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This week’s Voices on the Ground features Yavuz Bolgi, our Market Leader in Turkey, providing his perspective on how the local industry is adapting to the pandemic and their efforts to future-proof as the epidemic progresses.

Q1 - What are suppliers and retailers in Turkey doing in the way of planning or future-proofing their businesses against another wave of COVID or a new normal as COVID subsides?

Retailers and suppliers in Turkey are focusing their efforts in three critical areas as they work to future-proof in collaboration with their business partners.

Prioritization and Assessment of Future Plans – Retailers and suppliers have discussed and are determined to focus on the categories and segments that were positively impacted by the pandemic. They are working on the development of pricing and sustainable promotion plans to support banner and brand loyalty.

Supply Assurance – Manufacturers have finalized their forecasts according to their various assumptions and contingency plans. Category growth rates, trade stocks, and promotion plans were considered in the allocation of supply among channels and customers.

Monitoring Shifts across Channels – Due to shifts in consumption across channels, there has been a significant reduction in sales of out-of-home foods as a result of social distancing, food-service related business closures, and a slowdown in tourism. More consumers have prepared and consumed food at home and there has been an increase in the use of convenience stores, regional retailers, and mobile apps offering on-demand, fast delivery services for grocery items. However, it is still unclear what types of food retail will benefit in the medium term. Another pandemic wave may dramatically change shopper behaviour again.  An acceleration in digital forced suppliers to focus more on e-commerce and balance their integrated e-com strategies. Suppliers have tended to increase listings to fast mobile delivery platforms.

Q2 - Turkey has a high presence of regional retailers. How have regional versus national retail chains managed to respond and adapt in moving forward through COVID?

National grocery retailers seem to focus on shopper health and wellness by implementing hygiene measures such as social distancing, mandatory mask usage, contactless and mobile payment systems, and self-checkouts. These measures are in place to bring shoppers back to stores while they also expand services and penetration for e-com shoppers by increasing their capacity, joining forces and partnering with pure players, providing click & collect service, and contactless delivery.

National discounters and cash & carries are investing in e-com via mobile. Discounters who are leading the market also entered into the e-com race by providing same-day home delivery service. This could lead to an increase in listings of new products, including new ranges in private label. Cash & carry retailers have also adopted e-com and digital marketing practices to recover the losses from the HORECA (Hotels, Restaurants and Catering) business.

Drug and Beauty retailers saw most of their stores close during the lockdown period, so their primary focus is e-com, digital marketing execution and strengthening private label lines with heavy promotional support.

Regional Retailers who did not have a well-established e-com structure, have been partnering with leading pure players during the pandemic. The collaboration helped them gain additional penetration and traffic without heavy investment. Regional retailers focused on local fresh food while adapting health & wellness measures including mandatory mask and glove usage. They have had the advantage of applying new protocols to smaller scale operations to provide convenience, such as home delivery and ordering by phone.

Q3 - How has the rise of e-commerce impacted the CPG industry in Turkey?  Do you see massive shifts to online and how are retailers and suppliers managing this surge in the e-commerce channel?

The online business had been growing in double digits every year, but the pandemic’s impact was extraordinary. There has been a massive shift to online, but this was still limited to major cities. The use of mobile devices has reached up to 70% penetration. The popularity of using mobile platforms for home delivery has increased drastically. Initially, these platforms had the advantage of fast delivery on only a limited basic assortment. However, as young shoppers adopted this new channel, the assortment began to increase to attract more shoppers. There is superior performance of IT and logistics behind the success of these operations. A shopper can order and receive an ice cream cone in 20 minutes while all retailers are closed at night. Recently, we began to see new media investment promoting safety and convenience against the pandemic.

Multi-channel competition has also intensified after two discounters started to provide online and mobile shopping services. This could lead to an increase in listings of new products, including new ranges in private label. Cash & carry retailers have also adopted e-com and digital marketing practices to recover the loss from the HORECA business. They increased their support to the HORECA channel by providing additional relief and supervision.

Retailers who did not have a well-established e-com structure have been partnering with leading pure players. Interestingly, leading pure players are also expected to expand their scope via national and regional retailers at the same time. Therefore, for the first time, the industry is experiencing a new type of collaboration that could not be realized before.  This development will force suppliers to increase their focus and balance their integrated e-com strategies.