Turkey’s manufacturing PMI hit 53.5 in May, the latest step in its climb over the 50-point mark separating expansion from contraction.
Overall the outlook is encouraging. Operating conditions improved amidst stronger growth in output, new orders, and employment. Companies noted a pick-up both in domestic demand and export orders, prompting an uptick in hiring. Analysts at FocusEconomics expect industrial production to rise 2.5% in 2017, and output to increase 2.9% in 2018.
The climb out of contraction is by inches, but holding steady. Arcelik, Turkey’s biggest manufacturer of household appliances and other consumer durables, presents a notable success story. Its position is favourable partly because of its sheer size. It is part of Koc Holding, Turkey’s biggest conglomerate. It has 18 factories and nearly 30,000 staff in seven countries, and generated global sales of $5.4 billion last year.
In the first quarter, domestic sales shot up 35% over last year. CEO Hakan Bulgurlu is optimistic: “Turkey is more resilient than it looks from the outside”, he said, adding that reports from the dealers who run his 3,000 shops are positive.
In the near term at least, Bulgurlu’s growth strategy centres primarily on international markets, starting with Western Europe. The company has been selling its Beko brand home appliances in Europe for the past seven years, and the brand is now the market leader in the UK. The company’s goal is to land in the top three in every European market, despite competition from powerful rivals like Electrolux of Sweden and Germany’s BSH.
Arcelik is also stepping up its investment in Asia. To break into Asia’s fast-growing markets, it will need to compete with global giants such as China’s Haier Group. Arcelik currently has a factory and sells in China. The company is also leveraging acquisitions. Last year it bought a Pakistani white goods producer, and opened a factory in Thailand. In May, Arcelik and air-conditioner maker Voltas, part of the Tata conglomerate, agreed to form a $100 million joint venture company in India.
Manufacturing industry consolidation is likely to continue, which puts smaller Turkish manufacturers at risk of being taken over. According to The Economist, their success depends on devoting resources to research & development; for example finding uses once appliances are digitally connected via the Internet of Things. Arcelik has a head start, having developed smart ovens and refrigerators, and secured numerous patents.