Turkey Destining for Global Growth and

Expansion in Processed Fruit & Vegetable starting with Tomatoes

Ümit GüvençJune 9, 2011

Tomato Forum 2011, Rome/ITALY

Turkey is a rich country for fresh fruits and vegetables.

Having the advantage of different seasonal conditions in her seven different climatic regions, she benefits by producing a large variety of fruits and vegetables throughout the year.

In the year 2010, Turkey’s total fruit and vegetable production was realized as 42.6 million tons.

Fresh Fruit & VegetablePotential of Turkey

Fresh Fruit & Vegetables

PRODUCTION(million tons)

2002

23.6

14.0

37.6

2008

27.2

16.7

43.9

26.7

17.7

44.5

2009

EXPORT(million tons)

2002 2008 2009 2010

FRUIT VEGETABLE

1.52.3

2.8 2.9

26.0

16.6

42.6

2010

Turkey is the nearest candidate to supply a full range of processed fruit and vegetables in many forms including processed tomato products into Europe, MENA and GCC, Africa, Russia, among many others.

Fresh Fruit & Vegetable Exports

Turkey exported 2.976.572 tons of fresh fruit and vegetables in 2010.

1. Tomatoes

2. Lemon

3. Mandarin

4. Cherry

5. Sour Cherry

6. Grape

7. Orange

8. Grapefruit

9. Pepper

10. Peach

Top 10 Fruit & Vegetable Exports

Tomatoes have a significant place in total exports with a share of 14 %, which corresponds to US $

483.179 million. (2010)

2008 2009 2010

1,092,202

1,029,294

1,115,725

Processed Fruit & Vegetable Exports(1000 $)

2008 2009 2010 2023

1,1 1,0 1,1 4

Processed Fruit & Vegetable Export Target

4 billion $ in 2023

(billion $)

4,0

1,1

2008

1,0

9,0%

20232009

x 4

Annual AverageGrowth Rate

(2008- 2023)

Processed Fruit & Vegetable Exports(1000 $)

2009 2010 Change (%)

Fruit & vegetable juice 107.882 175.288 62,5

Beverage and alcoholic beverage 181.562 230.491 26,9

Frozen, Dried, Preserved Fruit & Vegetable

170.636 172.921 1,3

Canned Fruit & Vegetable 569.233 537.024 -5,7

Total 1.029.294 1.115.725 8,4

2010 2011 Change (%) Share (%) Fruit & vegetable juice 135.811 120.726 -11,1 45,7

Beverage and alcoholic beverage 46.600 51.903 11,4 19,6

Frozen, Dried, Preserved Fruit & Vegetable

25.982 50.171 93,1 19

Canned Fruit & Vegetable 34.249 41.419 20,9 15,7

Total 242.642 264.218 8,9 100

Processed Fruit&Vegetable Exports(1000 $) (Jan-March)

2010 2011 Change (%) Share (%)

Canned vegetable and fruit slices 39.711 39.552 -0,4 15

Other fruit juice 11.158 25.906 132 9,8Tomato paste 42.872 22.576 -47,3 8,5Apple juice 11.401 19.821 73,9 7,5

Carbonated drink, mineral water, and soda 13.848 17.452 26 6,6

Frozen vegetables 10.893 14.504 33,2 5,5

Other canned vegetables 15.451 14.047 -9,1 5,3

Processed Fruit&Vegetable Exports (1000 $) (Jan-March)

Processed Fruit&Vegetable Exports(1000 $) (Last 12 months)

Canned vegetable and fruit slices

Tomato paste

Apple juice

Other fruit juice

Carbonated drink, mineral water, and soda

Beer

Dried vegetables

0 200,000 400,000

2010/2011 Apr-Marc 2009/2010 Apr-Marc

2009/2010 Apr-Mar

2010/2011Apr-Mar

Change (%)

Share (%)

Canned vegetable and fruit slices 199.672 186.285 -6,7 16,4

Tomato paste 182.953 121.953 -33,3 10,7Apple juice 42.891 93.724 118,5 8,2Other fruit juice 52.089 90.576 73,9 8Carbonated drink, mineral water, and soda

62.047 76.695 23,6 6,7

Beer 64.443 66.594 3,3 5,9

Dried vegetables 64.365 63.745 -1 5,6

Processed Fruit&Vegetable Exports(1000 $) (Last 12 months)

Global Tomato Production Areas

Global Tomato Production

Source: FAOSTAT

Country Production (MT) Production ($1000)

1 China 33.911.702 8.034.699

2 USA 13.718.171 3.250.246

3 Turkey 10.985.355 2.212.343

4 India 10.303.000 2.441.089

5 Egypt 9.204.097 2.180.726

Global Tomato Production2008

Source: FAOSTAT

8% of global production.

• Ecological and geographical conditions in Turkey allow to produce high quality tomatoes in big quantities, throughout the year all over the country.

• Tomato leads the list among other vegetables grown in the country. Tomato production accounts for almost 40%

of all vegetable production.

• As a result of continuous increase in production, particularly in the yield, tomato production nearly doubled within the last decade and reached to 10,050 thousand tons in 2005.

Tomato Production in Turkey

• Although considerable amount of tomatoes are produced outdoors, greenhouse production is also in effect during the winter months for fresh consumption.

• Almost 3 million tons of overall production goes to processing industry annually. Processing tomatoes are mostly produced in contract basis.

• There are more than 60 types of tomato varieties suitable for the industry consumption in Turkey.

Tomato Production in Turkey

Global Tomato Processing Industry

TOTAL PRODUCTION 2010Total: 37.549.000 Ton

EU14.644.000Ton

N.America+S.America15.423.000Ton

Africa+Asia Pacific7.482.000Ton

Italy: 5.080.000Spain:2.350.000

Portugal:1.280.000Ukraine:280.000

USA:11.158.000Canada:500.000Brazil:1.795.000Chile: 860.000

China: 6.500.00Iran:1.400.000India:130.000

Australia:265.000

The main production regions are located in temperate zones, close to the 40th parallels North and South.

However, most of this production is based in the Northern hemisphere, where an average of 91% of the world’s crop is processed between the months of July and December.

The remaining 9% are processed in the Southern hemisphere between January and June.

In commercial terms, exchange volumes and commercial results also position the tomato processing sector among the main players of the global food industry.

For the industrial market, tomato paste is the most important ingredient because it is used as the basis for a wide range of other products such as ketchups, sauces, soups, salsas, tinned meat and fish, etc.

Global Tomato Processing Industry

Tomato processing industry is the pioneering sector in food processing industry.

Although the dominant traditional processing line is tomato paste processing, peeled and diced tomatoes are the other promising products. Tomato paste processing plants are also suitable to process other fruits and vegetables during off season.

Production capacity of the tomato paste factories was 145 000 tons/year in 1982, jumped to 300 000 tons/year in 1990 and reached to 430 000 tons/ year and 495 000 tons/year respectively in 1997 and 1998.

Currently production capacity of tomato paste processing factories is over 650 000 tons / year. Actually over 70 plants process tomatoes and most of them are located in Bursa, in the Marmara Region.

Tomato Processing Industry in Turkey

YearsTomato Paste

Production(1000 tons)

2000 260

2004 260

2005 248

2006 279

2007 256

2008 343

2009 215

Tomato Paste Production in Turkey

Source: TUIK , Turkish Statistical Institute

Turkey currently ranks fourth in the world production of tomato paste after China, USA and Italy.

Modern tomato paste production in Turkey was initiated in 1967.

• The biggest share in the exports of the processed fruit and vegetable sector belongs to the tomato paste.

• The production of this very important ingredient was 343 thousand tons and about 105 thousand tonnes were exported in 2008.

• Export revenue from this sector in 2008 was realized as $150 million.

Turkish Tomato Paste Sector

YearsQuantity

(Ton)Value (1000

$)

2000 172.692 92.499

2001 123.353 74.933

2002 124.869 77.706

2003 149.801 100.238

2004 183.254 133.770

2005 155.083 126.679

2006 102.303 92.748

2007 87.002 90.774

2008 105.331 150.578

2009 138.443 181.832

2010 112.936 144.258

Turkish Tomato Paste Exports

Source: Republic of Turkey Prime Ministry Undersecretariat for Foreign Trade

Tomato paste exports started in 1967 with a symbolic amount of 3,5 tons but in subsequent years it has rapidly increased.

It was about 19 thousand tons in 1980, rose to 154 thousand tons in 1989, 173 thousand tons in 2000 and 183 thousand tons in 2004 which was the highest level ever attained and dropped back to 87 thousand tons in 2007 and increased to 105 thousand tons in 2008.

In the year 2009 Turkish tomato paste export reached the highest value 181 996 015 $.

Countries

2010Quanti

ty

2010Value

Iraq 39.460 55.663Saudi Arabia

15.211 17.186

Japan 12.674 16.107

Kuwait 5.536 5.829

Algeria 5.174 5.673

Sudan 4.363 5.614Russian, Fed.

5.230 5.206

Germany 3.993 5.198

Georgia 2.495 4.038

Oman 2.393 2.655

Other 16.407 21.089

TOTAL 112.936 144.258

Turkish Tomato Paste Exports by Destination

These markets represent almost 85% of all Turkish Tomato Paste exports.

The number of countries importing tomato paste from Turkey increases every year. This trend justifies the quality of Turkish Tomato Paste.

•Use of sun matured delicious industrial type tomatoes, •Ultra modern progressing techniques, •Delivery in time,•Competitive prices have all been the major factors in growing demand for Turkish Tomato Paste.

YearsQuantity

(Kg)Value (US

$)

2000 17,612,188 8,201,664

2001 15,380,021 7,054,474

2002 25,382,090 12,477,211

2003 31,058,753 17,500,634

2004 37,122,928 23,822,747

2005 26,712,118 19,127,904

2006 23,416,904 18,427,353

200723,949,682 20,927,76

9

2008 19,438,053 22,854,693

2009 18,499,604 21,410,931

2010 17,109,026 21,467,688

Exports of Processed Whole Tomatoes, Peeled, Diced etc.

Source: Republic of Turkey Prime Ministry Undersecretariat for Foreign Trade

Exports of canned whole tomatoes (peeled, diced and etc.) rose to its highest level in 2007 to 24 thousand tons and reached the highest export value 22,854,63 $ in 2008.

MemberStatesProduc.

2003 2004 2005 2006 2007 2008 2009 2010 2011

PT 865 1180 1000 900 1030 990 1242 1280 1200

SP 1750 2250 2850 1580 1750 1730 2700 2350 2000

IT 4900 6400 5300 4200 4600 4800 5747 5080 4750

FR 240 225 150 110 95 125 215 195 175

Gr 980 1200 850 710 640 670 810 640 570

Po 220 210 170 185 115 160 100 120 150

Hu 100 135 110 120 15 80 110 40 70

Tomato Production Evolution EU (1000 ton)

Source: Tomato Land

Stable Production (Record Years: 2004 - 11.612 MMT; 2011 - ~8800 MMT)

Lower Volume, Less growers Low Concentration Products Processors in Agric.Operat. Efficiency (Proc; Growers) Food Safety Regulations Environment Regulations High Quality; Innovation

Major Trends in European Tomato Production

Decrease in tomato production → estimated reduction of 10%

Production will be more specialized and centralized Strengthening standards on the environment, food

safety, animal and plant health and animal welfare.…yet dependent on:

how global tomato consumption will develop …and how much final consumers will pay for tomato

if consumption continues to raise and prices to increase, production in EU may very well continue.

Source: World Processing Tomato Council

Implications for EUTomato production to fall in

EU…maybe

REG. CE nº 1234 / 2007 (New COM)

2008-2011 : Fixed Amount ( Acreage)1200-1500 EUR/ha

2011-2013: Fixed Amount, dislinked/Hist.R Fixed Amount:1600-1800 EUR/Hectare

No Obligation to Grow Tomato to get subsidy

2013 + : No More Crop Subsidies…

Attention: EU agricultural production subsidies are expected to be entirely phased out by 2013. And this new lack of the EU subsidies may offer opportunities!

EU CAP POLICY: Subsidies

Future Tomato Price with no Subsidy: + 25-30%.

Larger and More Efficient Processors and Growers

Possible Reduction/Adjustment on Volumes Produced (Mainly Paste).

Shift Toward High Quality; Value Added Products

World Tomato Consumption, increases by 3-4% / Year

Who is going to Capture EU’s possible loss ?

EU Future Scenarios

• Turkey is a country of agricultural origin whose agricultural output shows significant increases every year.

• Turkey is the largest producer and exporter of agriculture products in the Near East and North African region.

• Including agroindustry the share of industrial products in Turkey are 94,8 %.

Why Turkey?

• Due to the climatic and ecological conditions that are naturally granted, Turkey has the means to dominate world trade in many traditional agricultural products.

• Turkey's vast agricultural potential, offers an extensive range of fruits and vegetables, especially tomatoes.

• Rapid growth occurred throughout the 1980’s, led by manufacturing but also by agroindustry and a resurgence of both domestic and foreign investment in Turkey. Trade policies, which included export credits and credit subsidies, also enhanced the export performance of the sector.

Why Turkey?

Foreign Direct Investments in Turkey

FDI in Food & Beverage Sector

Emerging Food And Beverage Business Environment Ratings

Turkey ranks in 5th place according to the Business Environment Ratings. The analysis emphasizes the food and beverage industry’s attractiveness to investors by taking into consideration the market size, current consumption levels, future potential growth and the legislative and political environment.

Turkey has a high score mainly due its largepopulation, lack of market maturity or saturation, and favourable long-term economic structure and GDP per capita. As a major agricultural producer with an increasingly positive food and beverage trade balance, Turkey offers easy access to raw materials.

• The advantage in Turkey for investors in this subsector of the food branch to come is that it has a very well established domestic market for these.

• Turkey also will get synergies out of this business, as Turkey is also producing around 45 million tonnes of fresh F&Vs whereas the exports lie at around 1,3 billion USD as 2010. Our target to expand to 4 billion USD.

• There are opportunities for processors of fresh F&Vs from all over the world to invest and get a decent return on investment in this land where a lot of fertile land and water is available.

Advantages for Investors in Turkey

The geographical location of Turkey presents the country a very advantageous in international trade. Turkey's proximity to Europe, the Middle East, North Africa, Central Asia and Russia provides an easy access to large markets.

Advantages for Investors in Turkey Access to Multiple Markets

• Trade between Turkey and the world markets must not be solely limited to export and import business; foreign investment is always welcome to Turkey. Joint ventures in Turkey and other countries are potential activities, which are expected to be the major promoting tool for enhancing trade relations of Turkey.

Foreign Investments in Turkey

Some International Investors in FMCG and Retail

Tomato paste industry was estabilished in 1967 with the technical help of the most global U.S.-based food company, Heinz; and with partnership of Migros / Konservenfabrik Bischofszell AG from Switzerland, and Felix (Procordia) from Swiss. These partnerships lasted for decades, until 1980s.

Foreign Investments in Turkey

Coca-Cola first entered the Turkish market in 1965 and invested in Marmara Region, Istanbul. Manufacturing is concentrated on 5 plants. There are 5 regional warehouses. Production, sales and distribution are managed by Coca-Cola Icecek (CCI), formerly known as Coca-Cola Bottlers of Turkey (CCBT), which is a joint venture between TCCC (40%), Anadolu Holding (also 40%; Efes Pilsen, the largest brewer in Turkey, is one of the core businesses of this major industrial group) and the Ozgorkey Group (20%). CCI manufacture and sell Coca-Cola, Fanta (fruit juice carbonate), and Cappy (juice nectar).

Foreign Investments in Turkey

In Nov ’09, a JV-called Anadolu Etap (AEtap)- has

been established to constituteTurkey’s largests

agro-business investment in fruit framing and juice

concentrate manufacturing, with participation of;

Sucocitrico Cutrale of Brasil, one of the world’s

largest Juice Producer,

Anadolu Group, the owner of EFES beer brand and

exclusive bottler of Coca-Cola in nine countries, and

Özgörkey Holding, partner of Anadolu in Coca-Cola

bottling business.

Foreign Investments in Turkey

• The goal of AEtap is to have thousands of hectares of plantation on selected

five fruits, Apple, Sourcherry, Peach, Apricot and Pomegranate, and

to process them in existing three plants apart from the fresh fruit business.

• For the time being, AEtap manages 1,000 Ha of land in three different

regions.

• Apart from two existing plants in Mersin and Balıkesir, AEtap plans to

activate the third plant in Antalya

before 2012 season.

Foreign Investments in Turkey

In Turkey Pepsi Coke was began to be bottled in 1964 in İstanbul. The Pepsi Bottling Group (PBG) completed the purchase of Fruko, the exclusive Pepsi bottler in Turkey, from the principal local owners and PepsiCo for approximately $100 million in 2002. PBG acquired Fruko taking over Pepsi-Cola Icecek’s (PCI) 22% stake and purchasing the remaining shares from Tamek Holding. Tamek Holding has held the exclusive rights to produce and distribute all PCI products, alongside with Fruko’s own brands. Fruko used to manufacture and sell Pepsi-Cola, 7-Up, and a number of local brands of carbonates and juices. There are currently 6 major plants for carbonates.

Foreign Investments in Turkey

Japan companies Kagome Co. Ltd. and Sumitomo Corp. have partnerships with Turkish tomato paste and tomato processing industry in both technology and marketing since 1983-85.

Nomikos from Greece has become the major shareholder of a Turkish processor of fruits and vegetables in 1994.

Foreign Investments in Turkey

63% of the shares of Turkish prominent fruit juices producers and exporters in Turkey belong to the British food company Gerber Foods since 2000s.

A German company, Jahncke Fruchtsäfte und Konz. Kg “Sunshine Fruit Verwaltung Gmbh” is producing fruit juices concentrates in a partnership with a Turkish significant exporter since 1998.

Foreign Investments in Turkey

Morning Star California, one of the world’s biggest players in tomato processing business (accounting for 10% of the World’s market share with 3 million tonnes of tomato processing capacity), is a strategic investor in Harranova Besi since 2008. Morning Star California provides valuable know how in efficient organic growth for Turkey’s south east boasts, which is much more fertile soil compared to other parts of Turkey.

Foreign Investments in Turkey

In 2000s Coca-Cola Company, the largest juice buyer in the world, entered into a strategic supply alliance with Sucocitrico Cutrale Ltda. from Brazil which is the world's largest grower and processor of oranges, in Turkey. The Coca-Cola Company and Cutrale are working with local farmers around the world to improve agricultural practices.

Foreign Investments in Turkey

In 2010, The Eckes-Granini Group, one of the leading fruit juice producers in Europe and Yildiz Holding (Ulker), the leading company in the Turkish fast-moving consumer goods market agreed on the foundation of a joint, full-scale fruit-beverage subsidiary in Turkey.

Foreign Investments in Turkey

This year British Diageo agreed to buy Turkish spirits giant Mey Icki for 1.5 billion euros ($2.1 billion), ramping up its presence in fast-growing emerging markets.

Foreign Investments in Turkey

Alara Agri Business is located in Bursa, Turkey and was established in 1986. The company is the largest fresh fig exporter in the world and the largest cherry exporter in Europe.

Alara’s products are distributed to major retailers in 22 countries across 5 continents. Strong brand recognition coupled with highly sophisticated cherry and fig line processes has enabled the company to continue the growth experienced over the last 10 years.

VISION: Alara Agri's vision is to be the "global leader" in the fresh cherry and fig sector.

A Success Story: ALARA-AGRI

The largest fig exporter in the World. The largest cherry exporter in Europe and second In

the world. The largest cherry nursery in the World. The largest "high-density planting" cherry orchards in

the World. The largest Turkish fresh fruit exporter. The largest Argentinian cherry exporter (Rioalara)

manage World's largest Eurepgap Project. (PMO)

A Success Story: ALARA-AGRI

ALARA is a member of the UNIVEG Group

The UNIVEG group of companies is a worldwide supplier of fresh produce, active in the fields of Fruit & Vegetables, Flowers & Plants, Convenience products, Transport & Logistics.

The UNIVEG group has operations across 4 continents and serves a global customer base in 25 countries; it generated a turnover of EUR 3.3 billion in 2009 and currently employs some 9,500 people.

A Success Story: ALARA-AGRI

• We, as the Presidency of Processed Fruit and Vegetables Exporters Association (PF&V) are working into a huge project with all players here to perform Turkey into a production and exports hub for any processor worldwide to invest in here.

• The aim of this project is to form the infrastructure of processors to invest into Turkey mainly for Agricultural Produce destined for Processors.

• Main items to be produced are tomatoes, all kind of vegetables, fruits to be processed and packed for export purposes, whereas the domestic market also is in easy grasp for investors.

“Invest in Turkey Project”

Official partners to be confirmed soon in such turnaround project are(who will be gathering around soon):

Presidency of PF&V (www.iib.org.tr) Republic of Turkey Prime Ministry Undersecretariat for Foreign Trade (

www.dtm.gov.tr) Ministry of Agriculture (www.tarim.gov.tr) Prime Ministry Investment Authority (www.invest.gov.tr) SİİD (Tomato Paste Producers and Exporters Association) (

www.siid.org.tr) MEYED (Turkish Fruit Juice Association (www.meyed.org.tr)

The latter two organisations have been invited as observers.

Partners

THANK YOU!umit.guvenc@tamek.com.tr