The Nut Job

Mesopotamia, the cradle of civilization, is thought to have been the first place plants were ever domesticated, and where cultivation, and therefore agriculture, first began. After their domestication, these plants spread quickly outside the region and were cultivated in other areas with suitable geographic conditions. It was from Mesopotamia that Europe took a major part of its agricultural products, which of course first passed through Anatolia.

Anatolia, also known as Asia Minor, was a part of the Mesopotamia region and is accepted to be the birthplace of key agricultural products such as wheat, barley, olives, grapes, walnuts, figs, carrots, onions, peas, chick peas, beans, garlic and more.

Fast-forwarding eight thousand years, today Anatolia still has the right climatic conditions to grow all of these agricultural products, which are both consumed domestically and exported. Of course the impact they have on Turkey’s economy depends on how well the country manages to add value to these products.

My focus today is an agricultural product that Turkey, alone, supplies to 75% of the world markets and accordingly is the world’s undisputed leader in production. It is a product the world loves to consume. However, it became Italy, rather than Turkey, that turned this particular product into significant economic profits. I am talking about the Turkish hazelnuts and Ferrero’s big success with Nutella.

Back in 1964, when the Ferrero family introduced the very first Nutella jar into the market, they likely imagined that Piedmont’s hazelnuts would be enough for their production. But we all know how tasty Nutella is, and the brand became a global success. 250,000 tons of Nutella are sold in 75 countries around the world each year. This makes the company the world’s biggest hazelnut consumer. Consider the fact that a standard 400gr Nutella jar contains 52 hazelnuts; plus, Ferrero uses hazelnuts in other chocolate products. All in all, this Italian giant uses over 50,000 tons of hazelnuts annually. Ferrero cannot make it without the Turkish hazelnuts.

The company had been an important buyer of Anatolian hazelnuts in the last five decades, and until now it acquired the nuts from local producers. However, 2months ago, Ferrero acquired the Turkish Oltan Gida, which accounts for 35% of Turkey’s and 26% of the world’s hazelnut production, a company with an annual turnover of € 370mn. Media reports that Oltan exported 68,000 tons of hazelnuts last year, and 70% of this was to one single customer: Ferrero. It is of course no surprise the Italian giant is vertically integrating. An Italian company that created a very strong international brand is securing not only its ingredient procurement, but also its future growth.

While Italians are famous in creating global brands in the food industry, just like Ferrero, Turks are not there yet. Turkey has the natural resources, it has the know-how, but it is not yet as successful in building up global brands. It is, however, taking alternative steps, such as acquiring Italian brands that are already internationally famous.

Let’s remain in the same product category and take a look at an example:

My generation in Turkey grew up eating Sarelle, the Turkish hazelnut spread with cacao. Some even say it is tastier than Nutella. Sarelle, though a local success story, went bankrupt under its parent company Sagra. In 2007, a strong Turkish group called Toksoz decided to acquire Sagra’s assets, which included the brand Sarelle. They easily conquered the domestic market, as the brand remained very strong in Turkey. Toksoz then started exporting Sarelle to neighboring countries, like Russia, CIS, and the Middle East. Today Toksoz’s overall food operation (which includes other chocolate-based products and ice cream) has a size of € 120mn, and it is destined to grow further and fast. Their goal is to turn export revenues twice as much as the local turnover. However, that is not all folks. Toksoz, last year, in an attempt to further internationalize its operation, decided to acquire Italy’s iconic chocolate brand Pernigotti from Fratelli Averna. Pernigotti, which is famous for its ‘Gianduiotti’ hazelnut-flavored nuggets and has an annual turnover of € 75 mn, has become a Turkish company.

So overall, Turkey is full of opportunities for Italians, not only because it is a big market for selling products and services, but because it is also a place to procure products and services. Italy, on the other hand, is full of advantages for Turks that plan to internationalize, because it is a country that has a competitive advantage in creating global brands.