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Organic Agriculture in Turkey

Leonard Burger

2012

“With a focus on Organic Fruits and Vegetables”

REPORT AVAILABLE ON REQUEST Netherlands Agri-Business Support Office Izmir, Turkey


© 2012 NABSO – NCH. All rights reserved. Unless reproduced or disseminated for educational or non -commercial purposes, provided it is properly referenced, no part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form of by any means, electronic, mechanical, photocopying, recording or otherwise, without th e prior written consent of NCH and/or the author. NCH, NABSO and the author take no responsibility for any injury or damage sustained by using information from this publication. Opinions portrayed in this report are those of the author and not necessarily those of NABSO, NCH or the Dutch Federal Government (i.e. Rijksoverheid). Neither NABSO and all its administering parties nor the author can be held responsible for any false information provided by third parties.

First Publication:

January 2012

Research:

September – December 2011

Written by:

Leonard Burger

Supervision:

Netherlands Agri-Business Support Office Mr Eren Kizilates (Direct supervision) Mr Jop Kipp (Director)

Aksoylar İş Merkezi 1476 Sok. No 2. D. 96 35220 Alsancak, Izmir Türkiye / Turkey +90 232 464 94 04 +90 232 464 94 08

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I.

EXECUTIVE SUMMARY

Doing business in Turkey; it is becoming more and more popular among EU’s entrepreneurs and businesses. An important reason for this is the economic growth the country has demonstrated within the past decade. In the spirit of this growth new markets awake, one of these is the market for organic food. Since this would be a relatively broad subject to research, this report focuses on organic fruits and vegetables. Organic agriculture in Turkey started to arise during the mid-eighties, mostly to satisfy the demand which existed in foreign countries. At that time the sector was not yet interfered with by the Turkish government. Turkish exporters therefore complied with regulations from the countries they exported to. The Turkish government’ first action was the implementation of a by-law on organic agriculture. Concurrently, the ministry of Agriculture and Rural Affairs was appointed to deal with the sector. This Ministry implemented an official law for organic agriculture in 2004 together with two committees. One committee deals with formalities and the other acts as a stakeholders-forum. The domestic market for organic products, unlike the production of these pro ducts, has only been developing during the past few years. In Turkey most people were unaware of the organic concept. Being at this early stage the market is far from being fully developed or utilised; however increasing hectares of land is becoming available in the country for the cultivation of organic products. Moreover, consumer awareness amongst Turkish consumers is rising every day. Nonetheless, more attention and action from the government is needed in order for the domestic market to develop further. The domestic market, in its current form, exists of consumers mostly living in the larger urban areas (Ankara, Istanbul and Izmir). Herewith, the most commonly utilised sales channel is online. In production terms the country produces roughly 4% of the world’s total fruit and vegetables production. Organically speaking, the organic production is done over the span of the seven regions of Turkey. The Aegean region has the highest share in production amounts and businesses (affiliated to organic agriculture). Therefore it can be considered the most important region for organic production. The second most important region, for organic produce, is the Mediterranean region. Other regions include the; Inner-Anatolian Region with the country’s capital Ankara and the Marmara region with the metropolis Istanbul which presents a great target area for sales. This report utilised specific business analysis tools to induce an in-depth look in the market, namely a PEST analysis, a supply chain analysis and a marketing analysis. The outcome of these analyses shows that it is wise, when entering this market, to cooperate with a local partner. This also has helps mitigate the risks that are apparent, such as government regulations and local business used to a B2B (Business-toBusiness) model and not to marketing products to domestic consumer groups. Therewith, no marketing activities are currently taking place in the market. The marketing mix shows a Product with features such as a healthy and environmental friendly solution for its conventional counterpart. The Place [of sale] being stores specialized in organic products, special sections in super- and hypermarkets and online. The third P, Price, depicts adding premiums is perfectly fine. The last P, Promotion, is most likely the most important, especially in Turkey. The use of traditional advertising is considered the best method to promote any product in the country. Using a good price and convincing message, which preferably includes upbringing. At present new traders will be considered pioneers with the market still being in its primary life cycle; this increase the chances of having a large market share. Nevertheless, traders should bear the risks and the added social responsibility in mind upon entering this market in the world’s 17 th largest economy.

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II.

T ABLE OF CONTENTS

I.

EXECUTIVE SUMMARY ........................................................................................................................................................ 3 TABLE O F CONTENTS .......................................................................................................................................................... 4

II. III.

FOREWORD ....................................................................................................................................................................... 5 GLOSSARY ......................................................................................................................................................................... 6

V.

1.0 1.1

I NTRODUCTION: O RGANIC AGRICULTURE IN TURKEY ....................................................................................................... 7 TURKISH DOMESTIC MARKET ......................................................................................................................................... 8

2.0

PRODUCTION OF O RGANIC FRUITS AND VEGETABLES IN TURKEY ...................................................................................... 9

2.1 2.2

A EGEAN REGION ....................................................................................................................................................10 MEDITERRANEAN REGION............................................................................................................................................10

2.3 2.4

I NNER ANATOLIAN REGION ..........................................................................................................................................11 BLACK SEA REGION......................................................................................................................................................11

2.5 2.6

MARMARA R EGION .....................................................................................................................................................11 EAST ANATOLIAN REGION ............................................................................................................................................11

2.7 3.0

SOUTH EAST ANATOLIAN REGION ................................................................................................................................12 MARKET I N-DEPTH ANALYSIS.......................................................................................................................................13

3.1 3.2

PRICE DEVELOPMENT ..................................................................................................................................................13 PEST ANALYSIS ...........................................................................................................................................................13

3.3 4.0

SUPPLY CHAIN.............................................................................................................................................................15 MARKETING: CURRENT SITUATION AND ADVICE ...........................................................................................................16

4.1 4.2

MARKETING MIX: THE FOUR P’S .................................................................................................................................16 MARKETING ADVICE: SCOPE AND CONCLUSION ............................................................................................................18

5.0

O PPORTUNITIES & ADVICE FOR DUTCH TRADERS ..........................................................................................................18

6.0 6.1

APPENDIXES................................................................................................................................................................20 APPENDIX 1: GRAPH 1.1 .............................................................................................................................................20

6.2 6.3

APPENDIX 2: TABLE 1.1...............................................................................................................................................20 APPENDIX 3: GRAPH 2.2 .............................................................................................................................................21

6.4 6.5

APPENDIX 4: MAP 2.2 .................................................................................................................................................21 APPENDIX 5: TABLE 2.3...............................................................................................................................................22

6.6 6.7

APPENDIX 6: TABLE 3.4...............................................................................................................................................23 APPENDIX 7: FIGURE 3.1 .............................................................................................................................................23

6.8 6.9

APPENDIX 8: FIGURE 4.2 .............................................................................................................................................24 APPENDIX 9: FIGURE 5.1 .............................................................................................................................................24

7.0

BIBLIOGRAPHY.............................................................................................................................................................25

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III.

FOREWORD

Introducing the readers to the Turkish Organic Agricultural sector was a rather daunting experience. The biggest hurdle I came across was the (occasionally extremely) contradicting information I was receiving from different persons, reports and other quantitative/qualitative data sources. Nonetheless, I have aimed at utilising the most viable and trustworthy information as seen aggregated in this report, which in my opinion has been a success. I would like to express my gratitude to two persons whose reports have helped me most in investigating this sector in Turkey, Zeynep Ă–zbilge a graduate of Marmara University with her many reports on Organic Agriculture in Turkey and Matthias Lehner a graduate of the Swedish Agricultural University in Uppsala, with his master thesis and additionally providing me with extra reports which have proven to be valuable as well. Although most of their reports do not fully portray the exact subject I am writing about the information has been very useful. Turkey is a country which is very dear to me; herewith Izmir is one of my favourite cities. Therefore when I stumbled upon the opportunity to do an internship at NABSO, I took it with both hands. My endearment for Turkey has started in 1999 when I came to the country for the first time and after which I never stopped coming. In the past few years I had the opportunity to travel and experience a lot within the country. Over these years I have improved my Turkish language skills up to a satisfying level and created a good professional and social network. The organic sector in Turkey is far from being fully utilized as you will understand from the report; however in my personal opinion there are many opportunities within this specific market as well as within Turkey on a whole. Mainly due to a rise in consumer awareness and growing wealth (for a greater part in the larger urban areas), the domestic market in Turkey for organic products is an interesting one. A conclusion will be drawn at the end of this report, together with my humble personal advice whether to do business in this market or not.

Leonard Burger

Marketing & Research Assistant NABSO International Business & Management Student

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V.

GLOSSARY

B2B: Business to Business B2C: Business to Consumer Buğday: Ecological Living Support Institute (Ekolojik Yaşamı Destekleme Derneği) EİB: Aegean Exporters Union (Ege İhracatçı Birlikleri) ETO: Organic Agriculture Movement (Ekolojik Tarım Organizasyonu Derneği)

MARA: Ministry of Agricultural and Rural Affairs (Current: Ministry of Food, Agriculture and Livestock) OA: Organic Agriculture ORGUDER: Organic Food Producers and Industrialists Association OTK: Organic Agriculture Committee (Organik Tarım Komitesi) OTYK: Organic Agriculture National Orientation PEST analysis: Political Economical Social Technological Analysis TUGEM: General Directorate of Agricultural Production and Development (Tarımsal Üretim ve Geliştirme Genel Müdürlüğü) WHO: World Health Organization

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1.0

INTRODUCTION: ORGANIC AGRICULTURE IN TURKEY

Doing business in Turkey is becoming more popular among European entrepreneurs and businesses. The most important reason for this is the economic growth the country has demonstrated in the past few years. Turkey is a country which is developing on a daily basis; shortly, it has the potential of being ‘booming’, a word used by analysts describing the country. This report is the product of a research project on the Organic Agricultural (OA) sector in Turkey, with a focus on organic fruits and vegetables. OA and Turkey are an inevitable combination. Until the 1950’s the agricultural activity in Turkey was utilising methods which were almost identical to methods used in modern OA. However with modernization came the use of chemicals and therefore these methods changed for many farmers. Nonetheless, even now, in some parts of the country, farmers are still working with these same methods, which make them ‘organic by default’. They have no other choice since they could not afford using chemicals and (inorganic) fertilizers. (Güzel & Demiryürek 2007) However, besides being organic these ‘organic by default’ practices are often degrading and therefore need a sustainable alternative. After the modernization of methods, OA in Turkey started to arise again during the mid-eighties. At that time the production of organic products existed to satisfy the demand from foreign countries which were interested in products that could not be cultivated organically in their home countries. The domestic exporters answered this demand through cultivating just these products, mainly comprising dried fruits. Furthermore, Turkish OA was not yet interfered or in any way dealt with by the Turkish government. Therefore the Turkish producers and exporters initially solely needed to comply with the rules and regulations for organic production of every importing country. This changed when in Europe the EU-EcoRegulation was implemented in 1991, which made the export (and production) more efficient. (Özbilge, 2007; Lehner 2009) The first steps in OA by the Turkish government are traced back to 1994 when the Turkish National Assembly passed a by-law on OA, in line with the before mentioned EU regulation. At that time the Turkish Ministry of Agricultural and Rural Affairs (MARA) was appointed as the ‘competent authority’ to deal with OA further on. Some years later, in 2003, this same ministry created the Alternative Agriculture Techniques and Production Department (AATP). That following year in 2004/2005 it implemented an official law for OA together with two committees. One with a formal role: the OTK (Organic Agriculture Committee) which authorises and holds an eye on control and certification bodies, but also monitors entrepreneurs and implements or audits laws. The other one takes on the role as stakeholder -forum: the OTYK (Organic Agriculture National Orientation Committee), which shortly stated raises awareness among producers but also in local and foreign markets about OA. One of the latest activities in OA was the instalment of the National Organic Strategy for Turkey in 2006. (Lehner et al, 2009) Turkey’s OA is a sector with many opportunities and has developed a lot over the last 25 years, especially during the past six years. The main production of organic goods in the country is intended for export, with the domestic market starting to develop during the past few years. Concluding about OA in Turkey, a lot of soils are unpolluted, in many areas there are favourable climates all year round. On top of that these same grounds can facilitate the cultivation of a lot of different crops. Nonetheless, the development of OA in Turkey and opportunities for entrepreneurs lay in the development of the domestic market.

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1.1

T URKISH D OMESTIC MARKET

The domestic market of Turkey is still at an early stage and far from fully being fully developed. One reason for this is the relatively low percentage of land being used for organic production; however this is not the most important reason. A more important reason is found to be in the low domestic supply and ample marketing activities of organic products in the country. Over the past years these levels of supply are rising, mainly because the awareness of consumers has raised a lot during the last decade. Although the offer of ‘real’ organic products is still not supplying for this everyday increasing rise in demand, the demand is soothed in a negative way by the sale of ‘fake’ organic products. This also shows that the awareness of the consumer did not debouche in the full understanding of the real definition of an organic product. Although the last few years the domestic market has been developing, the Turkish government’s policy forms an obstruction towards the development of the Domestic market as well as to the development of the Organic sector as a whole. The government has not given the sector the attention it should have according a lot of stakeholders, companies and institutions. (Özbilge et al. 2006) An action plan for the period 2007-2013 was prepared by the government however, with clear goals. One goal in the plan states that the domestic market for organic products should develop more; stating that by developing the market the benefits of organic food will also be delivered to the Turkish population. But there is not one governmental or government related institution that has been implementing this action plan, in any way whatsoever. (Stange, 2010) The domestic market is mostly occupied by companies who are normally more active in the developed export market of organic products in Turkey. A shift in focus from export towards domestic sales, of these companies, is necessary in order to increase domestic activity. Export numbers have been dropping against rising production amounts, but these numbers are hard to compare because export amounts come from weighing processed products while production amounts come from unprocessed products 1 . Moreover the monitoring of organic goods which are exported is not precise enough to make a definite comparison between the two. The most probable cause for this is found in the lack of interest for data collection of government officials at the border. As mentioned a shift seems to occur, the larger sized export companies of dried and/or fresh fruits and vegetables understand that undertaking action in the domestic market is important for future business and branding. However export companies see trading in this market as risky, for several reasons. The two most important reasons are: chain stores and other food trading companies in Turkey do not separate selling standards for conventional and organic goods. As organic products tend to be sold slower than its conventional counterparts it possibly results in high stocking prices; the second reason is found in the before mentioned government policy in combination with strict regulations for domestically sold organic products. These reasons make exports companies feel that it’s not profitable to sell domestically. (Personal communication with export firms) In a more generalized view these companies are used to operate on a B2B level, and could have a hard time to define a strategy for operations on a B2C level. Activities that are conducted in the domestic market are mainly concentrated in the three largest cities of the country which are Istanbul, Ankara and Izmir. However this does not state a lot about the potential 2 consumers that could be reached in this area, with a population of 21.6 million people which make up 1 2

Appendix 1 and 2 Population in 2010, according Wikipedia / 13-12-2011

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29% of the total countries population. Retailers who have organic products in their assortment already are Migros, which also administers Tansaş and Şok, and the Kipa markets, owned by British Tesco. Another worldwide food retailer which is active in Turkey is Carrefour, which offers a broad variety of Organic products in their Turkish based stores. Next to that domestic wholesalers like Metro and Makro also sell organic products in Turkey. For a more specialized assortment of organic products there are smaller specialized stores in most urban areas in the west and south-east of Turkey, which solely sell organic food and other organic related products. The largest offer of organic food for the Turkish public can be found on the web. There are a lot of websites, also active on e-marketing, which sell organic products online. This last channel can probably be considered the most used marketing channel in Turkey at present.

2.0

PRODUCTION OF ORGANIC FRUITS AND V EGETABLES IN TURKEY

In Turkey a great amount of Fruits and Vegetables are produced, thereby tomatoes and cucumbers are always eaten during the Turkish breakfast. Furthermore fruit plates are commonly served with some tea at nights as well as during the day time for ‘Misafirler’ or guests that come to visit. In terms of production approximately 4% of the total annual production of fruits and vegetables in the world are being produced in Turkey, mainly for the domestic market but also for export purposes. (Özbilge, 2007) Map 2.1 shows the production of organic fruits and vegetables per region in Turkey as a percentage of about 78000 tons of four main types. As seen in the chart of the map these four products are tomatoes, apples, grapes and eggplants.

Map 2.1 Statistics: TUGEM

In Turkey next to these four types, more types of fruits and vegetables are produced organically. Types vary from region to region. Therefore when looking at the Turkish organic food production it is important

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to separate the main seven regions of the country. In map 2.1 these regions are divided and per region the percentages of the total production in Turkey are portrayed. Map 2.1 also shows that the Aegean Region is by far the most important region regarding organic production. Map 2.2 3 shows the total percentages of all organically produced products in Turkey per region. Divided over the different regions of Turkey a broad variety of fruits and veget ables are produced organically. Because of the availability of different climates and soils in these regions, a greater variety of product output is seen over the country as a whole. Distinguishing which types of fruit and vegetables are important to a certain region is possible when a detailed look is taken at the l ists with production numbers. These lists are solely available in Turkish and have been made available by the RD division of the Turkish Government, or TUGEM. A data analysis is conducted in the following sections on a per-region basis.

AEGEAN REGION

2.1

The most important region for organic production, considering both quantitative and qualitative data, is the Aegean region. Little over a quarter of all organic production of Turkey is done in this region on the west coast. The region also has the largest variety of organic fruits and vegetables. One of the provinces in the Aegean region is Izmir; capital of this province is the city of Izmir which is the third largest city of Turkey. Izmir is of great importance to OA in Turkey, with a variety of 122 organic products being produced in this area, it has the biggest portfolio of organic products in Turkey. Furthermore, in 2008, around 1156 businesses affiliated to OA were registered in this province. These businesses mainly comprise of export companies. Organic products which are important for a region can be distinguished by looking to every province individually. For example another province in the Aegean region is Aydin; characteristic for this area is the organic fig. As a result Aydin has the highest production number in organically produced figs. Other provinces in the Aegean Region are Afyonkarahisar, Denizli, Manisa and MuÄ&#x;la. Noticeable about these provinces is the organic grape production in Manisa. Together with the organic grape production of the other provinces in the Aegean about 22.000 tons of organic grapes are produced, making up 85% of all organic grape production in the country. To conclude, in general and in detail the Aegean region can be considered the most important region for organic production in the country. (Statistics: TUGEM) 2.2

MEDITERRANEAN REGION

The Mediterranean Region can be considered the second most important region for OA in the country. The region’s span reaches from the south west of Turkey to far south east; therefore the weather conditions vary from province to province. The western part of this region has a climate which can be compared to that in the Aegean region, but more to the eastern side it has a softer and warmer climate all year round, a south-eastern sea climate. As a result a broad variety of organic fruits and vegetables can be cultivated in the provinces of this region. One of the products that are characteristic for this region as a whole is the pomegranate, of which about 3300 tons are produced spread over the provinces of this region making up 36.3% of the total organic pomegranates production in Turkey. To further consider other important products for this region, like in the Aegean region, a distinction is made between the provinces. The three provinces with the biggest 3

10.4 Appendix 4: Map 2.2

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variety in organic products for this region are Antalya (100), Adana (66) and Mersin (64). In Antalya the pomegranate is the product with the highest production numbers, making up 22.4% of the total organic pomegranate production in Turkey. In the province of Adana, there are three products which can be considered most important for that area, namely the orange, lemon and thirdly the pomegranate. Lastly the third most important province of this region is the province of Mersin, which can be considered as the centre for OA in the South-East of Turkey. That is because of the many businesses affiliated with OA are located in the city of Mersin, most of which also have connections and/or offices in the other important cities for OA. Remarkable about Mersin is that 99.4% of the organically produced bananas are produced in this province. Other important products for this area are grapes and the fruit carob (Turkish: Keçıboynuzu) which is not a very well-known fruit; however it is another product that is produced almost solely in Mersin. The last remarkable fact about this region is that the production numbers of organic vegetables are not very high. The only vegetable which has a reasonably high production number is tomatoes, produced mostly in the province of Isparta. (Statistics: TUGEM) 2.3

INNER ANATOLIAN REGION

The Inner Anatolian Region in Turkey can be distinguished from all other regions by one single organic product, the apple. 61% of all organic apples are produced in this region. A high amount of these apples are produced in one province, Niğde, which is located south east of Ankara. Other than the capital Ankara, which houses all agricultural governing institutions, and the province of Konya where a large amount of organic strawberries, cherries and carrots are produced this region does not have very much affiliation with OA. 2.4

BLACK SEA REGION

The Black sea region, with more than 88200 hectares of land being utilized for organic farming, withholds the largest area of land dedicated to OA in Turkey. The organic production in this region however only represents 10.4% of the total amount in Turkey, and these production numbers are mostly not related to the production of organic fruits and vegetables. Namely the nut production of the Black sea region is very important and also the hazelnuts from this region are very popular. A good marketing example can be given about Ferrero, with their famous product Nutella, who has launched a television commercial about Nutella4 which also states it uses the famous hazelnuts from the Black sea region. 2.5

MARMARA REGION

In the Marmara Region, because of the many urban and industrial areas and the relatively small surface of the region, organic production amounts are quite low. However the region has an important role in the sales of organic products, mainly because Istanbul is located in this region. Istanbul withholds a lot of RD institutes active in OA. Examples are Buğday and ETO. Next to that there are a lot of known universities with agricultural departments that also attend to research on OA in Turkey. Furthermore 17% of the population of Turkey lives in Istanbul of which also a large group of highly educated people with a medium to high income. This group can be regarded as the target group for many Organic traders. 2.6

EAST ANATOLIAN REGION

The East Anatolian Region is a less noticeable region for many organic traders and producers, however with 21.7% they are the second on the list of organic production. The cause for this is the high production 4

http://www.ferrero.com.tr/Nutella/

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amounts of wheat’s however. Therefore considering the production of organic fruits and vegetables it is logical this region is not really noticeable for OA affiliated businesses. Nonetheless the region has a lot of land which is suitable for organic agriculture, because in this region a lot of land has never been polluted with chemicals or other kind of materials. Simply because the land owners and farmers don’t have the money to use these chemicals, which is a good example of Organic by default (Introduction ). But since some areas with these unpolluted lands are located in, which have not been cleared of landmines for example, the region is not very popular amongst producers. Next to the high organic wheat production in the region as a whole, the only noticeable province with a variety of 28 organic products is Malatya. Malatya’s most important products are apricots, lentils and chickpeas. These dry beans are considered vegetables as well. 5 2.7

SOUTH EAST ANATOLIAN REGION

The South East Anatolian region has the lowest organic production in the country and can be considered unimportant to OA in Turkey. However also in this region in a lot of area unp olluted grounds are available. However some provinces like Diyarbakır and Mardın are considered high risk areas with the ongoing conflict between terrorist organizations and the Turkish Army. However more to the west of this region, the provinces Gaziantep and Şanlıurfa have reasonably high organic production amounts according to the Turkish standard. The most important product for these two provinces is the pomegranate with over 2000 tons, 22% of the countries pomegranates are produced here.

Organic Production per region (2010) 90000 80000 70000 60000 50000 40000 30000 20000 10000 0

Production amount (Ton)

Production area (Ha)

Statistics: TUGEM

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Graph 2.1

mypyramid.gov/pyramid/dry_beans_peas_table.html

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3.0

M ARKET IN-DEPTH ANALYSIS

3.1

PRICE DEVELOPMENT

Data collection on price development is not conducted at present in Turkey. Only common lists are available that do not separate conventional products from its organic counterparts. The main reason for this is that there is no price monitoring system which keeps track of organic products. Without this information available and because of the unpredictable inflation rates in Turkey it is hard to make general comparisons with other countries. However the EIB (Aegean Exporters Union) is working on a system like this for Organic products, which is to be finished by the end of 2012. These and other monitoring systems (or the improvement of existing systems) will create a more transparent market. (Personal communication with EIB) 3.2

PEST ANALYSIS

The PEST analysis of the Turkish Domestic market is conducted from the standpoint of a strategic option; in this case this option is the potential entering of this market. Be they for investments for one’s own business or investing in other people’s businesses or business propositions, when assessing a market like the organic market for fruits and vegetables in Turkey, it is important to take into account disciplines such as Political, Economic, Social and Technological elements. The PEST analysis can help identify the current position of the market, the potential of the market and the direction that an entrepreneur or trader could take after entering the market. The outcomes of this specific PEST analysis can also help in the creation of a Marketing strategy. The first element, Political, stresses the regulation of OA in the country. An important point of consideration is that legislation on other elements for businesses were not taken into account during this analysis. It is wise, like for any business entering a market in new territory, to either work with a local partner or conduct a thorough research on all elements considered important for doing business in that country (e.g. Wage legislation, Taxation, Inflation, Current political stability etc. ). Among the elements of the political analysis it is important to explain that the loans with discount (60%) are given only by the Turkish Agriculture Bank (Ziraat Bankası) and being controlled by a licensed control and certification body is a requirement before a business’ products can be considered organic. In the economic analysis it is considered that the economy in Turkey might overheat. It was stressed that the demand for (specific) products is higher than the current production in the country and imports together could supply, this demand is growing fast and hard to keep up with (Media sources: Hurriyet 6 , 2011). Under social elements the fact that healthy food is important needs to be emphasized because of two key reasons in the Turkish culture it is important to have a healthy diet among all classes of society. This can also be seen as a religious point of importance.

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www.hurriyetdailynews.co m

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The PEST Model for OA in Turkey criteria considered current legislation international legislation regulatory bodies and processes government policies funding, grants and initiatives home market pressuregroups international pressuregroups Current (2011/12): Stability of politics

Political

Economical

    

       

 

  criteria considered l i festyl e trends demographics cons umer a ttitudes and opi nions bra nd, company, technology i mage cons umer buying patterns rel i gious factors a dvertising and publicity ethi cal i ssues

Organic Farming law of 2004/2005 In line with EU regulations MARA OTK committee with formal responsibilities OTYK committee: Stakeholders forum National Organic Strategy for Turkey (2006) Direct Income Support (DIS) for organic farmers Enterprise- and investment loans available with 60% discount EUROSTAT norms and parameters used in data collection (MARA) Obligatory weekly promotional programs on state TV to promote organic sector (only monthly) Licensed control and certification Pressure groups in the form of NGOs: ETO, EIB, BUGDAY, ORGUDER. IFOAM, World Bank projects Slight political instability

Social 

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    

      

  

High economic growth Prosperity Low labour costs Close ties with EU economies Long history of import and export of organic products Only 1% VAT on agricultural goods 8% VAT on food (retail) Existing market channels for organic products Improved national infrastructure Instable inflation rates High Exchange rate Accessible support from World Bank, IMF, etc. due to ‘developing economy’ status High activity in investment Good treatment of investors Risks for stagnation and economical turn-down due to chances of economy overheating

Technological

Relatively large young population with lifestyle trends which organic food fits into More focus on health outside ‘normal’ target group Rising awareness for ‘real’ organic products Healthy Food important (culture), cooking with raw ingredients rather than a ‘microwave’ culture Healthy food important (religion) 15% of labour force has tertiary education (2007) Quality advertising new and appealing Rising importance and awareness for ‘modern’ ethics Relatively High influence of Media

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 

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criteria considered

Newly rising technological solutions for production processes Adequate maturity of technology in organic production due to export quality standard adjustments for exporting to developed economies Accessible international funding for research and development in OA due to importance to World Bank, IMF, etc. due to Licensing Member of WTO, adopted all regulations of all rounds Gap between technology and middle-aged workforce (due to fast increase in a short period) High capacity for organic product cultivation Relatively slow technological diffusion

Organic agriculture in Turkey

home economy overseas economies general taxation taxation specific to product/services market/trade cycles customer/end-user drivers exchange rates international trade and monetary issues

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3.3

SUPPLY CHAIN

The supply chain for Organic fruits and vegetables in Turkey is shown as a flow chart (chart 3.1); it can be considered the supply chain for Turkish OA in general. The main product moved through this supply chain can be considered as the organic fruit and/or vegetable. In the supply chain a few things strike out, for one the RD institutes deliberately have no connections with any of the other elements of the chain. The reason for this is that they are not connected to the product running through it. However their input in OA is high, institutes like BuÄ&#x;day (Istanbul), ETO (Izmir), the OA department of EÄ°B (Izmir), TUGEM (Ankara) and other RD institutes affiliated with OA are feeding the other parts of the supply chain and contribute to the development of OA in Turkey.

Another thing is the three different outputs of the movement of a product. The first is from seed to processing and exporting companies who sell directly to markets which on their part sell to the consumers in the Turkish domestic market. A list of some of these companies who are mostly involved in two parts of the supply chain (overseeing the organic producers or contracting them directly plus having processing fabrics) can be found in the appendixes. This movement is currently the most common one for sales of organic goods in the domestic market. The second movement is from seed to trading companies abroad; being that a lot of goods are produced with the intention of being exported, therefore this can be considered the main stream in the supply chain. There is no connection made between exported goods and the consumers since the companies who export goods from Turkey only operate on a B usiness to Business level (B2B). And therefore have no direct connection with the consumers in foreign countries. The third movement is a movement which is less common in Turkey at the moment, but it is this movement that would be beneficial for the sales in the domestic market (especially the development of this movement). This is the flow of products from the Processing and Packaging Fabrics directly to the domestic market.

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4.0

MARKETING: CURRENT SITUATION AND ADVICE

At present, there are little to no marketing activities conducted for organic fruits and vegetables in the Turkish domestic market. This is due to the fact that there are no real viable segments to be targeted. Since most companies are active in different parts of the supply chain, they tend to focus on export and therefore are more accustomed to the B2B model. As a result little to no marketing activities are taking place for organic products. Furthermore in Turkey the concept of Marketing in forms and proportions of how they are in Europe and USA is quit new. The companies, who were the first to spend high amounts of money on marketing, are mostly from the west. However these companies are mostly active in different sectors. There is no company that markets its organic fruits and vegetables to the Turkish consumer at the moment, most awareness comes from peoples own interest. These people do research and find there information on where to buy organic products or why they should buy organic products through institutes who conduct research or intend to develop the domestic market in Turkey (ETO, EIB, BuÄ&#x;day, TaTuTa, etc.) Or they have been buying products which are more marketed (as organic) like baby food from companies that do try to market their organic products in the Turkish market. The companies that do try to market their products in this sector mostly go for personal selling or direct marketing, meaning they use a more personal way of bringing the product to the consumer. The group of consumers of Organic fruit, vegetables and other products can therefore be considered as a pro-active group of consumers. For this group little to non-advertising is necessary to create awareness for a specific product; however it takes a special approach to attract this group of people to another set of products or brand. Therefore for this specific group of consumers it is important to offer a Unique Selling Proposition (USP); an example would be to offer full degradable packages for fruits and vegetables. This could be the USP that attracts this group of consumers that already buys existing products. However both finding and using the USP is best done in brainstorm session with all parties that are involved in the process.

4.1

MARKETING MIX: THE FOUR P’ S

Since the group of existing consumer is not the only group that is a possible target group for (new) traders. A short and simple analysis of the Marketing Mix could help define a style of marketing to approach target groups. The first P in the marketing mix is Product, describing the important features of the product. Here we are considering organic fruits and vegetables, some of the features of this product (e.g. a piece of organic fruit or an organic vegetable) are that these are healthy, environmental friendly, sustainable substitutions for its conventional counterpart. The second element of the mix is the Place, in the case of this product they are currently most often sold in specialized shops in the larger urban areas. Also consumers originated from these areas buy these products online at organic online shops. So the points were this product is made available to consumers are stores specialized in Organic products, specialized sections in some super- or hypermarkets, online specialized shops or they are directly sold from producer to consumer (however this last channel is not 7 very common). A good view of this is given by the marketing channel, which can be found in figure 4.2 .

7

7.8 Appendix 8: Figure 4.2

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The third element of the mix is Price. Since there is an inadequate price monitoring system for organic products in Turkey it is hard to find out what are the consumer prices in the country. If there is a need to know this a more in-depth research is needed to find out what the prices are for all fruits and vegetables. However in marketing terms it is more important to know the price which current and new consumers are willing to pay for the product. A fixed price will not be given in this report; however a consumer survey in 2009 revealed that 79, 5% of the respondents were willing to pay a premium for food that benefits their health (i.e. organic fruits and vegetables). (Lehner, 2009) On top of the already higher cost price for organic products a reasonable premium can be charged. A competitive advantage would exist (at the moment) if this premium was to be kept at a low point since current traders charge relatively high premiums for organic products in Turkey at this point in time. This would suggest using penetration pricing in the market entry strategy. An example (in Turkey) is taken from a recent (re)entering strategy of Snickers. Snickers was already available in the Turkish candy bar market however during their new TV 8

commercial they have set the price on 1 Turkish Lira (equivalent to â‚Ź 0.41) whereas it used to be 2 or 3 TL for one bar. Sales and availability in more stores have grown in Turkey since this price stunt. The last, considerably most important, element of the mix is Promotion. Promoting a product is what any marketer would consider as they most important element in selling a product. In the case of Organic fruits and vegetables in Turkey, one of the options to promote products is through traditional advertising. Billboards, posters, adverts in newspapers and tabloid newspapers and/or commercials on TV are a good way to reach a greater part of the people that at first might not be considered as the target group and next to that the initial target group as well. Setting a good price in combination with a convincing message stating that; an organic product is a healthy substitution for conventional counterparts. An example would be: “A healthier way to be healthy, eat your daily dose of fruits and vegetables in an organic fashionâ€?. This and sort like messages are usable phrases to promote a piece of organic fruit or vegetable in the country. It is a widely spread message throughout western countries, the WHO recommends 400 grams of fruits and vegetables for a person to eat per day. 9 This message is not commonly used or spread in Turkey, since most people in Turkey are brought up with this message already. This message does not contain the organic version of fruits and vegetables however, so using upbringing when promoting organic products in Turkey is most probably wise. For more promotion tips and or advice on marketing refer to chapter 5.0.

8 9

According the currency rate on 30-12-2011 http://www.who.int/dietphysicalactivity/publications/f&v_pro motion_initiative_repo rt.pdf

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4.2

MARKETING ADVICE: SCOPE AND C ONCLUSION

May marketing techniques are usable in the field of marketing food products. In Turkish terms the promotion of the concept organic itself is still in progress, however. Even though awareness is growing, there has been almost no activity in the field of brand promotion. This current situation has two significant effects, the first is an opportunity: the field for marketing is relatively blank and a blank slate is what a lot of marketers would consider easier to work with and less ‘polluted’. Secondly it creates a treat: there is less to no experience with consumer and target group reactions to advertising or other means of promotion (i.e. there is neither quantitative nor qualitative data available). Because of this it is harder to conduct research on consumer reactions and it creates a hurdle for developing a complete marketing strategy to enter this market. Using basics and a good common sense, with experience from other countries and/or examples from other branches in Turkey including some introductory research, it is not impossible to create a good marketing strategy for the organic market. Advisable is to work with marketing staff that have attainable knowledge of Turkish markets and only enter the market once the specific brand and product are known. Herewith due of the ‘maidenhood’ of the Turkish domestic market for organic products (i.e. the first stage of the market cycle) it is most likely easier to enter the market and to create a cost efficient marketing plan. 5.0

OPPORTUNITIES & ADVICE FOR DUTCH TRADERS

Turkey has an interesting economy, when considering the development of this economy in the past decade it is not surprising that foreign investors are constantly seeking (new) opportunities in this country. Turkish OA presents a new market. This market is, like described in the introduction, far from being fully developed or utilized. This means that traders entering this market, whether launching a whole new venture including product line or just one product, would be considered pioneers because the market is still in its primary life cycle. This brings along the necessary risks. These risks can never be annihilated however these can be mitigated when cooperation with local firms are formed. Since cooperation with businesses overseas also brings along other risks it is important to choose the right partner to work with. Nonetheless this search for a partner and the guidance of future cooperation are aided by organizations like NABSO and NBSO. Entering the organic market in Turkey also presents opportunities; your business will settle itself in Turkey’s economy which is currently the 17th largest economy in the world 10 , hopefully profiting from the economic growth this emerging economy is enduring. When entering this market bear in mind that all policies are set for economic growth; the country’s economic policies are designed in a way that thrives to th acquire a place among the world’s 10 biggest economies by 2023, the nation’s 100 birthday. (Lehmann, 11 2011) Turkey is also bidding for major sport events like the Olympics in 2020 and EURO 2020. It will increase the opportunities for business in the country. Shortly, the country seems to have a bright economic future and, in micro-economic terms, looking at this specific market the cultivation of organic products can be done at lower labour costs than in the EU. Furthermore labour costs are not only lower for low skilled labour but also for medium- and high skilled labour. Other opportunities are apparent regarding the ‘maidenhood’ of the country’s organic food market, mentioned in chapter 4.2. Being among the pioneers in this market presents the opportunity to acquire 10 11

http://en.wikipedia.org/wiki/World_econo my#Twenty_Larg est_Economies_by_GDP_at_Given_Yea rs http://www.imd.org/research/centers/eviangroup/upload/Tu rkey-s-2023-Eco-Goal-in-global-persp ective.pdf

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and sustain a high market share. This high market share would be consistently sustainable due to new entrants accumulating market knowledge upon initiation. Completing the business plan with a solid market entry strategy, a cost-efficient marketing strategy and ample research, should induce the chances of entering the Turkish food market successfully. Nonetheless, notice should be taken when entering the market that social corporate responsibility should be included in any strategy devised. This clause should thereby include having good relations with local NGO’s and governmental institutions. These can simultaneously help your business grow in a sustainable manner, as the promotion and development of the organic food market is partially in their hands. Herewith, every socially responsible investor and/or trader who extends their hand to local and regional stakeholders will reap the benefits on a longer term as well.

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6.0 APPENDIXES APPENDIX 1: GRAPH 1.1

6.1

TR: Export of Organic Products 1998-2010 70,000,000 60,000,000

50,000,000 40,000,000 Amount ($)

30,000,000 Amount (KG) 20,000,000 10,000,000 0

6.2

Year 2002

APPENDIX 2: T ABLE 1.1

Exported Amount* (Ton) 19.182

Production Amount** (Ton) 310.124,58

2003

21.083

291.875,92

2004

16.093

279.663,16

2005

9.319

289.082,32

2006

10.374

309.521,59

2007

9.346

431.202,97

2008

8.628

415.380,09

2009

7.565

318.164,99

2010

3.592

331.361,48

*Processed: Regarded as organic by customs ** Full organic production amount (not regarding products from producers in transition)

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6.3

APPENDIX 3: GRAPH 2.2

Organic Production in Turkey (in tons, 2010)

40872 88126

Aegean Black Sea

71986

Marmara 34258

South East Anatolia

28361

East Anatolia

42981

6.4

Inner Antolia

24162

Mediterranean

APPENDIX 4: MAP 2.2

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6.5

APPENDIX 5: T ABLE 2.3

IMPORT OF ORGANIC PRODUCTS IN 2010 FOR TURKEY

Product name Raspberry Jam Raspberry Jam & Bilberry Jam Bee Milk Syrup Sunflower seeds Sunflower oil Honey wax Bio-One(US): Microbial Organic fertilizer Wheat Walnut Chlorella Rye Flour Chocolate Chocolate Soy Pudding Strawberry Jam Extra Strawberry Jam Apple juice concentrate Filter coffee (Medium Roast) Pumpkin Seeds Coffee Coffee variaties (Dutch) Canola Caramel soy pudding Apricot Jam Flax seed (Lijnzaad) Coriander extract Lactose Lactose Lentils Chickpeas (Dry) Cotton Orange- and elderberry flower marmelade Plain soya Beverage Soybeans Soybean meal Cherry jam Wild garlic extract Oatmeal

Amount in KG 34,8 5839,03 200 7413,2 1125 3650,2 750 33.308,8 21.265.130 66.000 180 225 2929,5 1125 34,8 4599 96596 1.641.165 450 2200 2220 496.280 1125 34,8 675 0,1008 1000 3000 3.260.400 88.000 683.109,5 3848 3825 500.000 120.000 34,8 0,1008 1250

TOTAL (in KG)

28.297.757,63

Country of origin TRNC* Sweden Germany Mexico Holland Germany Germany USA Russia Kyrgizistan Germany Holland Sweden Spain TRNC* Sweden Iran Sweden Holland Holland Holland Russia Spain TRNC* Holland Germany Austria Germany Russia Russia Kyrgizistan Sweden Spain Kazachistan PRC** TRNC* Germany Holland

*Turkish Republic of North Cyprus Statistics: TUGEM

**People's Republic of China

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6.6

APPENDIX 6: T ABLE 3.4

Fresh, Canned, Frozen Fruits and Vegetables Bidaş Gıda San. Ve Tic. A.Ş Gökay Soğuk Hava Tesisleri San. Ve Tic. A.Ş. Hipp Dış Ticaret Ltd. şti. Isparta Gida San. Ve Tic. A.Ş. Mavideniz Gıda Sanayi A.Ş. Nimeks Organik Tarim Ürünleri San. Ve Tic. Ltd. şti Okyanus Organik Tarim Ürünleri Sanayi Ltd. şti. Öztaş Tarim Tic. Ve Endüstri a.ş. Rapunzel Organik Tarim Ür. Ve Gıda Tic. Ltd. şti. Işık Tarım Ürünleri San. Ve Tic. A.Ş Tunçsan Salça Konserve Gıda Sanayii ve Ticaret A.Ş.

Location Bursa Eşkişehir Izmir Istanbul Izmir Izmir Izmir Izmir Izmir Izmir Istanbul

Source: www.turkishorganics.org

6.7

APPENDIX 7: FIGURE 3.1

Source: Development of Organic Agriculture in Turkey (2002)

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6.8

APPENDIX 8: FIGURE 4.2

6.9

APPENDIX 9: FIGURE 5.1

Development of Organic Production in Turkey (2002 - 2010)

500000 400000 300000 200000

TOPA*

100000

Production(Ton)

0 2002 2003 2004

2005

2006

2007

2008

TOPA*

2009

2010

TOPA: Total Organic Production Area

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7.0

BIBLIOGRAPHY

Demirkol, C., Karadeniz, C. F., Pezikoglu, F., Dogan, S.(2002) “Development of Organic Agriculture in Turkey ” Akdeniz University, Trakya University, Ataturk Central Horticultural Research Institute, Rapunzel ltd., Izmir Özbilge, Zeynep (2006) “Analysis of the domestic organic product market in Turkey in comparison with the European union experience” Istanbul, Marmara University Özbilge, Zeynep (2007) “An analysis of organic agriculture in Turkey: the current situation and basic constraints”: Istanbul, Marmara University Leeuwen, M.A.E. van, Voort, M.P.J. van der, Sukkel, W., Balcı, S. (2008) “Organic Agriculture in Turkey”: Wageningen, Applied Plant Research Olhan, E. & Ataseven, Y. (2008) “Turkey’s Organic Agriculture Potential: An Opportunity for the Mediterranean Region”: Ankara, Ankara University Lehner, M (2009) “Hindrances local organic farmers are facing in the Turkish organic agricultural sector: An attempt to identify barriers and suggest ways to eliminate them.” SLU University, Uppsala Stange, J (2010) “Promoting Organic Food for Sustainable Consumption: The Food Retail Sector In Istanbul.” University of Utrecht - Turkish Business Council for Sustainable Development E-SOURCES: http://www.isiktarim.co m/articles.php?tPath=6 _8&osCsid=fc14158cc571814a85e11abcd1d8be21 http://www.tarimsalbilgi.o rg/forums/o rganic_ag riculture_in _tu rkey8221_congress-t1192.0.html http://www.tarim.gov.tr/TarimPo rtal.html http://www.tugem.gov.tr/Default.aspx http://www.doganorganik.com.tr/en/yazi.php?id=29 http://www.egeliihracatcila r.com/Asp/Content.Asp?MS=1&Content=1&MN01 =19&MN02=1&MN03=0&MN04= 0&MN05=0&ID=246 http://www.tarim.gov.tr/uretim/Organik_Tarim,O rganik_Ta rim.html http://www.turkishorganics.org/04_FreshCannedFrozenFuitVegetables.h tml http://www.invest.gov.tr/en-US/sectors/Pages/Agriculture.aspx http://globaledge.msu.edu/blog/post/1129/ge-blog-series---agribusiness-part-2---organic-fa rming http://www.gib.gov.tr/index.php?id=469 http://www.businessinturkey.co m/value-added-tax-vat/tax/ http://www.ifoam.org/gro wing_organic/7_training/t_materials/3 _economics_markets_trade/pdf/IFOAM_Wor kshop_LocalMarketingInitiatives.pdf

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Organic Agriculture in Turkey - 2012  

A research report on the organic food market in Turkey, prepared by a BBA (Hons) student for the Netherlands Agribusiness Support Office.

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