Impact of the current Turkish hazelnut industry in the Nutella production
Nutella is the most popular product in Ferrero Group sold in over 160 countries and reaching a global consumption of over 300,000 tons yearly, which is equivalent to the weight of the Empire State Building. Ferrero Group uses a fourth of the global production of hazelnut which allows the yearly Nutella production to be over 770 million containers. If all the containers are placed side by side they could circle the equator nearly twice. Nutella accounts for over 50% of the global sale of chocolate spreads, which means that their demand for hazelnuts is high, sourcing it mostly from Turkey.
Turkish hazelnut industry thriving despite recent regulation changes
Turkish hazelnut production accounts for 70% of global production. According to the Black Sea Hazelnut and Hazelnut Products Exporters' Union, in 2021 Turkey exported USD 2.26B in hazelnuts which is equivalent to 344,379 metric tons. This is a historical record export volume with a 119.2% increase from 2020.
Source: www.trademap.org & www.bazaartimes.com, Black Sea Hazelnut, and Hazelnut Products Exporters' Union
In 2021, there were many economic and policy changes in Turkey. President Recep Tayyip Erdogan and the Central Bank of Turkey reduced the interest rate, which weakened the value of the Lira in 2021 by half of its value. During the first weeks of 2022, the US dollar has lost some value which has increased the value of one lira in relation to the dollar. The measurement had a big negative impact on many areas of the agricultural industry. Due to the decrease in the lira value, products that were imported for production like fertilizer, seeds, pesticides, and other essentials have increased in cost. Additionally, producers are paying more for energy, packaging, and transportation.
Source: www.xe.com, Value of 1 lira in dollars.
The increase in production costs due to the devaluation of the lira has affected many agricultural products, but not hazelnut. According to Tridge’s industry specialist Ferhat Erdem, the hazelnut industry has not been greatly affected by the lira devaluation and the cost increase in production products. Hazelnut is a product traded in US dollars, which makes it isolated from the inflation in Turkey but sensitive to global inflation. Additionally, hazelnuts are only 5% dependent on fertilizers to grow, which is why the increase in fertilizer prices is not a big issue either.
The lira devaluation has only affected the local hazelnut industry because hazelnuts have become more expensive to local buyers due to the international value per kilo. The international hazelnut industry has remained stable in the international markets and currently not processed shelled hazelnuts sell for 30 to 30.50 Turkish lira per kilo. This value is expensive for local buyers which is why suppliers are placing their product on the international market where they earn more per kilo.
In 2021, there was an increase in the demand for hazelnut. During the last trimester of 2021, there were increases in exports reaching over 30% increase from 2020. Farmers are selling their hazelnuts on the international market to the highest bidder and it is estimated that the wholesale prices will increase globally, which will affect the Ferrero Company and the Nutella industry.
The increasing global demand for hazelnut and its impact on the Nutella industry industry
Ferrero purchases a third of the Turkish production of hazelnut and one-fourth of the global production. Due to their purchase volumes being so high, they were able to establish long-lasting contracts with an alleged established price per kilo of 22.5 lira. Turkish producers had been honoring those agreements for years and supplying to the Ferrero company, but the increasing demand for hazelnut has affected those arrangements.
Lately, there have been claims that a declining Turkish hazelnut production has threatened the Nutella industry. According to our industry specialist Ferhat Erdem, this is not the case because there has not been a decline in hazelnut production, but there has been an increase in hazelnut demand. The increased demand for hazelnut and a competitive international market price has allowed farmers to offer their hazelnuts on international B2B platforms where they can sell to the highest bidder.
The competitive Turkish hazelnut market has threatened the supply allocated to the Ferrero Company and the Nutella production. Hazelnuts represent 13% of the Nutella recipe and taking into account Turkish hazelnut accounts for 70% a decline in Turkish hazelnuts allocated to the Ferrero Company could cause a big setback in the Nutella production. This creates an opportunity for the Ferrero Company to source from other countries. Countries like Italy, Chile, and Azerbaijan have been growing their hazelnut production and trade. The scattered Turkish hazelnut supply creates an opportunity for these emerging markets to introduce their products into markets and companies, like Ferrero, that have high purchase volumes.
According to our industry specialist Ferhat Erdem, the Turkish hazelnut industry is not declining its production, on the contrary, there is a foreseen growth. Hazelnut exports are increasing and farmers are gaining export value and export volume. Producers are investing in research and development, and quality in their production lines and processes. There is not a foreseen production crisis which means the Nutella production will not face setbacks as long as they can source their hazelnuts from various sources.
Sources
Bazaar Times. Turkey earns $2.26B from hazelnut exports in 2021.
Daily Sabah. Turkish hazelnut farmers frustrated over Nutella ‘monopoly’.
Euronews. Italian company Ferrero accused of exploiting hazelnut pickers.
Fortune. The world’s Nutella supply is under threat, and that’s igniting a ruckus in the Italian countryside.
The Wall Street Journal. Turkey’s Currency Crisis Slams the Nutella Global Supply Chain.
Tridge. Intelligence and Data.
