dairy producer in its region. In addition, Turkey has an estimated total of 11 000 plant species, whereas the total number of species in Europe is 11 500.
Among the products, currently present in the market, which have good sales potential, are: food additives, food processing aids, especially innovative new ones; all kinds of coffee products, coffee additives, coffee aromas etc., coffee innovations; tree nuts and certain dried fruits (e.g., cranberries, prunes); vegetable oil; sauces; gourmet and ethnic food ingredients, as well as certain spices. Products, that are not present in the market but are characterized by good sales potential, include: ingredients for healthy, natural, or functional foods and ingredients for organic processed food. The third group - products not present in the market, because they face significant barriers, includes: ingredients and additives derived from biotechnology (according to a current agricultural biotechnology report), organic sugar and some beef products.
“By 2023 Turkey aims to be a key player at every level, keeping its main goal which is to consolidate its regional production, supply and distribution hub position for the international actors. In this way, the country has implemented many incentive measures in order to attract investors. Some of the instruments are: flexible legislations, lightened tax burden, supports and subsidies within European programs frameworks, geographic and sector incentives, etc. Regarding the needs of the food industry and the advantages that Turkey offers to investors, there are many opportunities in export (goods and services, technological how-know), outsourcing (machinery, R&D collaboration), or settlement (M&A or Greenfield)”, the Investment Office of the Presidency of the Republic of Turkey reports.
Agriculture is a cornerstone of Turkey’s economy, and its output easily makes it the Middle East’s largest producer of fruits, nuts, and vegetables, the Investment office further explains. “However, food manufacturing is more than just growing and harvesting crops. It’s about creating everything from ice cream through to oils and beyond; it’s investing in the meat industry; it’s boosting aquaculture nationwide. Turkey is in the midst of all this. It’s not like Turkish brands are restricted to just the domestic market, either. Turkish food has a regional – and, indeed, a global – presence. Ulker, for example, is one of Earth’s giants of biscuits, cakes and confectionery. Yildiz Holdings owns many foreign brands, such as the UK’s McVitie’s biscuits, and elsewhere Beta tea has transformed itself from Turkey’s first tea importer to a major international player”, official reports state.
There are large, medium, and small size food processors spread throughout the country, with a heavy concentration around major metropolitan areas in western Turkey. According to statistics, 70 % of imported food processing machinery used in the sector, come from the EU. Most companies have local and/or global representatives and production facilities, and in their major part - offices or headquarters in Istanbul. Some food processors use local ingredients and/or locally produced additives. For many of the others, though, imported ingredients and/or additives are vital.
Production of bakery ingredients, such as flour (but not additives and yeast), is concentrated around Karaman and Konya, in Central Anatolia where Turkey grows wheat. Dairy processing is concentrated around Izmir and Bursa, the Federation of food and drink industry associations of Turkey (TGDF) reports. Large food processors in Turkey are often capable of accessing the ingredient suppliers themselves and importing directly.
Ulker, for example, has a total of 19 manufacturing plants around the world and exports to over 80 countries, having more than 30 000 employees. Anadolu Efes, another large local player, unites 85 firms in 19 countries which operate 61 manufacturing plants and have more than 49 000 employees. Sutas, an important local dairy producer, has 5 manufacturing plants around the world and over 5000 employees. The company has USD 25 million of annual exports.
A majority of SMEs which outsource and operate in bread processing equipment, packaging and line subsets Turkey boasts over 41 000 registered producers, but shakeups in the country’s demographics, and rising domestic production costs is opening the door wider for foreign goods. Today the country is also considered a key regional hub for international brands like Mondelez, Nestle, Coca Cola, Carrefour, etc. Global agri-food giants, which are present in Turkey with significant productive activities, use it as a market and distribution centre to access regional markets. Successful partnerships with local companies help global enterprises grow in the region, capitalizing on locals’ experience and networks, the country’s Investment Agency claims.
Keywords: Turkey, food industry, food production, food and beverage industry, agriculture, food manufacturing, food producers
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