Atc Fahhan(Presentation)

  • 1,638 views
Uploaded on

Industrial Potato Growing & Issues in Turkey

Industrial Potato Growing & Issues in Turkey

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
1,638
On Slideshare
0
From Embeds
0
Number of Embeds
1

Actions

Shares
Downloads
4
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. FRITO LAY – TURKEY 24th ANNUAL CONFERENCE ON US – TURKISH RELATIONS June 5 – 7, 2005 FAHHAN OZCELIK
  • 2. Major Growth in All FMCG Categories following 2001 Crisis FMCG Growth (Value) Macro snacks Growth (Value) $ BIO +%50 $ MM +%42 692,5 10 8,4 750 578,1 8 6,6 600 488,4 5,6 6 450 4 300 2 150 0 0 2002 H1 2003 H1 2004 H1 2002 H1 2003 H1 2004 H1 Source: Household Panel January - June Source: AC Nielsen Macrosnack Report January - June Salty Snacks Growth (Value) Salty Snacks Growth (Volume) TONS $ MM 96,2 13.341 +%110 15.000 +%80 100 74,1 12.500 9.415 75 10.000 7.451 45,9 50 7.500 5.000 25 2.500 0 0 2002 H1 2003 H1 2004 H1 2002 H1 2003 H1 2004 H1 Source: AC Nielsen Macrosnack Report January - June Source: AC Nielsen Macrosnack Report January - June
  • 3. Political & Economical Stability: Accelerated Growth leading to Investments 35.000 30.385 30.000 %103 25.000 22.343 20.000 16.911 15.128 14.933 14.716 15.000 11.029 10.731 10.927 10.454 10.556 10.076 10.000 8.856 8.030 8.378 5.000 4.041 3.225 2.197 2.432 1.788 1.519 398 0 94 95 96 97 98 99 "00 "01 "02 "03 "04 Volume Capital Investments
  • 4. Though Traditional Snacking is high the new habits are developing Turks likes snackingmacrosnackers... Turks are heavy ! Packaged (Processed) Snacking Consumption is rather low 3 2,5 2,5 2,5 Past 24H Snacks Consumption Occassion 2,3 2,2 P24Hr Makro Snack Consumption % 2 1,9 1,9 1,8 1,8 1,8 1,7 1,7 1,6 1,6 1,5 1,4 55 1,3 0,7 20 23 15 14 14 13 12 10 10 8 7 6 1 Australia USA Colombia Argentina WEBU Belgium China India Spain Poland P Rico Brazil Portugal UK Chile Turkey Mexico Peru Netherlands Greece Nuts Simit Bakery (Acna, Pogaca) Gum Chocolates Cookies Salty Snacks Snack Cakes Candies Fruit Ice Cream Popcorn Pastries (Borek) Crackers Kaynak: 5Ws Çalismasi 2003 However the trend is growing in Packaged Snacks 500.000 Sales Value) 448.958 450.000 414.720 400.000 376.498 400.347 320.898 350.000 315.336 300.000 250.000 Source: 5Ws Study 2003 1999 2000 2001 2002 2003 2004 Kaynak : Internal projection based on SS share in MS fcast
  • 5. Frito Lay 2000 – 2004 Agricultural Product Purchases 90.000.000 82.785.000 80.000.000 70.000.000 60.716.094 60.000.000 Corn Meal 50.000.000 38.724870 41.156.614 Corn 40.000.000 Potato 27.468.597 28.763.509 30.000.000 20.000.000 10.000.000 0 2000 2001 2002 2003 2004 2005 (PLAN) Corn Meal 3.073.052 3.103.175 3.336.600 8.204.257 6.126.370 8.000.000 Corn 6.170.625 4.342.266 5.555.820 7.052.357 10.046.048 16.000.000 Potato 29.481.193 20.023.156 19.871.089 25.900.000 44.453.676 58.785.000
  • 6. Industrial Potato Issues in Turkey
  • 7. Potato Consumption (ton) : 44.454 Unit Cost (USD/ton) : 282.- Total Purchase(USD): 12.5 Million
  • 8. Corn Consumption (ton) : 10,046 Unit Cost (USD/ton) : 365.- Total Purchase (USD): 3.7 Million
  • 9. Corn Meal Consumption (ton) : 6.212 Unit Cost (USD/ton) : 493.- Total Purchase (USD): 3.0 Million
  • 10. Potato & Corn Procurement through Contracted Farming Direct Procurement Indirect Procurement Contract Contract Big Farmers Suppliers (4) (12) Sub-Contract (85) Farmer Own Production Farmer Farmer
  • 11. Typical Potato Production Cycle 26 months March ‘03 Seed Order March ’04 Elite Seed Import Apr-May ‘04 Elite Seed 100 ton Planting 1000 ton Sep. ‘04 Certified Seed Harvest Jan – Apr ’05 Certf. Seed Planting May – Oct ’05 Chipstock Potato Harvest 7500 ton
  • 12. Industrial Variety Approval Process AGRO PC Production Consumer • Field Trials • Productivity & Efficiency • Appearance •Observations • Defects and Yield • Taste •Supplier Preferences • Crispiness, mouth feel
  • 13. Industrial Chips Potato Varieties FL Approved Concession Required Agria Atlantic Aster Bolesta Diamant Columbus Ernestolz Courage Fresco Desiree Hermes Eersteling Hertha (stored) Agria Karilera Maris Piper Lady Rosetta Lady Claire Mila Panda Pepo Record Saturna
  • 14. Potato Farming Areas Suadiye Yenisehir Eskisehir Altinova Sivas Manisa Afyon Nevsehir Kayseri Odemis Konya Tufanbeyli Nigde Karaman Adana
  • 15. Supplier Development Capacity & Investments Potato Stores: Corn Silos & Facilities: 3 Nos 11 Nos Total Capacity: 32.000 ton Total Capacity: 24.000 ton Investment: USD 3,5 Million Investments: USD 2,2 Million Equipment Inv.: $1,4 Million Equipment Inv.: $ 1.0 Million Corn Meal Production Facilities: Total Development 2 Nos Investment: Total Capacity: 14.000 ton USD 12.3 Million Investment: USD 4,2 Million
  • 16. Labor Intensive Production Potato Field Labor Cost: 67.736 wages Potato Storage Labor Cost: 7,131 wages Technician Cost (12x22x24) 6,336 wages Appx. Total Labor Cost (’04): USD 950,000.- Appx. Transport. Cost (04): USD 3.0 Million (5250 trips)
  • 17. FLT Technical Support •Train the Trainer of Supplier •Certification •In the Field Training &Support •Vendor Assurance Programs
  • 18. Forecasting & Planning is the Key with the given constraints on the Importation of Seeds & Potatos The production cycle of 26 mos from elite seed planting to chipstock harvesting requires a very comprehensive planning in spite of market dynamics. The natural growth of business is blocked by the difficulties of seed and potato importation 70 70% 60% 60 50% 50 % Change 40% Ton 40 30% 30 20% 20 10% 10 0% 2002 2003 2004 2005 Plan 20,6 19,7 24 48,5 Actual/Frcst 19,7 25,9 39 69 % Variance 0% 31% 63% 42%
  • 19. Potato Quality Turkey Potato Defects % 8<45 100% 20 80% 15 r - pi ot PeOts r 60% 10 40% 5 20% 0% 0 P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13 >15% 10,8 16,1 26,1 33,6 44,1 1 0 1,5 2,4 0 16,5 2 2,4 8-15% 41,5 67,8 50,7 58 54,1 27,1 16,8 41,8 56,8 8,3 54 68,8 75,2 5-8% 43,6 14,2 20,1 7,5 1,8 47 56,1 40,3 33 22,9 24,2 24 20,7 <5% 4 1,9 3 0,9 0 25 27,1 16,5 7,8 68,8 5,3 5,2 1,7 In Bag Defects 4,7 5,1 5,7 5,8 6,2 3,6 3,2 3,6 3,8 2,5 4,1 4,1 4,3 Volumes (MT) 3284 3453 2974 1581 1229 2808 2214 3060 2852 2876 2081 3052 3565 EU Defects Average %8<84 100% 20 80% 15 Pre-Optisort 60% 10 40% " 5 20% 0% 0 P1'04 P2'04 P3'04 P4'04 P5'04 P6'04 P7'04 P8'04 P9'04 P10'04 P11'04 P12'04 P13'04 % Ref. Capable YAG 49,7 50,1 48,8 48,6 47,3 63,7 78 94 93 94 88 78 75 >15% 4 4 2 3 5 3 2 1 2 3 4 5 4 8-15% 24 19 16 17 16 11 10 5 5 6 6 17 22 5-8% 32 28 28 29 28 24 20 6 9 11 14 26 32 <5% 40 50 54 51 50 63 69 87 84 80 76 53 42 Pre-Optisort 6,7 6 5,7 6 6,2 5 4,3 2,6 2,8 3,3 3,9 5,7 6,7 Volumes (MT) 55959 58402 65319 61952 67301 66475 67843 63306 61524 63255 63951 65919 65779
  • 20. Industrial potato shares Million ton 21,8 7,7 7,1 6,5 12,1 5,3 100% 0,13 80% 2,86 4,08 4,05 13,52 7,02 60% 5,17 40% 3,64 3,62 3,05 5,08 20% 8,28 0% USA Netherlands UK France Germany Turkey Kitchen Potato Industrial Potato
  • 21. Contracted Potato Farming Comparison Million ton 100% 3,3 90% 1,8 80% 70% 60% 21.8 7.7 4,8 5.3 50% 18,5 40% 5,9 30% 20% 10% 0,5 0% USA Netherlands Turkey Contracted Not-contrated
  • 22. Frito Lay Potato Unit Cost Index Cost Index 100 100 94 91 90 88 80 80 72 69 70 62 60 55 50 50 49 49 50 48 42 40 30 20 g y s l el n nd us m ey e t UK A a ga yp ar Av nd ai ec ric KS ra iu rk la pr Sp ng rtu Eg la lg Is re Af Po EU Tu Cy er Be Hu Po G S. th Ne
  • 23. Frito Lay Quality Reference Production (%) 100 96 93 91 91 90 84 80 73 70 60 54 50 45 40 30 20 UK Netherlands Spain Portugal Poland Belgium Turkey EU Avg
  • 24. Poland Success Story 160 140 Poland Turkey 120 112 110 100 100 100 100 97 89 84 36 80 69 27 61 60 42 40 20 Cost '95 Cost '99 Defect '95 Defect '99 Efficiency '95 Efficiency '99
  • 25. Poland Success Story – Cost Efficiency & Quality Improvement Fields are big and not scattered Contracted Farming with Cost + Profit & incentive to Quality Improvement – Minimized Price Fluctuations Conscious Input (Seed, fertilizer & chemicals), minimum 3 years Crop Rotation (integration w/animal breeding) & continuous technical support Potato handling, packing, storage and transportation standards are high – minimized losses Seasonal Potato importation is allowed and easy Customs and quarantine regulations are fast Incentives for infra-structure, foreign investments and exports
  • 26. Outcome The supply of Industrial potato not meeting the demand The cost and quality of Turkish potato market is not competitive at all with foreign markets Unlike Government partners with the Industry for the development of Potato Agriculture, Turkey will end up importing potato with World Trade & EU regulations change!
  • 27. What Frito Lay Turkey can offer as Market Leader in Salty Snacks Industry • Assured Quality Elite Seed importation for our produce • Specialist Support & Training for quality Certified Seed production • Technical Support to farmers to increase field productivity • Technical & Financial support to Develop Model Industrial Potato production • At Contracted Farming, guarantee for purchase and incentive for quality • Exports of quality Potato Chips and Competitive Industrial Variety Potato • Pioneering to develop Modern Warehousing and Handling Equipment & handover to suppliers within a period • Cooperation with Public Sector to provide training abroad at Frito Lay best practice farming implementation techniques • Cooperation with Universities to develop agricultural protection and quarantine labs • Scholarships to talented Agricultural Faculty students abroad
  • 28. What Frito Lay Turkey expects from Government • Elite Seed importation and quarantine requirements should be according to EU regulations • All Quotas on Elite Seed importation should be removed • At Seed approval and certification EU regulations should be taken • The barriers on seasonal potato importation should be removed • The Government should give incentives for industrial potato producers and exporters
  • 29. Introduction Frito Lay Turkey, Part of Pepsico Intl. within MEA Region under EMED Business Unit. 1988 JV, ’93 100% Revenue: – ’04 Net Revenue: $168MM, ’02 $71MM 137% Growth in 2yrs # of employees – 2,165 employees (incl. contractual/dist.), 61% Sales, 28% Plant & 11% HO Macro Snacks share, Salty Snacks Share, brands, distribution etc. – April ’05 Salty Snacks 14.6% in Macro (’04 size $1,700MM) – FLT 79.2% in Salty Snacks (’04 size $230MM) – FLT company share in Macro YTD ’05 13% #3 – Global Brands in top 10 Macro shares » #1 Doritos 4.2% » #2 Cheetos 2.6% » #5 Lay’s 2.0% » #6 Ruffles 2.0% – Numeric Distribution 76.9% & Weighted D. 96.2%
  • 30. Last 3 yrs Growth & Outlook Economic & Political Stability Remarkable economic achievements during AKP period with ’04 GNP growth of 9.9% & Consumer Price Inflation 9.4%, High Central Bank reserves $37 billion Capacity utilization rate reached 80.3% in March FMCG & Macrosnack & Salty Snacks Growth Significant growth in all categories during last 2 years; FMCG 50%, Macrosnacks 42% & Salty Snacks 110% Frito Lay Growth 137% growth in revenue during the same period Growth Expectation ’05 growth forecast is 22% Capital Investment Progression Plans to have $65MM capital investment over 3 yrs.
  • 31. Why we are optimistic for the future ? EU accession road Road to October 3rd is still bumpy Referendums in France & Holland changed the agenda within EU German elections likely to bring a new concept privileged state rather than full membership Turkey still needs to sign the protocol for Customs Union including Cyprus as a member state Outlook for 05 ’05 outlook is + with growth of 5% & 8.0% CPI Further a steady 5% annual growth can be maintained Further economic growth No more ups & downs with stability established in politics and economy The risk of economic and political collapse is low. We have a lot of optimism. There is now a real chance of sustainability Still hurdles to over come!!! Unemployment is high 11.5% The current account deficit is $3.8 billion in 1st 2 mos of 2005 was mainly financed by portfolio investments Intellectual property rights is an issue Unbalanced income distribution Unfair competition because of “Kayit Disi” sizable grey economy that reduces the fiscal base, weakens public budget performance and disrespect for the rule of law Still bureaucracy, needs a cultural transformation in public administration
  • 32. However we still have issues to be sorted out in our sector Potato Story Industrial Potato – Annual Potato production in Turkey is 5.3 million tons, only 120 thousand tons are industrial potato varieties (FLT ’05 usage : 60 thousand tons). 2% compared to 62% in USA, 57% in UK, 53% in Holland & 58% in Germany Certified Seed – Certified Seeds are required to protect the soil from diseases, improve field productivity, and deliver high yield from the potato. In 2005 Turkey needed 62 thousand tons of elite seed for seed multiplication to have certified seeds, but Ministry of Agriculture’s quota was 10 thousand tons only (FLT for the first time awarded with 1500 tons that secures our 06-07 season potato needs) Contracted Farming – Contracted potato farming practice secures the farmers. However, only 9% of potato farming in Turkey is contracted compared to 85% in USA and 77% in Holland. Conscious Agriculture requires to have – Soil Analysis to prevent disease and identify required fertilizer usage – Seed/Fertilizer/Chemicals balanced and controlled use – Crop Rotation to protect the fields from disease and improve productivity….unfortunately due to lack of resources of ministry and education of farmers the control is very poor…resulted in Synchitrium Endobioticum (potato cancer) disease in well known potato farming areas of Derinkuyu and Kaymakli. Unfortunately is now spreading out due to weakness of quarantine measures. Temp. & Humidity Controlled Storage Capacity – Fresh chipstock is available from June to October then it is the storage period when temp & humidity controlled storage required to protect the quality and yield of the potatos. In Nevsehir area there are primitive cave stores used for this purpose. FLT & suppliers have build and renovated 35 thousand tons of modern storage area & continue to build as required. ./..
  • 33. However we still have issues to be sorted out in our sector Barriers on Seasonal Importation – The end of the storage season April-May is critical for the stored potato quality and yield performance in industrial production. Current industrial varieties have low performance. During this period we need to have imported potato. Though by law potato importation is not banned. Ministry applies all bureaucratic barriers not to give importation permit. The recent application resulted in having permission on May 12th Thursday valid till May 15th Sunday ! Is this a joke? Still we can import finished packed potato chips from our sister companies in Europe. This year we imported 1,000 tons of finished products from Spain. Customs & Quarantine regulations not in line w/EU – Unfortunately we have not adopted yet EU regulations in our Customs and Quarantine procedures both for elite seeds and theoretical potato imports Government Incentives for Industrial Potato Agro – Though Ministry is talking about Government incentives for Industrial potato farming still not walking the talk! Subsidization will be removed on the road to EU Price & Quality Competitiveness for Turkish Potato – Unfortunately both price and quality references are way below compared to European and Middle Eastern standards in industrial potato. (Detailed comparison can be provided for the interested parties)
  • 34. Conclusion We offer Assured Quality Elite Seed importation to be planted for certified seed multiplication Specialist support & training for quality Certified Seed production Technical support to farmers for conscious agricultural practices Technical & financial support to develop model industrial potato farming At Contracted farming, guarantee for purchase and incentives for quality improvements Exports of quality potato chips and competitive industrial variety potato Pioneering to develop modern warehousing and handling equipment and handover to suppliers within timeframe Cooperation with public sector to provide training abroad at Frito Lay best practice farming implementation techniques Cooperation with Universities to develop agricultural protection and quarantine labs Scholarships to talented Agricultural Faculty students abroad ./..
  • 35. Conclusion We expect Elite seed importation and quarantine requirements in compliance with EU regulations Removal of all quotas on Elite seed importation EU regulations at seed approval and certification procedures Removal of barriers on seasonal industrial potato importation Government incentives for industrial potato farmers and exporters “Walk the Talk” link the vision, legislation to execution. Focus on Cultural Transformation at state departments