New opportunities for tea sales in Turkey

An Expert's View about Marketing in Turkey

Posted on: 6 Apr 2010

Long established traditions of tea production and consumption have helped established Turkey as the world's second largest market for tea by volume sales, behind only India.

New opportunities for tea sales in Turkey Euromonitor International 12 March 2010 Long established traditions of tea production and consumption have helped established Turkey as the world's second largest market for tea by volume sales, behind only India. Turkey also boasts the highest per capita consumption of tea in the world, at 3 kg per person in 2009. Despite this maturity in the marketplace, the dynamics continue to shift in this category, creating spaces for new growth and innovation. ECONOMIC RECESSION GIVES MOMENTUM TO BLACK TEA In 2009, the rate of volume and value growth of higher priced teas, such as fruit/herbal tea and green tea, slowed down due to the adverse effects of the economic crisis. On the other hand, loose black standard tea saw a steady 3% retail volume gain, as this is a traditional tea type with dominant sales which is considered as a necessity in the country and an essential part of Turkish culture. Black tea is extremely popular in Turkey and is the country's favourite national drink, and also comprises more than 95% of all tea volume sales. Tea is consumed throughout the day in Turkey and is enjoyed by people of all ages. The prevalence of black tea in the homes and caf├ęs of Turkey has not led to conformity in purchasing behaviour though. In 2009, the share of private label increased as a result of rising price-sensitivity among consumers and a higher number of private label products offered by supermarkets/hypermarkets. The products offered by the leading companies were of standard quality, whereas the brands of small tea companies and private label were considered to be economy products. Domestic producers have focused on highlighting this difference in quality through further new product development in 2009, in the hopes that consumers will seek out higher priced teas once again as their economic situation improves. Leading company Cay Isletmeleri launched new teas for its Ovit Cayi, Diyarbakir Cayi and Zumrut Yesil brands. In the summer of 2009, Cay Isletmeleri also became involved with the organic production of tea in the Black Sea region of the country, where most tea farming is conducted. The company aimed to produce 3,000 tonnes of organic tea leaves in 2009, which the company plans to convert into packaged dry tea to be exported to the EU and also launch into the domestic market. The availability of organic tea will translate into the creation of a more premium segment within the category and should attract new interest from consumers in the future. OUTLOOK BETTER FOR FRUIT/HERBAL TEAS Though relatively minor in sales compared to black teas, fruit/herbal tea was one of the best performing categories from 2004-2009. Although the loose format of fruit/herbal tea is traditionally popular in Turkey, sales of packaged fruit/herbal tea also increased significantly. There were over 20 types of fruit/herbal tea available in Turkey by 2009, with the most popular being ihlamur tea, made from lime blossom leaves which is thought to combat cough and cold symptoms. The high prices of these teas caused a drop in consumer demand during the recent downturn however. For example, whereas the review period value CAGR of fruit/herbal tea was 10%, in 2009 this category registered only 2% current value growth. The perceived health benefits of herbal teas over black tea should help them regain traction in the marketplace in Turkey once an economic recovery is underway. In 2010-2011, the negative effects of the economic crisis are predicted to still be visible in hot drinks, with customers reducing their expenditure on luxury products. However, from 2012 onwards, the sales of luxury and health and wellness drinks are expected to pick up again given their performance prior to the economic crisis. Consumers are expected to become less price-sensitive and begin choosing value-added products and health and wellness products due to increased health concerns. In addition, manufacturers are looking into ways of making their products more sophisticated in terms of health benefits. Such developments are expected to become popular in Turkey, particularly amongst women and young people. Manufacturers will, therefore, launch greater numbers of flavours, including adding ingredients such as ginseng and a high variety of fruit flavours, in order to increase consumer demand. Fruit/herbal tea is expected to regain its position as the tea type with the most dynamic growth in the category by 2012-2013, according to Euromonitor International forecasts. SPACE OPENING FOR MULTINATIONALS Within this shifting landscape of tea choices, domestic producers have traditionally built an advantage through local production and access to distribution channels. This is exemplified by Cay Isletmeleri, which in 2009 continued to lead total tea sales with a retail value share of 52%. Unilever, with its Lipton brand, was ranked second in 2009 with a retail value share of 16%, and until 2008 was the only multinational with a significant presence within tea in Turkey. But in 2008 Coca-Cola entered the market by purchasing Dogadan Gida, the country's leading producer of fruit/herbal teas. Dogadan is a well recognized name in Turkey and Coca-Cola has since built upon this brand equity by expanding Dogadan into black standard tea. Unilever is also finding success through catering to local tastes, creating a Turkish variety of its global Lipton brand, Lipton Dogu Karadeniz Cayi. The flavour better approximates the stronger aroma of teas from the Black Sea. A NEED FOR STRONGER FLAVOURS IN THE EAST The smuggling of tea is also a major problem in Turkey. Around 30,000 tonnes of illegal tea enters the country every year. Although leading tea producers are relatively unaffected by the availability of illegal imports, some small regional players have been forced out of business. Tea is typically smuggled from neighbouring countries such as Syria on the southeast border and many consumers in eastern Turkey prefer the strong taste of tea from across the border. Leading tea company Cay Isletmeleri owns a brand called GAP, developed specially for the Eastern part of the country where the consumption of illegal tea is high, although, this brand is not particularly successful. In 2009, Cay Isletmeleri developed another brand called Diyarbakir (taking its name from the largest city of the south-east of Turkey), with a stronger flavour (as favoured by the people of the region) compared to standard tea sold by the company, which aimed to reduce the consumption of illegal tea. The illegal market for tea represents a very visible pocket of consumption that is still not being reached by existing players, and could be an opportunity for Unilever, Coca-Cola, or another multinational tea producer. Since tea consumption in Turkey is well established, growth will come from companies able to identify these kinds of specific differences in preferences between consumers, especially as the priorities informing their purchase decisions shift along with the economy. Innovations in new tea types, flavours, and packaging are still underutilised and could be an engine of further growth and a point of entry for companies still looking to gain a foothold in one of the largest global markets for tea. For further insight, please contact Brian Morgan, Beverages Analyst: brian.morgan@euromonitorintl.com
Posted: 06 April 2010

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