Talking Turkey as a market to replace Russia

This article is appeared in The Irish Times, among other places, on Thursday October 30 2014. Irish food exporters are up against it. The Russian ban on EU and others’ foodstuffs over the conflict in Ukraine has had another negative consequence: a scramble with EU neighbours for access to replacement markets.

Sitting on the edge of Europe, Turkey, a country with projected 4.2 per cent growth this year, a market of 75 million people and Europe’s sixth-largest economy, is set to become one of the top beneficiaries of Russia’s EU ban. But could Turkey also be a destination for Irish food exports?

Moscow already imports €1.33 billion worth of Turkish food and, in August, three major Turkish dairy suppliers were granted access to the Russian market. Analysts say Turkish fruit and vegetable exports to Russia may double over the coming year, while poultry producers are also expected to ship increased volumes to Russia.

Turkey’s imports of food, animal products and animal hides were valued at a massive €4.6 billion in 2012. Turkey imports fish from Norway, canola seed from Black Sea countries and corn oil from as far away as the United States.

The potential for Irish exporters lies in fact that, with Russia now sucking up Turkish food and adverse local weather affecting yields for many products this year, food stocks in Turkey may fall.

“Countries including Turkey will see higher food exports to Russia, which will help their current account positions, but the downside is that this will tighten domestic demand for food and hence will increase inflationary pressures,” analyst Timothy Ash told Turkish newspaper Today’s Zaman in August.

Ireland-Turkey trade
The Irish Exporters Association hopes to see trade with Turkey more than double to €3.5 billion by 2023, with Irish exports increasing from €803 million in 2012 to €2 billion in nine years’ time. Food products amounted to 55 per cent of Irish exports last year, though of the €10 billion exported from Ireland worldwide, a minuscule €21 million went to Turkey. Dairy and prepared foods make up over two-thirds of overall food exports. 

But industry voices say Turkey may not, in fact, be a ready-made replacement market.Jonathan Ryan of Enterprise Ireland, which opened an Istanbul office in January, said: “The big fear is of displacement within European markets of products that were scheduled to go to Russia, that these will now be dumped in other European markets.”

“The main export products from Ireland to Russia are meat and dairy products and, as Turkey is self-sufficient, there is in my opinion unlikely to be a major boost in food exports to Turkey.”

Nor does Bord Bia, which is involved in exporting Irish food products to over 180 countries and territories, see Turkey as filling Russia’s boots.

“While all export markets and market potential will be assessed [in light of the Russian ban], Turkey is not a key focus due to our limited existing trade with the market,” said Roz O’Shaughnessy of Bord Bia.

However, Irish food exporting giants Kerry Group and Glanbia Plc are both involved in the Turkish market.

“Turkey is very much part of our plans,” said Frank Hayes of Kerry Group, which exports “food technology” to Turkey in the form of ingredients ranging from bakery to dairy production. He said Kerry Group’s customers in Turkey are established and leading local manufacturers, but wouldn’t name those entities.

According to Glanbia Plc’s Geraldine Kearney, the Kilkenny-based group exports performance and sports nutrition brands (Optimum Nutrition and BSN) to Turkey. “These products are widely available in GNC and nutrition and supplement stores around Turkey with strong presence in key cities Istanbul, Izmir and Ankara,” she said.

 

A protected market
But challenges remain. Since the 1980s, Turkey has established a robust and entrenched agriculture sector which today accounts for 10 per cent of the country’s GDP. Import restrictions on food are particularly high. 

Moreover, Turkey ranks below Egypt and Jordan, among other countries, in the World Bank’s ease of doing business index in international trade. Notices of tariff changes and amendments are often not publicised, making it difficult for foreign businesses to carry out thorough assessments of the Turkish market.

“Turkish import regulations, especially on dairy products, makes importation complex, especially on cheese,” said Kearney. Foreign wine brands, for example, are rare in Turkish supermarkets because of associated high tariffs.

For Turks, recent increases in electricity and gas charges coupled with food price rises are shoving inflation towards an expected 10 per cent by end of year, while the Turkish lira has come under renewed pressure in recent weeks. All this contributes to less disposable income for Turks looking to buy foreign goods and foods.

The opportunity to see Turkey’s business environment first-hand was taken up by 30 Irish businesses during a four-day mission to Turkey, led by the Minister of State for Business and Employment, Ged Nash, last week.

 

Acoustic material
Ventac Group, a Blessington, Co Wicklow-based vehicle noise control manufacturer, announced during the mission it will supply acoustic material to a Turkish bus and coach manufacturer, while PM Group stated its involvement in a €1 million project in cooperation with Turkey’s ministry for environment and urbanisation. 

Food, it seems, wasn’t on the table: the Minister was a keynote speaker at the Ankara Innovation Week while the companies party to the mission included those in aviation services, telecommunications and ICT.

“Bord Bia and the agri-food industry in Ireland are alert to the potential opportunities in Turkey, including the opportunity to grow the dairy sector. With a population of 80 million people, this is a significant market,” the Minister said. “However, Turkey is 105 per cent self-sufficient in dairy production and 97 per cent self-sufficient in meats.”

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