Turkish supermarket BIM brings discounts to the region

By bne IntelliNews May 15, 2013

David O'Byrne in Istanbul -

The jury may still be out on whether the "Arab Spring" has actually delivered better living conditions to the bulk of the Middle East and North African region's formerly disenfranchised masses, but not many would argue that the resulting instability has been good for business. Which makes the recent announcement by Turkish supermarket group BIM that it plans to start operating in Egypt, opening as many as 30 new stores this year, all the more remarkable.

Despite continuing instability, BIM duly opened its first store in the Egyptian capital Cairo in early April, promising 13 more by the end of the month, having identified what it believes is a lack of sufficiently organised food retail.

Certainly, the unrest that has followed the overthrow in 2011 of former president Hosni Mubarak has been marked by shortages in some basic foodstuffs and sharp price increase in what is available. "Trouble can also be an opportunity, and at a time when [foreign direct investment] is dropping and other retailers are withdrawing, we think our investment will be appreciated," says BIM's chief financial officer, Haluk Dortluoglu, repeating BIM's belief that democracy will eventually take root.

Sticking close to its Turkish model of offering a limited range of basic products at heavily discounted prices, BIM's plans for Egypt currently envisage offering between five and six hundred mainly food lines, around most of which it expects to source locally in Egypt. "Around 80% of what we sell will be sourced from local [small producers]," explains Dortluoglu, pointing out that this again should help in its adoption by the local market.

BIM's Egyptian venture is not its first in the MENA region. Three years on from opening its first store in Morocco, BIM has expanded its operations to include 116 stores and aims to open a further 50 stores this year after recovering from what it regards as a slow start due to Morocco's poorly developed property leasing system.

After that experience, BIM subjected the Egyptian property market to close scrutiny before opting to start operations. "After Morocco, that was the first thing we looked at, but our research didn't identify any problem leasing outlet locations," says Dortluoglu, saying that for the first year at least BIM anticipates only opening stores in the Egyptian capital Cairo before targeting only the main population centres. "We'll focus initially on Cairo, opening at least 30 stores, and then expand into Alexandria and the Nile delta region."

With a population of over 80m, the Egyptian market should keep BIM busy for some time. "We are looking at other markets nearby, and some not so nearby, but for the short to medium term we have no plans to enter other markets," he says.

Closer to home

Not that BIM is only looking outside of Turkey for growth. Since first opening its doors in 1995 with just 21 stores, it today operates 3,655 stores of which 366 were added last year alone. Turnover last year topped $5.5bn, with fourth-quarter sales up a healthy 16% to TRY2.58bn and profits up 7.6% at TRY85m. Growth in Turkey has yet to peak and it's planning on opening a further 375 stores in 2013, as part of a $270m investment and expansion plan aimed at growing sales by 17-18% this year.

BIM has grown organically without making any acquisitions, but Dortluoglu wouldn't rule out any future purchases if the right target presents itself, nor a move away from its base of "hard discount" retailing given that Turkey's per-capita spending is expected to rise from around $7,350 this year to over $10,000 by 2015. "If there is a really good opportunity, we should consider it, but a different format would be more appropriate to balance the market," he says, pointing out that Turkey's supermarket sector is currently in a period of unparalleled change.

That would be putting it mildly. Turkey's oldest supermarket chain Migros, which operates 911 stores across a range of formats, is already formally for sale with UK-based owners BC Partners reported to be in protracted talks with US giant Walmart, having already sold Migros' discount subsidiary Sok to Turkish food giant Ulker. Similarly, recent announcements by top Turkish combine Sabanci that it is thinking of exiting its joint venture with Carrefour suggests that the 247-store Carrefour chain could also be put on sale.

As to which of these might tempt BIM, Dortluoglu is tight lipped. "As yet we have no decision and no budget, and there is no solid proposal on the table - this is just something we're considering," he says.

Watch this space.

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