Interview:  Bora Yalınay

What does Ülker’s $550m syndication loan, secured in November 2014, indicate for the potential of the industry and retail sector in particular and for Turkey as a whole?

BORA YALINAY: First, it is important to mention that the size and attention of this syndication was unprecedented in Turkey before this. A total of 26 banks comprising more than 10 new lending relationships from Europe, the US and Asia committed to the deal. The syndication loan was the largest and most diverse syndicate of banks for any Turkish corporate, excluding banks, in the past 10 years.

Banks from Asia, including those from China, Taiwan and Japan that had not taken part in any loan agreements in Turkey previously, participated in the syndication loan. The diversity of the participating banks resulted in the largest transaction seen in Turkey in the last 10 years.

Indeed, we have been observing an increasing demand from international banks towards a wide range of blue chip Turkish companies in the last three years, as these companies have become sounder and more secure in the global financial arena and are increasingly looking abroad to expand.

What does Yıldız Holding’s recent acquisition of UK-based United Biscuits mean for the sector, and do you believe more acquisitions will come from the Turkish side in the future?

YALINAY: If you happened to look at this deal from a confectionery company’s point of view, this type of transaction, i.e., the acquisition of United Biscuits, does not occur frequently. This type of deal tends to be rare and when it does occur, it boosts companies’ brand strength and recognition, widens their geographical presence, and develops their distribution capabilities in their operating countries, which is essential to doing business.

Not only are Turkish firms becoming more active in foreign markets, but their brands are also gaining more recognition from non-Turkish customers around the world. Thus, it is fair to expect additional similar moves from Turkish companies that are also aiming to expand into international markets to strengthen and improve their operations.

How has the recent rise in the price of cocoa impacted the processed food industry, and to what degree does this necessitate price hikes?

YALINAY: The volatility in the commodity market, particularly as it pertains to cocoa, which is one of the major raw materials for our business, has been a critical issue for almost a decade. There are several concerns as regards the global supply-demand imbalance of cocoa, including the fact that global demand increases by an average of 2% per year. Despite this, great parts of Asia, mainly China, consume very low levels of chocolate. Other challenges include farmers often having limited knowledge of modern farming techniques and often confronting structural problems such as ageing of trees, decline in soil fertility, and pests and disease that attack cocoa trees, all of which drive the price of cocoa up. Price volatility certainly has an impact on operations in a way that the increase in the commodity costs should partly be reflected to our end prices.

What is the general growth outlook for the food products industry in 2015?

YALINAY: In 2015 consumer demand in Turkey is expected to recover along with the country’s macroeconomic indicators. Many will recall that 2014 was a year with high commodity costs mainly in cocoa, nuts, pistachio and wheat. However, as the prices for these products have since softened and visibility has increased, we are expecting higher domestic consumption of these products in 2015.

Under these circumstances and expectations, we believe that the confectionery market is poised to outgrow the rate of the wider Turkish economy.