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Fast food industry

Fast food industry HOTEL RESTAURANTS INDUSTRY FOOD SERVICE SECTOR IN TURKEY Turkey has a fast growing $5.6 billion HRI food service sector, due to increased incomes,urbanization, more women working outside the home, and huge growth in tourism. Major changes in the life styles, incomes, and consumption patterns of Turks in the last decade means they are increasingly prone to eat meals and socialize over food outside of the home. The growing number of fast food chains and restaurants in newly astablished shopping centers and hypermarket complexes are evidence of this newly emerging demand. A new and faster pace of life has also led people to find quicker meal solutions for their shortened lunch hours. This has developed two niche sectors; fast food and institutional food service. Four factors helped this development: 1. Increased income levels: The researches show that the per capita income level in Turkey doubled during the last two decades. According to purchasing power parity, per capita income was actually much higher. In addition, Turkey was one of the world’s 20 biggest economies in 1999. 2. Urbanization and smaller household size: The share of urban population increased from 44% to 65%,and there was a sharp decrease in household size from 5.5 to4.4 individuals per household between 1978-98. The decrease in household size and increase in urbanization indicate an environment in which expenditures in the HRI sector will increase. 3. Growing number of working women : The share of working people has increased from 15% to 28% of the total workforce during the last two decades. This has also led to an increase in recreational and social dining. People are beginning to prefer to meet friends and to eat out rather than at home, which directly increases food service expenditures. 4. Growth in tourism : Turkey has strong tourism industry, over 25 million foreign tourists have visited during the last three years. The sector is expected to reach $15 to $20 billion revenues per year within five years. Continued growth in tourism sector should lead to increasing numbers of foreign cuisine restaurants, both inside and outside hotels. TABLE 2 FOOD SERVICE REVENUES BY SUBSECTOR,1998 TABLE3 MARKET SIZE OF HRI FOOD SERVICE SECTOR IN TURKEY, 1994-1998 Here we show the summary of the advantages and challenges facing US food products in Turkey: The number of US fast food outlets is increasing rapidly . Some Us products are more competitively priced than local products. Branded foreign products do well in the Turkish market due to changing consumption patterns and Western influence . Turkish society is repetative to new products&readily adopt Western tastes. The number of foreign cuisine restaurants and international hotel chains are increasing. Customs Union with the EU created a privileged position forEU country imports to Turkey. Transportation costs are less for products from neigbouring countries. Some high import tariff rates exist. There is a well-developed local food-processing sector providing most needed items. European and Far East cuisine are still dominant in restaurants and hotels. MARKET STRUCTURE AND SUBSECTOR PROFILES A.Distribution Channels and New-to-Market Exporter information: The distribution system in Turkey is beginning to shift from the wholesaler/dealership model to large scale networks backed bye large distribution companies. There are also a significant number of food manufacturers with their own distribution companies. The following chart illustrates how the distribution network operates for HRI food service purchasers. The most common pattern is exporter to import agent, import aagent to retailer: Since import procedures are complex and volume low in this sector, very few companies handle the direct importation of HRI food service products. Most domestic distribution companies, with the exception of some of the larger concerns, do not deal with imports. Imported food products are generally handled by specialist import distribution companies. The best approach for new-to-market exporters is to first contact importer/distributors. The hotel sector has a 15% market share of total food service sales. 25-30% of sector revenue comes from food&beverages, with 73% and 27% shares respectively. There were 3,308 hotels in Turkey by the end of 1998, of which 460 were 5 and 4 stars hotels, accounting for 34% of the total number of beds. It’s expected that between 2000-2005 the growth in hotel and resorts food service will increase by 15-20% per year, parelleling the growth in the tourism sector from $7 billion in 1998 to $15-20 billion in 2005. Four and five star hotels and holiday resorts with foreign cuisine restaurants, catering not only to foreign but also domestic tourists, business meetings and conferences, form the major target group for imported food and beverage items. Hotels contact importers and distributors for their imported food and beverages needs. It is rare for hotels and restaurants to purchase imported items from cash and carry outlets or hypermarkets since these businesses work on cash payment and do not offer delivery service. The total number of restaurants in Turkey as of 1998 was about 45,000. Restaurants comprise the leading market segment in the food service sector, accounting in 1998 for 37% of total food service sales-91% in food and 9% in beverages. It is a large category covering all kinds of outlets from traditional kebab and pide houses to luxurious restaurants offering a wide variety of international menus. Traditional restaurants have a 26 % share of total restaurant sales. Their use of imported food and beverages is small, as the high import tariffs are a major deterent. An average 10% growth rate is expected in restaurant food service for the next 5 years. Luxury restaurants comprise the main market for imported food and beverages, but only 5-10% of the total restaurant market. After retailing and catering, the high-end restaurant business has also become very popular as a new investment area for big conglomerates. It offers profitability and strong cash flow, pluses for companies considering the benefit of Turkey’s high real interest rates. Along with a great many restaurants specializing in Turkish cuisine, there are a conciderable number, which specialize in foreign food. The number of foreign cuisine restaurants has now reached 200-250. Turkish people are open to new tastes. Italian, French and far Eastern cuisinas are particularly popular. Fashion plays its part-Mexican food is a new favorite among trendy Turkish Restaurant- goers. Foreign cuisine restaurants procure their imported items eighter through importers or wholesalers. In the case of urgent or specialty needs, hypermarket are used. Few international chains, TGI Fridays import directly. The main import items are wine, beer, fish products, speciality cheeses, soucesand pastry, and staple items like corn, rice etc. when domestic supplies are not appropriate. Many restaurants owners have expressed interest in imported meat products. If the government lifts the current ban on such items. Food purchasing managers complain about cumbersum import procedures choking supply. Many restaurants do not have the staff expertise to negotiate the way through the importing process. Restaurant chains in general have not become popular yet in Turkey-most are single entity businesses. An exception to this is fast food chains, discussed next. Below is a list of the major foreign cuisine restaurants: Fast food chains are a relatively new concept in Turkey, with only a 13 year history. With the entrance of foreign chains like Mc Donald’s and Burger King. Turkey’s fast food market reached about $480 million in 1998. Currently there are 17 fast food chains with a total of 350 outlets. 75% of them are located in big cities like Istanbul,Ankara and Izmir. The estimated growth rate for fast food restaurants is 23% for the next five years. Though turkey’s fast food consumption is climbing fast, it lags far behind European levels. 1998 fast food consumption was $8 per head in Tukey, compared to $40 in Germany, $48 in France and $160 in the U.K. Fast food consumption in Turkey is expected to reach $35 per head by 2005. An average meal price is about $3,00-3,50 for a sandwich, french fries, and soft dirnk. As seen above, US fast food franchises are dominant in Turkey, with a fast food market share about 47%(The UK increased its share to 18% when Burger King became a UK company in 1997.) The remaining 35% of the fast food market is made up of Turkish companies.Burger King primarly sources food items locally, only importing paper products directly from the US .McDonalds’s also prefers to work with local food manufacturers. Some of the types of these companies who could supply this subsector are: Pinar (meat& condiment products) , Mis (dairy products), McCormick-kutas (JV) (condiments) and Dogus-Lambweston (JV) (frozen products). In the 1980s, institutional food service providers began emerging in Turkey to provide food service to factories, schools, hospitals, private companies, and public sector organizations . the institutional food service sector developed rapidly, sometimes with the help of foreign joint venture investments, becoming a $500 million business in 1998 and accounting for 6% of the overall HRI sector. The estimated growth in this sub-sector is about 23%. There are about 3,000 food service enterprises, 65% of whom are working informally without registration with the Ministry of Industry or the tax authorities. The sector is mainly composed of small-to-medium sized privately-held enterprises,often with mostly neighborhood customers. Currently there are 4.5 million people taking advantages of institutional food service in Turkey.2 million-%45 of the overall number-are in Istanbul. As in the case of the retail sector with the larger super-and hyper –markets, institutional food service has spread from Istanbul to other industrialized cities such as Ankara, Izmir, Adana, Bursa, Sakarya, Kocaeli,Bolu and Eskisehir. The main food inputs of the sector are meat (30%), and fruits and vegetables(%20). Use of imported food items is mostly limited to bulk commodity agricultural products, such as rice, pulses, corn, and vegetable oils. There is less demand for catered food service from public sector organizations than from companies in private sector. Many public sector organizations provide cafeteria services on their premises, or offer a meal voucher good at nearby restaurants. The millitary provides catering services in house and prefers local products, using a minimum of imported food materials, again being mostly bulk commodities.  In 1998 the United states was the leader in the food exports to Turkey in the food service sector, with an 11% market share, selling mainly vegetable oil, dairy products, and beverages-whisky and beer.  Local products have dominance in the HRI market due to customer preferences for familiar foods and high duties on imported products. Imported products are mainly branded products (spirits, dairy products, sauces) and particular products that are eighter not available in Turkey or that have a higher cost of domestic production (sea food, exotic and tropical fruits etc.)  Almost 50% of Turkey’s imports in the food service sector are from European countries, due to their proximity, the Customs Union with EU (which provides for quota-free access and lower duties), and the dominat position of European (French, Italian) cuisines among foreign cuisines in Turkey. Alcoholic Beverages: Beside the wines of the famous French growers, wines from Italy, Chile, Australia, and the United States are popular in Turkey. Turkey applies a 70% import duty on non-EU wines and 50% duty on EU wines, TEKEL is the only entity currently allowed to import alcoholic beverages other than whisky and champagne. Whisky imports however, make up 70% of total beverages, and non_state importers have access to this market Sea Food: Turkey provides a good and promising market for various sea food products. In addition to the local fresh fish, frozen, preserved and ready to eat seafood products are welcomed by Turkish consumers. Argentina,Norway, and European countries are the leading suppliers of seafood products such as mussels,octopus, shrimp and squid. Dairy Products: Speciality cheeses , ice cream and butter have good market potential for Turkey. Sauces: Various brands for sauces for salads, meat and pastry are popular in Turkey and form an important part of the HRI sector. The sauces mostly come from Germany, the UK, France, the Netherlands, the United States and Far East countries. Processed Meat: Though there is a high demand for imported meat, a protestionist ban is currently in place. A small quantity of processed meat, in the form of Pork products, was imported largely from Italy, Belgium and the Netherklandsin 1998. Products unsuccessful in the market: Due to the conservative nature of many of this sector’s clients, and the small average size of the existing HRI providers,many foreign products have not been tested in the market. Most of the distributors tend to focus on the tried and truein tastes for the HRI market and do not look to introduce imported items to their customers. Innovation and new foods are coming as larger companies become involved in providing HRI meals and as tastes become more sophisticated. Interested exporters should be prepared to assist their importing partners in developing the market. Bibliography:

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