Three of Turkey’s leading six grocery retailers, BIM, Migros Turk and Sok, reported sales growth rates between 25% and 40% for the first half of 2019. This is above the market’s 15% increase for the year that IGD estimates.
These retailers managed to grow above the 15.7% price inflation, as reported by the Central Bank of Turkey, due to their strong store expansion, with all the retailers adding between 100 and 500 new branches in the first six months of 2019. Sok stood out as one of the best performing, due to its strong store expansion, differentiated offer and shopping experience.
Sok outperforms BIM and Migros Turk in real like-for-like (LFL) sales growth…
BIM and Migros Turkey grew their store networks by around 20% each in the first half of 2019, the former adding 463 and the latter 134 new stores. Stripping away store growth and price inflation, BIM’s year-on-year sales growth of 30.5%, meant it grew real LFL sales by 4%, while Migros Turk reported real LFL sales of 4.5%. However, Sok was the best performer as it reported a 37.8% increase in sales with 480 new stores. In real LFL terms it achieved a 5.4% increase in sales.
…as it applies an effective ranging and fresh strategy
Sok outperforms its key competitors, especially in the discount channel, by differentiating its proposition. This is partly because it offers a wider range of branded and private label products, more types of price promotions and superior quality in the fresh food category.
Subscribers can see this clearly defined strategy in our Discounters in Turkey report.
Sok shows best improvement in profitability
BIM, Sok and Migros Turk continue to report healthy profit (EBITDA) margins. However, the leader reported a slight drop from 5.5% in H1 2018 to 5.3% in H1 2019 and Migros Turk reported no improvement on its 6.6% margin.
Sok was the only one of the three to report a better result, increasing its margin from 4.2% to 4.8%. It attributed the improvement in margins to gains from economies of scale from a growing store network and by leveraging its strong private label range for better negotiated terms with suppliers.
Outlook for 2019 to 2023 will continue to be inflation and store driven
Most of Turkey’s leading retailers are expected to open stores in the triple-digit figures between 2019 and 2023. Modern retailers will compete to capture share from traditional channels and by acquiring smaller regional or single-city grocers. Price inflation will continue to be a significant impact on all retailers’ sales as it is not expected to subside from the double-digit rates any time soon.
Subscribers can get an in-depth guide to Turkey’s grocery market here.