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Case Code: BENV037
Case Length: 15 Pages 
Period: 2003-2017     
Pub Date: 2018
Teaching Note: Available
Organization : Tesco
Industry : Retail
Countries : Turkey
Themes: -
Case Studies  
Business Strategy
Human Resource Management
IT and Systems
Leadership & Entrepreneurship

Tesco Exits Turkey

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The Turkish retail sector was traditionally dominated by family-run retail stores, street vendors, street markets, and bazaars. After Turkey adopted a liberal Foreign Direct Investment law in 1954 the retail started to pick up. One of the turning points in the Turkish retail was the advent of Swiss Migros Genossenschaft, a retail cooperative in 1954. Gottlieb Duttweiler, founder of Migros, and 19 others, invested in the venture which was funded largely by the state-owned Ziraat Bank and YapiKredi Bank. It started operating as Migros Türk in mobile trucks. In 1957, its first self-service store was started. In the next two years, the number of stores increased to eleven. By the end of the decade, the company started integrating vertically and it opened a buying office. By then, Swiss Migros had a share of 51% in Migros Türk. Soon, several retailers emerged in the country, and they followed practices similar to those at Migros. Most of these were managed by local governments and consumer cooperatives. These included Gima, Ordu, and Tanas Supermarkets. (Refer to Exhibit I for more about Turkey)..
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In August 1992, Kipa was established in Izmir as a retail store in a partnership of hundred partners. In 1994, it opened its first hypermarket in Bornova, Izmir. Izmir had traditionally been a center of trade in western Turkey. Kipa targeted the middle class and lower class consumers. In 1997, Kipa’s shares began trading in the Istanbul Stock Exchange. In 1998, it moved out of Izmir by opening a store in Denizli..


In 2006, the company expanded beyond the Aegean region, to Marmara , the Central Anatolian and Mediterranean regions. During the year, the company introduced Kipa Express stores, with the first store in Izmir. The first Kipa Express store outside Izmir was opened in Antalya in December 2006. Kipa Express stores were smaller than the hypermarkets and sold an assortment of products, especially fresh food, fresh produce, and bakery products. Most of the Kipa Express stores were modeled after the shophouses. These were small shops that opened on to the main street and sold several products, mainly fresh food...


While on the one hand the company was expanding in the country, it found that it was still not progressing as it had planned. It had entered the market intending to become one of the top two players in the country. The CEO of Kipa said that though Turkey was a small market, Tesco was attracted to it due to its sheer potential, and Tesco had invested heavily in the venture..


Tesco was not performing well overall. In 2012-13, it took a £ 2 billion hit after it had exited its US venture – Fresh and Easy. This resulted in profits being halved during the year. For the year ending February 2013, Tesco’s profits fell for the first time in 20 years and it reported a 6.9% fall in annual profits for the year ending February 2014. It took a charge of £734 million on its European and Chinese ventures. Prior to this, Tesco exited Japan in 2011 after a write-down of £ 1 billion...


Even as of 2015, Turkey remained a highly fragmented retail market, with traditional stores accounting for more than half of the grocery sales and highly advanced retail formats accounting for the other half. The competition was high in the country, with well-established local retailers having a strong hold. As in the UK, in Turkey too Tesco offered chilled and pre-prepared food. However, this was not a hit with consumers, who preferred to cook food the traditional way and from scratch..


The Turkish retail landscape also underwent changes during Tesco’s tenure in the country. The economy was further liberalized, which meant more FDI inflows and increased investments by retailers like Metro and Tesco. Migros also grew at this time through acquisitions – Tansaş (2005), Maxi (2008), and Yonca (2009). The retail industry continued to develop further with growing real estate activity. Several hypermarkets found new locations in shopping malls whose growth had increased post 2005..


Between 2008 and 2015, the major stake in Migros was with BC Partners, and during that time, Migros’ business strengthened with the number of its stores nearly doubling. In July 2015, Turkey’s Anadolu Holding acquired a 40.25 percent stake in Migros Turkey. Anadolu was one of the largest conglomerates in Turkey, with interests in automobiles, food, banking, retail, and energy. It had a presence in 18 countries. It also held franchise rights to McDonald’s Turkey and operated retail stores under the name Ekomini. Anadolu Group Chairman TuncayÖzilhan became the chain’s chair in March 2016. .


Exhibit I: About Turkey
Exhibit II: Top 10 Supermarket Stores in Turkey