SG Expects D-8 Poulterers such as the Turkish Banvit to have Roles in Food Security Programs

Istanbul, Turkey | January 28, 2009 by D-8 Secretariat

Poulterer Banvit confident of weathering financial crisis and emerging a winner.

The CEO of Bandırma Vitaminli Yem Sanayi A.Ş (Banvit) Ömer Görener

“We will expand our market share in 2009 and have no plans to lay off any of our 2,400 employees due to the economic slowdown,” the top official at Turkey’s largest integrated poultry producer has said, as quoted by the Turkish leading newspaper, TodaysZaman.

Ömer Görener, the CEO of Bandırma Vitaminli Yem Sanayi A.Ş (Banvit), shared his company’s perspective and his expectations for the industry in 2009 with Let’s Talk Business. He said Banvit has continuously expanded its production base by increasing existing capacity and implementing new investment projects, not just in Turkey but also abroad. The company’s ultimate goal, he explained, is to become a key player in the regional food industry.

Görener is confident that they can easily compete with industry giants worldwide, especially in the European market. “Unlike firms in Thailand and Brazil, we do not simply produce bulk chicken or chicken parts,” he said, “But we can rather cater to special product categories in niche markets.” The company supplies a range of frozen, cooked and ready-to-cook chicken and turkey products, including whole birds, legs, breasts, skewered pieces, breaded products and special products, such as ground and boneless meat and wings. It supplies to Kentucky Fried Chicken, Dominos, Pizza Hut and McDonalds either directly or through dealers nationwide.

Banvit also offers convenience products, such as burgers, kebabs, breaded products, meatballs and pastries, and charcuterie products, such as frankfurters, ham, salami and sausages. “If a supermarket chain in Germany places an order for a special chicken product, we can have the shipment ready in a week, as opposed to the month it would take a Brazilian company.”

Banvit has over 1,000 different products in terms of stock-keeping unit products (SKU) in its portfolio and conducts regular consumer surveys to keep abreast of shifting taste trends.

An American who helped Banvit grow

The history of Banvit goes back to 1955, when the Görener family first settled in Bandırma. In 1967, Vural Görener, Ömer Görener’s father, established a partnership with the Koçman family, another prominent family that owned a feed plant at the time. With the expansion of chicken farms, the company’s business grew. Banvit decided to enter the white meat sector after a World Bank study determined that the region was good for chicken breeding.

Vural Görener enlisted the help of American Jess Merkle, a veteran in the chicken business and founder of Country Pride, which was later acquired by ConAgra and then by Pilgrim’s Pride. At 75 years of age, Merkle offered his services through the International Executive Service Corps — a non-profit economic development firm that was established by David Rockefeller in 1964 to assist development programs abroad using volunteers, mostly retired professionals.

“He taught us the nuts and bolts of the chicken business, including marketing,” Görener recalls. His father framed Merkle’s business card and it hangs on the wall behind the office desk. Another turning point for the company was an advertising blitz run by Lades, a chicken brand owned by Entaş, which was formed as a joint corporation by Oyak in 1987. “We reaped the benefits of that commercial campaign run by Lades even though we did not pay a dime for it,” Görener said. “Lades could not keep up with the demand boom, and we made up the difference in the consumer market,” he added.

A graduate of the St. Benoit French High School, Ömer Görener completed his university education at the University of Nebraska with a major in economics. He joined the firm in 1987 as deputy general manager, and now he runs the company as CEO. He loves hiking and mountain climbing and seems to have addiction to sailing. “The sea is everything for me,” he says.

The growth of the company has been impressive for the last three years, though it hit a snag in the fourth quarter of 2008 primarily because of the external impact on the economy due to the ongoing global crisis. It posted TL 543.5 million in sales revenue in 2007, a 49 percent increase over 2006. Görener said the total figure for 2008 would exceed TL 650 million even though sales plummeted toward the end of the year.

The most recent data for the first nine months of 2008 shows that Banvit has increased its sales by 21.8 percent over the same period the previous year. Sales for the first nine months totaled TL 503.3 million, compared to TL 413 million in the same period in 2007. Though the company will reach or even exceed its 2008 target in sales revenue, the strong dollar against the Turkish lira will have a negative impact on company finances. “Our debt is tied to foreign currency and every Kr 10 increase in the dollar’s value means we lose $14 million,” Görener said.

The poultry industry has already started to feel the pinch of the economic slowdown. In fact, there has been a 25-30 percent decline in capacity utilization industry wide since summer 2008, and some poultry producers such as Mupi, Aytaç and Köy-Tür Ege have shut down operations entirely. Görener argued that Banvit is the only poultry firm that will survive the slowdown in 2009 without resorting to reducing production in its plants. “We have not scaled back our production and are not planning to do so,” he said, explaining that Banvit, unlike its competitors, has a low-cost structure thanks to its qualified and dedicated workforce.

Well-known brand among consumers

Qualified workforce and cutting-edge technology are keys to Banvit Success

Pointing out that the company’s financial indicators are in good standing, Görener maintained they have a sufficient cushion to absorb market shocks and reduced demand. “The fact that Banvit has an expanded network reach and the brand is very well known among consumers gives us a competitive edge in today’s tough business environment,” he said. He also noted that he does not feel uneasy about the future because the poultry business operates in the basic food market, which usually comes last in family budget restructuring, unlike luxury items such as cars and electronics. Nonetheless, the company will have to shelve growth plans until the dust settles and uncertainty about the future outlook of the economy is dispelled.

When asked how Banvit can maintain a low-cost structure in the poultry business, Görener said a qualified workforce and cutting-edge technology helped the company be very competitive. “We were the first one in 1996 to adopt computerized technology to monitor everything, from the hatchery to production, and even to the sales point,” he explained. In fact, Banvit contracted with a US-based technology firm that specialized in developing programs for the poultry business. “They come in, update our programs and overhaul our systems every year,” he added.

Banvit also has the advantage of being able to monitor sales volume on supermarket shelves. “We work closely with our retailers, and some have even opened their systems up to us so we can monitor what is going on at the point of sale in real time,” Görener noted, adding that this has enabled Banvit to swiftly respond to changing market conditions.

Around 19 percent of Banvit’s shares are traded on the İstanbul Stock Exchange (İMKB), while the rest is owned by major stakeholders, including the Görener, Koçman and Ebubekir families. Görener said they have no plans to offer more stock to the public at this time. The last partner Banvit took on was the International Finance Corporation (IFC) when it secured major financing from IFC in 2007 to upgrade its poultry processing operations and associated facilities, including slaughterhouses, processing plants, feed mills and cold storage facilities, in Turkey.

Asked if the shareholders would be willing to sell the business if the price was right, Görener said they would consider any offers but that he did not think the shareholders are particularly looking to sell Banvit. “We are open to joint ventures and partner offers provided that they will contribute to the growth of Banvit,” he stressed. However, he dismissed the suggestion that Banvit might enter into other sectors, such as construction or tourism. “I think everybody should be involved in promoting what they do best,” he said.

The company also entered the Romanian market in 1999 by setting up Banvit Aliment Romania S.R.L. With an expanded hatchery, parent stock farms and a feed mill in the country, Banvit enjoys an 18 percent market share there. “We would like to launch our European operations from this country, as it is already an EU member-state,” Görener said. The hatchery alone can produce 700,000 eggs per week.

Expansion to overseas market

Banvit facilities including slaughterhouses, processing plants, feed mills and cold storage facilities

Banvit would like to expand its Romanian operations not just for a launching pad to export to other EU member-countries, but also to target the 23 million consumers in the Romanian market. “We wanted to take advantage of the agriculture potential in Romania,” he explained, indicating that their 10 million ton corn production capacity can easily be doubled in the future. He said their goal is to set up a state-of-the-art integrated production facility in Romania.

Banvit has committed considerable resources to implementing an emergency action plan in the event that avian flu becomes an issue of concern for public health and safety. It has also developed a comprehensive plan to increase public awareness on issues of food hygiene, provide training for contracted farmers and enhance bio-security measures taken on contracted farms, processing plants and adjoining areas. It has a communication strategy to inform and update consumers through mass-media advertisements and provides traceability information on all its poultry products. In the bird flu scare of 2006, the company implemented this action plan and stockpiled Tamiflu — the only drug known to be effective against bird flu — in the event of an emergency. “Our policy is transparency,” Görener stressed, adding, “The company has worked closely with government agencies and informed the public regularly using the press.” Banvit maintains ISO 9001, ISO 14001 and ISO 22000 certification for its processing operations in Turkey.

High corn prices increase cost

Chicken production in Turkey amounted to 1 million tons in 2008, with consumption at 15.2 kilograms per person. Production is expected to hit 1.5 million in 2013, according to State Planning Organization (DPT) estimates. In 2005 Turkey ranked 14th in the world in terms of chicken production. According to EU reports, the facilities of many Turkish firms, including Banvit, meet or even exceed EU standards. However, an EU import ban on chicken from Turkey is still in effect, and resolving the issue will take a great deal of bureaucratic red tape.

The industry provides employment to 500,000 people. Including families, it is estimated to be supporting 2 million people. The total turnover for the industry is over $3 billion. Processing plants operate at 85 percent capacity on average, though this is expected to decrease in 2009 due to declining in demand.

Industry interest groups complain about the high cost of chicken feed, specifically corn, which constitutes 55 percent of all feed. While the price per ton is $261 on average in world markets, it is $400 in the Turkish domestic market. Increasing use of corn in bio-fuel production has pushed corn prices up worldwide, though it may decrease with the drop in oil prices.

Banvit uses special lab to monitor and detect possible problems in production process

Banvit also has a special lab to monitor and detect possible problems in the production process and employs mobile units to disinfect hatcheries and spray surrounding areas. “They swab and take samples from breeder farms to make sure everything is alright,” Görener said. For example, all vehicles entering the premises of the Banvit production facility in Bandırma get sprayed down and all visitors are must sterilize their shoes in a special bin located at the gate.

Including its sales force and contracted breeders, the company employs 5,000 people nationwide, mostly in Bandırma, where it generates 80 percent of its revenue. Görener says the company currently has no plans to move its headquarters to İstanbul. “We have talked about this at company meetings and have decided against it,” he said. Banvit supports 2,000 families in Bandırma alone. “But if we are to be a global player and add new production plants in other places, we may have to establish our base in a centrally located region like İstanbul,” he acknowledges.

Banvit has also expanded into the red-meat business in Turkey by establishing a 19,000-head cattle feedlot in Bandırma. The marginal cost of red meat is lower, as the company has already invested in storage and distribution networks for chicken and turkey products nationwide. “Our customers pushed us into this segment because they wanted to work with a reliable supplier,” Görener said. The company aims to double its daily red-meat production in 2009 from 300 cattle a day to 600.

D-8 is scheduled to hold the 1st Ministerial Meeting on Food Security in Kuala Lumpur, on February 25-27. Secretary General, Dipo Alam, said that he expects participations from developed poulterers such as the Turkish Banvit and other potentials poulterers across the D-8 region to exchange knowledges and recommendations to further strengthen the outcome of the meeting for wider benefit of the member countries.

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