text stringlengths 11 5k |
|---|
Project Delta
Confidential Information Memorandum | December 2021
Strictly private and confidential
IFC |
Table of contents
Section
I
II
III
IV
V
Executive summary
Key investment highlights
Business model overview
Financial overview
Appendix
1
Page
2
10
23
53
70
IFC |
I. Executive summary
IFC |
DeFacto: Leading innovative fast-fashion retailer with a global vision Overview
3
At a glance
Key figures
→ Founded by two shareholders with complementary backgrounds in fast-fashion retailing and textile production, DeFacto (the “Company”) is a leading Turkish fastfashion retailer with presence in over 90 countries
- 495 stores globally; 301 stores in Turkey, 168 stores in 18 international markets,
and 26 franchise stores in over 10 countries
- Sales from stores account for c.75% of Net sales in 2021B, while remaining c.25% are realized through online and other channels; established omnichannel model
→ DeFacto operates with a balanced strategy of Turkey and international sales
- Turkey sales (55% of Net sales): DeFacto stores are widespread in almost every city in Turkey at high traffic locations both in main streets and shopping malls, registering yearly footfall of 300+ mn visitors3
- International sales (45% of Net sales): International stores are currently located mainly in MENA and CIS, while the strategy to ramp-up presence in developed countries with a “more online, less physical” model is at the implementation stage
→ The Company has become a true omnichannel retailer with continuous investments, adapting to changing trends and customer needs, resulting in strong sales growth especially through online channels
→ As one of the “love brands” in Turkey, DeFacto boasts a high brand awareness score among its competitors, and commands the second highest market share4 in Turkey
→ DeFacto places operational excellence at the heart of its operations, with its focus on HR, an agile store management strategy, best-in class automated warehouse investments, in-house ERP system and continuous technological investments
→ Ozon Tekstil (“Ozon”), DeFacto’s wholly owned-subsidiary, brings in-house supply arrangement capability as well as exposure to global best practices, through its relationships with leading multinational brands
→ Solid financial performance with real topline growth and c.14% EBITDA margin;
excluding IFRS 16
c.TL 7.3 bn Net sales1 (2021B)
c.14% EBITDA margin1 excl. IFRS 16 (2021B)
495 # of stores2
427k sqm Total net selling space2
c.55% Turkey sales (2021B)
c.45% International sales (2021B)
c.20% Online sales (2021B)
115+ mn Annual online visitors to Defacto.com
Financial performance1
14.4%
14.3%
10.4%
10.3%
14.6%
13.8%
17%
vs +27%
4,223
4,564
7,344
15.2%
13.8%
+40%
13,067
2019
2020
2021B
Net sales (TL mn)
EBITDA margin excl. IFRS 16
2022E EBITDA margin5 excl. IFRS 16
16.0%
15.2%
39,429
2026E
CAGR
CPI
(1) Big 4 audited IFRS financials for the historical period of 2019-2020, excluding IFRS 16 effect (2) As of October 2021, for 469 stores excluding franchises (3) Pre-Covid-19 figures (4) Apparel retail market share as of Q2 2021 (5) Calculated excluding Defacto.com operations in international markets, which are at ramp-up stages, both at Net sales and EBITDA levels Source: Company, Euromonitor, IPSOS, TUIK
IFC |
Executive summary Distinguished player with unique operational DNA for growth and innovation
4
Swift expansion in Turkey
Applying expertise garnered in Turkey to high-growth emerging markets
2005
2011
2012
2013
2014
Established as a male only retailer by native entrepreneurs with vast experience in retail and textile production
First store opened in Istanbul
Category expansion
Aggressive land grabbing strategy with strong execution
Store expansion in Turkey through organic store roll-out and store acquisitions
Internationalization journey started with first international store opened in Kazakhstan
Design office inaugurated in Barcelona with respected designers
Continuous investment to improve operations with fully automated warehouse investments
New category launched: Kids New international markets: Iraq, Egypt, Belarus Minority investment from Franklin Templeton1
2
It took only 6 years for DeFacto to become the second largest apparel retailer in Turkey
133
163
4
DeFacto penetrated high-growth emerging markets through timely and effective execution, expanding to more than 10 countries within a three-year time frame
238
20
Investing in fully integrated omnichannel capabilities
Globalizing brand with continuous omnichannel expansion
2016
2017
2018
2019
2020
2021 - …
New category launched:
New category launched: Denim
Cooperation with Solvoyo2 to implement algorithmic replenishment system and other machine learningbased modules
Professionals being assigned top management roles
Baby and athleisure International sales reached up to 20% of Net sales Internationalization milestone: 100th store in Morocco Launch of DeFacto Academy
New category launched: Studio collection
Internationalization milestone: Expansion to East Asia with Malaysia and first EU store in Romania
Reached 450+ stores
First e-commerce sales in Kazakhstan, Egypt, Morocco and Iraq
Turkey’s first Smartest Digital Fashion
store in Akasya Mall Istanbul
Launch of e-commerce websites in Germany and the UK, and surge in online sales, testaments to DeFacto’s adaptable model
First stores openings in Macedonia and Montenegro
Berlin flagship store opening in Q4 2021
Internationalization journey and brand investment strategy continue…
323
2,033
64
325
2,649
98
332
3,531
141
307
4,564
146
299
4,223
153
3014
7,344
1684
(1) Executed in 2015 (2) Third-party system provider (3) Excluding franchise stores (4) As of October 2021 Source: Company
Net sales (TL mn)
# of stores in Turkey3
# of stores in international markets3
IFC |
Executive summary Brand of the future: DeFacto making the right moves in an ever-changing landscape
5
DeFacto is always one-step ahead to welcome fashion’s new trends and opportunities
Emerging trends in fashion…
…opening new horizons for DeFacto
Embracing new norms of fashion at all capacity
Digital transformation Online penetration and digital infrastructure investments are multiplying
Omnichannel transformation Agile operational model mix enabling “Buy online; Pickup in store”
Experience stores Stores are meant to be for beyond shopping
Casual fashion Homewear has gained momentum with work-fromhome becoming the new norm
Sustainability It is not an option but a priority
1
2
3
4
5
Source: Company
Precise focus on to gearing up online channel through continuous investments in operational infrastructure, technology and company culture
Surging online share in total sales
1%
2015
c.20%
2021B
DeFacto follows multi-platform approach to support its online presence via Defacto.com and marketplaces
Responsiveness to customer needs represents the fulcrum of DeFacto’s operating model Omnichannel solutions such as Pay-at-store and Buy online; Pick-up in store options are available across markets
Strategic allocation of channel mix to fuel further growth and profitability with optimal resource allocation
Online sales facilitate access to international markets by promoting brand awareness with limited initial investments
One-stop shop approach to capture emerging trends with flexible and agile operational maneuver
Key pillars of DeFacto’s philosophy for happy customers: Fashion-forwardness, Dynamism, Consciousness, Empathy
Sustainability is a core value deeply embedded in DeFacto’s operations and fully subscribed by management
IFC |
Executive summary Expansion-led strategy playbook customized for each sales channel
6
Stores
c.75%
Online
c.20%
Other2
c.5%
c.55%
y e k r u T
c.45%
3 l a n o i t a n r e t n
I
e c n a m r o f r e p
) n m L T (
→ 301 stores; foothold in almost every city → Attracts 300+ mn1 footfall annually → Strong brand investment
and category
extension and optimization strategy
→ Captured strategic locations in frequented
venues with high consumer traffic
→ Land grabbing strategy completed after years of expansion-led strategy execution; always opportunistic for attractive locations
→ Initiated with
the
establishment
of
Defacto.com platform in 2012
→ Constant improvement with beter inventory
management techniques
→ Increased partnerships with marketplaces to
→ Covering all areas of retail through wholesale in addition to store network in
channel, Turkey
→ Enhanced
fuel further growth in online channel omnichannel
by streamlining the processes across channels to fulfill customer needs with Pay-at-store and Buy online and Pick-up in store options
capabilities
→ Replicating proven success in Turkey with rapid expansion in attractive emerging markets such as MENA and CIS regions
→ Reached 168 stores
(in 18 countries)
internationally in a decade
→ Ongoing expansion in attractive markets → Flagship store openings
in developed markets starting from 2021; “more online, less physical”
→ Bolstered the market presence with the launch
of Defacto.com platform in 2019 in key international markets
→ Continuous collaboration with global/local marketplaces to boost online presence → Strategic gateway in penetrating developed markets ahead of offline, to promote brand awareness and gain traction via marketplaces followed by Defacto.com
→ Franchise system to support store roll-out strategy in international markets is key for growth (currently 26 stores), especially where local expertise is crucial to overcome regulatory and operational hurdles
→ Well-established supplier relationships of Ozon with international retailers, primarily Primark and C&A, contributing to DeFacto sales through exports
318
146
300
149
308
160
316
181
340
266
4%
1%
11%
10%
6%
9%
11%
11%
20%
30%
+17%
4,063
3,262
5,555
+25%
9,557
17,052
+145%
707
1,401
233
+70%
2,810
19,726
+20%
254
388
267
2,651
+47%
700
2019
2020
2021B
2022E
2026E
2019
2020
2021B
2022E
2026E
2019
2020
2021B
2022E
2026E
% share in 2021B Net sales
# of effective stores
% share in Net sales
% share in 2021B Net sales
y g e t a r t S
l
a i c n a n F
i
(1) Pre-Covid-19 figures (2) Other category consists of Wholesale, Franchise and Ozon sales to third-parties (3) Consists of Developing markets and Developed markets Source: Company
IFC |
Executive summary Offering broad assortment of products for the whole family, centered around one-stop shop strategy
7
Global brand with agile portfolio management strategy and customer responsiveness built on the key brand pillars of: Fashion-forwardness; Dynamism; Consciousness; Empathy
Core segments
c.80%
Complementary segments
c.20%
Men Core segment, unique know-how and experience
Women
Baby & kids
Accessories
Footwear
Key segment targeting the broad wardrobe with focus on fashion
Fast growing category, key to complementing all family needs
Support category to drive frequency of visits and boost sales transactions
Complementary category to enable complete outfit building
Homewear Sportswear Expansion category to respond to changing customer needs
Focusing on more value-added SKUs and kids' category to ensure profitable growth
Trusted brand, offering high quality standards at affordable prices
Addressing consumer needs with dynamic product portfolio
Season range styling and tailor-made offerings to suit local preferences
Source: Company
% share in 2021B Net sales
New category
IFC |
Executive summary Brand house of DeFacto: Enjoy/Embrace the new you
8
Strong brand portfolio led by DeFacto umbrella brand enriched with distinguished sub-brands
DeFacto FIT
DeFacto Coool
DeFacto Modest
DeFacto Plus
DeFacto Studio
DeFacto’s key features…
…attracting customers with different characteristics
Promises to bring “feel good” factor with comfortable products
Dynamic and bold
Unique design capability
Trendy and forward thinker
Aims to be the best friend of its customer by offering quality at value prices
Embraces differences with different sub-brands for each customer type
Enjoy/Embrace the new you
Conscious
Self explorer
Tailor-made offerings befitting diverse lifestyle preferences
Global minded
All communicated within the marketing tagline of “The Joy of Refreshing Life”
Source: Company
IFC |
Executive summary Transaction structure
9
Transaction scope
Transaction timeline
→ Project Delta refers to the contemplated minority stake sale of 10.67% treasury
shares of DeFacto owned by the Company (“Proposed Transaction”)
→ Staying true to their ambition of building a listed global fast-fashion brand, DeFacto shareholders continuously channel their efforts into establishing a structure with well-invested operations and visionary corporate culture. In this respect, the shareholders sold 10.67% minority stake to a group of financial investors led by Franklin Templeton (“FT”) in 2015, to support the Company for its future IPO
→ Having reached the end of its investment horizon, DeFacto is buying back its shares with a view to placing these shares with a new investor that will support the Company’s growth and realize its IPO plans in the medium term
- The buy back of shares is mostly completed and targeted to be finalized in
January 2022
→ In this respect, DeFacto has appointed ÜNLÜ & Co to act as its exclusive financial
advisor in the Proposed Transaction
Phase I
Phase II
NDA
CIM distribution
Limited Q&A & MM
Indicative Offer due date
Initiation of due diligence
Binding bids
Signing
January 27th, 2022
Phase I details
→ Distribution of the CIM
→ Limited Q&A process for key questions and clarification requests
→ A meeting with the management (“MM”) to be arranged upon request of the
Shareholding structure1
potential investors
Founding shareholders2
The Company
89.33%
10.67%
→ Non-binding terms & conditions for Indicative Offer due by January 27th,
2022
→ Selected potential investors will be granted access to a virtual dataroom
DeFacto
Phase II details
→ Due diligence period for a limited number of selected potential investors
100%
100%
100%
Ozon Tekstil
DeFacto Teknoloji
Int. subsidiaries3
→ Virtual dataroom access along with Q&A process
→ Management presentations and site/store visits
Shareholding
→ Exact timetable for Phase II to be circulated in a separate process letter for
short-listed potential investors
(1) Presents the target as of January 2022 (2) Zeki Cemal Özen with 66.5% shareholding, İhsan Ateş with 13.7%, İdris Özçelik with 4.6%, Şahin Demir with 4.6% (3) Consists of wholly owned subsidiaries in international markets Source: Company
IFC |
II. Key investment highlights
IFC |
Key investment highlights Strategic positioning of DeFacto
11
1
2
3
4
5
6
7
8
9
Vision to become a global retail brand
Well-balanced internationalization strategy; benefiting from its omnichannel model
Multi-platform/diversified approach to online sales
One-stop shop approach offering a broad assortment of products addressing the whole family
Unique brand, well-positioned to benefit from attractive global trends
Strategic production base as a check and balance for the supply chain
Operational excellence constantly nurtured by technology investments
Strong professional management and rooted corporate culture
Strict commitment to sustainability guidelines
10
Robust financial performance backed by outstanding growth prospects; system wellmanaged during Covid-19 pandemic
Innovative fastfashion retailer, meeting global quality standards, at affordable prices
IFC |
1 Vision to become a global retail brand
12
Internationalization lies at the heart of DeFacto’s vision since its inception
First steps of building tomorrow’s global fast-fashion brand
Finding new avenues for growth in achieving the globalization vision of DeFacto
→ DeFacto was established by two visionary founders that came together with the common goal of building a truly global brand
→ Opening its first store in 2005, DeFacto quickly expanded its network in Turkey through organic store roll-outs and store acquisitions, and became the second largest brand by market share as early as in 2011
→ DeFacto replicated its successful expansion-led strategy in international markets and grew its footprint to 18 countries in a mere five years, starting off with MENA and the CIS, to be followed by developed countries
→ The Company transformed itself by leveraging in-house technology to execute a successful omnichannel strategy, with growing online sales and improving supply chain infrastructure; both in Turkey and in international markets
More online, less physical
Unique combination of fast-fashion retailing and production know-how
Establishing strong Turkish market presence with increased penetration
Stepping into international markets with attractive fundamentals followed by rapid expansion
Initiating online strategy + leveraging online channels to tap into developed markets
Expedited omnichannel growth and expansion into new international markets with optimized resource allocation strategy
2005
2011
2012
2017
2018
2020
from 2021 onwards
First store in Turkey
Reaching more than 130 stores
First international store
Establishment of online presence
Expansion to Asia with Malaysia store
Reaching the milestone of c.100 stores in international markets
Reaching c.150 stores by expanding to more than 15 countries in international markets
First physical presence in Europe with flagship store opening1 in Berlin, Germany
(1) Expected opening in Q4 2021 Source: Company
IFC |
2 Well-balanced internationalization strategy; benefiting from its
omnichannel model
13
Bringing online and offline format together under omnichannel strategy…
Turkey c.80 mn population
MENA & CIS c.700 mn population
Europe c.750 mn population
Land grabbing strategy paid off by capturing prime locations…
… and further growth lies in underpenetrated MENA & CIS regions with already established DeFacto operations…
… as well as Europe, a new territory for DeFacto to step in, en route to realizing its vision of becoming a global brand
301 stores1
168 int. stores1 70 in MENA; 98 in CIS, CEE, Balkan and East Asian countries
Flagship stores in selected countries, starting from Q4 2021 with Germany, to be followed by Austria, the Netherlands and the UK
Cities with DeFacto stores
…with room for further growth to explore
Internationalization strategy: Entry into developed markets “more online, less physical”
Expand presence built on marketplaces with own Defacto.com platform and then flagship stores
Become the brand of tourist shopping
(1) Store count as of October 2021, excluding franchise stores Source: Company, World Bank
IFC |
3 Multi-platform/diversified approach to online sales
14
Online strategy
Key pillars of online strategy
Clear omnichannel strategy
DeFacto has been steadily focusing its efforts towards diversifying and expanding its online presence with…
A truly omnichannel platform
I
Defacto.com platform
2 Marketplaces
Sustained technology investments for enhanced consumer experience
Increasing partnerships with global/local marketplaces
Targeted marketing efforts to promote Defacto.com
Expanding product variety and fulfillment options
Multi-platform online strategy enables
Accessing new territories with limited initial investment
Establishing brand awareness
Gaining valuable market insights and learning customer behavior
Source: Company
IFC |
4 One-stop shop approach offering a broad assortment of products
addressing the whole family
Product assortments with broad consumer appeal delivered through…
c.80%
Men
Women
Baby & kids
Accessories
Footwear
Core category
Key category
Key category
Growth category
Support category
Complementary category
01
02 02
03
04
05
15
c.20%
Homewear/ Sportswear
Expansion category
06
Trendy and comfortable
Broad offerings at value prices
Serves the whole family
… reinvented and customized “One-stop shop” store concept to address a broader fashion spectrum
→ DeFacto stores are designed with one-stop shop concept, allowing customers to enjoy a convenient shopping experience. Going forward, DeFacto plans to open new concept stores with niche sub-brands to appeal to a wider consumer base
→ DeFacto Fit, an example of concept stores as previously mentioned, was launched by the
Company, with its first store opening in Bursa, Turkey, in 2020
→ DeFacto also concentrates its efforts on reinventing in-store experience through unique in-store activities. Phygital stores1 allow customers to enjoy easier product assessment through smart screens and a faster checkout process
(1) As of October 2021, there is one phygital store in Istanbul, Turkey Source: Company
% share in 2021B Net sales
IFC |
5 Unique brand, well-positioned to benefit from attractive global trends
16
DeFacto, ideally positioned to gain leverage from…
…attractive fundamentals in global landscape
Growing target market
DeFacto operates in the most strategic segment of the apparel sector, with flexible price points enabling the Company to leverage trade up/down opportunities in the market
In addition, market growth is further enhanced with the ongoing shift from unorganized individual brands/shops (still currently at c.40%1) to organized market, especially for Turkey and emerging countries where DeFacto is well-positioned to capture this growth
Agile global growth strategy
DeFacto’s strategically built store network enables the Company to capture different growth dynamics that each market offers; DeFacto has two distinctive strategies:
(i) Expanding to underpenetrated markets with relatively lower share of organized retail, signaling strong growth prospects (ii) Opening flagship stores in highly visited, tourist attracting cities carrying DeFacto brand to the next level in the international arena
One step ahead for technological investments
DeFacto was well-prepared to respond to changes, as shopping rapidly shifted to online with the outbreak of the Covid-19 pandemic The Company’s long-running investments paid off, as the pandemic speeded up changes already underway in fashion sector
Omnichannel: Integration of physical stores and online
Supply chain: Fast and flexible delivery options
Shopping experience: Seamless and inspiring in every channel
(1) Individual shops’ share in total apparel market as of Q2 2021 in Turkey Source: Company, Euromonitor, IPSOS, market research
Following the increasing prices globally, consumers tend to seek out products with good price/performance ratio, using quality and value as their guides
Global apparel market is set to grow at a higher pace, rebounding from the slump caused by Covid-19. Growth is estimated to come from emerging markets as shown below
Global apparel market size (USD bn)
1,420 500
920
2015
+1%
5%
-1%
CAGR
1,525 630
895
2020
+8%
10%
6%
2,045
920
1,125
CAGR
2024E
Emerging markets
Others
Ongoing shift from unorganized individual brands to organized markets, especially in Turkey and in emerging countries
Online sales are seen as a silver lining, presenting the biggest opportunity for the fashion industry, going forward. Digital channels are envisaged as the primary growth driver in the coming years
Online sales’ share in global apparel sales
<5%
2005
c.20%
2020
30+%
2024E
IFC |
6 Strategic production base as a check and balance for the supply chain
17
Ozon in a nutshell
A leading textile producer in Turkey, active in tricot, woven and knitwear groups Acting as an important supplier for DeFacto across categories, constituting c.12% of DeFacto’s total purchases in 2021B. Ozon is fully outsourcing DeFacto products to third-party workshops and factories across Turkey and controlling their production process from raw material sourcing to final products
Ozon Tekstil enabling flexibility and favorable cost base for DeFacto
I
IV
Strategic ownership critical for key capabilities
Source: Company
II
III
Dedicated capability providing sourcing security and flexibility
→ Optimal sourcing strategy to maximize capacity and
profitability
→ Rapid response to fashion trends, with shorter lead times
Third-party sourcing, benefiting from Ozon’s sector expertise
→ Strategic partnerships with key raw material suppliers
enabling proper planning
→ Advantageous sourcing from carefully selected third-party
suppliers
Strategic tool to benchmark and control costs of thirdparty suppliers
→ Platform to control cost base and leverage price
negotiations with suppliers
→ Strategic production base enabling check and balance for
the supply chain
Access to market intelligence and know-how via strategic suppliers
→ Proactive cost control through market intelligence → Best practice transfer
IFC |
7 Operational excellence constantly nurtured by technology investments
18
Agile management vision encouraging continuous excellence aiming highest customer satisfaction DeFacto has invested heavily in operations to serve convenient and seamless shopping experience for its customers
1
Online operations
2
Store operations
3
Distribution/logistics
→ The Company looks to continuously invest, together with DeFacto Teknoloji, to improve its online infrastructure, and dedicates its efforts to providing the most convenient online shopping experience, emulating the quality offered at DeFacto stores
→ DeFacto seeks to extend its fashion experience to make it available anytime, anywhere via mobile devices, with the added convenience of customers being able pick up their products at a convenient DeFacto store
→ DeFacto is
consistently
improving its
in-store experience for its customers, with agile store staff management and incentive tools supported by big data analysis and AI1
→ DeFacto invested in a fully automated warehouse at its main distribution center in Turkey, enabling centralized control over supply chain processes and KPIs
→ Omnichannel integration started in 2015 with Payat-store and Buy online; Pick-up in store options, now available across Turkey
→ As part of DeFacto’s
constant
improvement
principle, the Company invested in:
- Fully digitized hand terminal software that tracks information such as
important operational shipping, shift schedules, stock keeping, etc.
- Smart
camera
customer decisions with variables such as gender, age, etc.
tracking
systems
→ Warehouse investment paved the way for efficient and swift integration of DeFacto’s store and online operations and distribution processes
throughout
transport
storage,
→ In
proliferation
tandem with
rapid of the the Company built a international operations, across network of countries, to allow transfer of merchandise within stores
local distribution centers
Key pillars behind DeFacto’s operational excellence
In-house technology powerhouse: DeFacto Teknoloji
Omnichannel native warehouse management system
Centralized logistics/warehouse management network
Professional management with hands-on approach, controlling day-to-day business
(1) Artificial intelligence Source: Company
IFC |
8 Strong professional management and rooted corporate culture…
19
Strong professional management dedicated to deliver DeFacto’s vision to become a global brand
Board member
İhsan Ateş1 CEO
30+ years of work experience
Önder Şenol CFO/Online Operations
Serdar Ersoy COO/CGO2
Cenk Karapınar CSCO3
25+ years of work experience
20+
years of work experience
20+
years of work experience
Quality and innovation driven professional management…
…supported by fully-equipped and visionary board4 of non-executive shareholders…
…committed to delivering sustainable growth across markets
(1) Only board member with an executive role (2) Chief growth officer (3) Chief supply chain officer (4) Board consisting of Zeki Cemal Özen, İhsan Ateş, İdris Özçelik, Şahin Demir, Erman Kalkandelen representing FT and Cengiz Solakoğlu, independent board member. Plus, Yılmaz Argüden is acting as advisor to the board with his extensive experience as board member roles across local and global companies Source: Company
IFC |
9 … with strict commitment to sustainability guidelines
20
Environmental
→ Viewing the environment as an integral stakeholder, DeFacto prioritizes reducing its environmental footprint by focusing on innovation and using more environmentally friendly materials, as well as developing efficient production processes with lower levels of production waste
a member of
Recycled 4 mn1 parcels and 3.6k1 tons of paper
Adoption of zero waste target of waste management
Reduced avg. yearly per sqm electricity consumption in stores by c.37%1,2 compared to 2015
7.7k1 tons water saved for 770k products
1.2k1 tons scraps reused for 4.3 mn1 products
Social
→ Focusing on long-term sustainable outcomes, DeFacto management works to increase social welfare
through various efforts, with participation from different departments of the Company
→ DeFacto employees volunteered for over 60 events, devoting more than 8,500 hours to several campaigns. Efforts were channeled mostly to raising awareness for women’s empowerment and promoting equal opportunities in education, health and child raising
Governance
→ DeFacto management assumes a collaborative approach, adapting sustainability measures to
corporate governance and decision-making processes. DeFacto’s governance model is equipped with secure mechanisms, aligned to value creation for all stakeholders
→ As the highest authority in the Company, the Board runs the governance through C-suite and director level management. The CEO, the highest managerial role overseeing the full set of business functions at DeFacto, is appointed by the Board, to which the CEO reports
committed to delivering the best combination of fashion, quality, price and sustainability
10-15% of the product assortment is made from regenerated yarn
(1) 2020 figures (2) Turkey stores (2017-2019) Source: Company
IFC |
10
Robust financial performance backed by outstanding growth prospects;…
21
Net sales1 (TL mn)
Key remarks
5%
17%
19%
22%
30%
37%
44%
50%
Covid-19
17%
vs
1,341
267 25
4,564
2,931 2019A
+27%
4,223 2,399 2020A
254 147 1,423
7,344
4,026
2021B
+40%
931
18,288 1,572 6,441
9,344
24,076 2,500 8,802
11,448
39,429 2,651 5,849
13,969
1,902
31,223
3,851
11,438
1,327
14,032
16,960
13,067
4,586
7,074
700 706
388 405 2,525
2022E
2023E
2024E
2025E
2026E
Turkey
Developing markets2
Developed markets3
Others
% share of online
International operations
EBITDA4 (TL mn)
14.4%
10.4%
14.6%
15.2%
15.9%
16.4%
16.1%
16.0%
14.3%
10.3%
13.8%
13.8%
13.8%
14.0%
14.4%
Covid-19
656 655
1
439 434
4
1,061 47 1,014
1,940 141 1,799
2,798 267
2,531
3,682 309
3,373
4,599 92
4,507
2019A
2020A
2021B
2022E
2023E
2024E
2025E
15.2%
5,640
5,978
-338 2026E
Topline growth across geographies and channels; focusing on further internationalization and online conversion
Targeting around 55% international sales and around 50% online sales by 2026E
Focusing on recently added categories such as kids and continuous shift to more value-added products
Sustained investment in technology and human resources enabling steady growth and profitability
Operational excellence and close monitoring of cost items facilitating margin improvement
Robust EBITDA margin despite Defacto.com’s international operations still at ramp-up stage contributing negative to EBITDA during the projection period
EBITDA
EBITDA exc. Defacto.com international
EBITDA %
EBITDA % exc. Defacto.com international
CPI
(1) Represents store and online operations for each market. Others constitute the total sales for Wholesale, Franchise and Ozon sales to third-parties (2) Consists of MENA, CIS, Balkan and East Asian countries (3) Consists of Western European countries (4) Excluding IFRS 16 effect Source: Company, TUIK
IFC |
10
…system well-managed during Covid-19 pandemic
22
Turbulence caused by forced store closures due to Covid-19 pandemic in many of DeFacto’s operational markets in 2020 and 2021
Region
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Turkey
Developing markets1
13.0%
9.4%
47.3%
44.3%
0.1%
13.4%
7.9%
4.1%
21.6%
7.4%
33.1%
4.3%
0.1%
3.9%
Ratio of non-operational days of stores due to Covid-19 per country
≤1%
≤20%
≤50%
Challenges compelled DeFacto to devise alternatives which served to bolster its financial performance
Strong negative impact of Covid-19 on the global retail industry
Physical store and mall closures during lockdown dampening fashion retail sales volume and value
Drastic shift in consumer behavior
Major hurdles in manufacturing and supply chain
DeFacto: Success story in turning threats into opportunities
Swiftly adjusting to shifts in trends and customer behavior such as online shopping, leveraging DeFacto team’s agility and flexibility
Widespread and diverse customer portfolio providing a natural hedge against any business downturns
Hands-on management and day-to-day control of the business on all revenue and cost aspects, limiting the impacts caused by sudden external factors such as Covid-19
Operational excellence due to in-house technology powerhouse and well-invested talent pool
Well-managed eco-system enabling continuous goods and services flow and effective cost management for main cost items including rent and others
Rapid decision making, swift implementation, and continuous monitoring to introduce modifications, if needed
(1) Please refer to Appendix section for country specific details (2) Excluding IFRS 16 effect and Defacto.com international Source: Company
Net sales (TL mn)
7,344
4,564
4,223
2019A
2020A
2021B
EBITDA2 (TL mn)
14.4%
10.4%
656
439
14.6%
1,061
2019A
2020A
2021B
EBITDA % exc. Defacto.com international
IFC |
III. Business model overview - Operational flow - Key business functions
IFC |
Business model overview Unique business model built on innovation, continuous improvement and agility
24
DeFacto’s unique business operations are ideal to quickly respond to fast-fashion needs
Design
Procurement & Production
Logistics & Distribution
Sales/store operations
→ Experienced innovative design team, composed of 71 product designers & 31 graphic designers
→ Step-by-step design process based
on calendar year, including in-depth analysis of micro/macro & seasonal trends, review of fabrics
→ Working with 200+ top suppliers for
design samples and market intelligence
→ Procurements made through c.500 local and international suppliers
→ Around 15% of procurements go through Ozon, wholly owned subsidiary of DeFacto
→ Local production support enabling
favorable cost base, checks & balances system controlled by Ozon
→ Optimal sourcing in each product category due to its strategic partnership with around 25+ key suppliers
→ Well-established logistics network both in Turkey and international markets, securing fast and reliable supply chain operations
→ Fully automated, best-in class distribution center in Turkey
→ International operations supported through 22 local warehouses in selected markets
→ AI backed inventory management provided by strategic partner, Solvoyo
→ One-stop shop strategy executed at global standards across all countries
→ Omnichannel integration to fulfill customer needs for various occasions
→ 495 stores globally; 301 stores in
Turkey, 168 stores in 18 international markets and 26 franchise stores
→ Online existence in over 90
countries
Excellence enabled by key business functions lying at the center of operations
Key business functions
Source: Company
Sustainability
Human resources
Marketing
DeFacto Teknoloji
IFC |
Business model overview Fast retail and value-driven strategy characterized by flexibility
25
Customer-centric company culture supported by technology to timely meet specific customer demands
→ DeFacto implements a “Fast Retail” and “Cluster” strategy to address its customers’ needs. DeFacto management’s unique experience in production/supply chain
and retailing lays a reliable foundation for the implementation and proper execution of this strategy
→ The Company forecasts fashion trends, makes quick changes to the product mix and efficiently manages store inventory due to its distinctive operational edge. Complementing this, the cluster strategy through constant feedback from customers and use of big data analytics, can make the right product reach the right location at the right time
Fast thinking
→ Forecasting
→ Supporting trends
→ Brainstorming
→ Every idea through the “grinder”
→ Letting the best ideas win
Fast decision making
→ Establishing guiding principles
→ Removing bureaucracy
→ Shuffling portfolios
→ Constantly repackaging
→ Track record
Source: Company
Fast to market
→ Competitive advantage
→ Faster suppliers
→ Efficient process
→ Scalability
→ Institutionalizing innovation
Sustaining speed
→ Simplicity
→ Without boundaries
→ Growth mentality
→ Financial flexibility
→ Business process management
IFC |
III. Business model overview - Operational flow - Key business functions
IFC |
Highly structured and efficient process built on unique design know-how
27
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Analysis
Design
Order
Step-by-step design process based on
→ Macro/micro trends
→ Historical product
performance review
→ Customer behavior
Repeat or new design created by
Internal designers
Internal designers
50%
External designers
50%
Repeat
New
Orders consist of
→ 40% early orders
with up to 8 months delivery time
→ 40% in season orders with; c.3 months delivery time
→ 20% open-to-buy orders
Winter
Fall & Winter
Collection offering
Transition
Spring
Summer
→ Following global trends and reviewing product design performance
→ Evaluating new seasonal products, including competitors
→ Hands-on review of fabrics and accessories from start to finish, together with Ozon Tekstil
→ Product development
throughout the year; focus on creating new designs for current core products and updating existing designs
→ Product development
performed by both in-house and strategic external designers, providing diversity to DeFacto’s product range
→ Early-order-placement mostly for “basics” and partially for “updated basics” categories, as most of the products are repeated
→ Up to 80% of allocated capacity ordered in advance, reducing cost and supply risk
Transition
→ Offering 6 main collections and 12 lines with 6 well-
balanced product phases
→ Product lines prepared based on calendar; small quantities lined up to address additional sales opportunities
→ Design team has weekly milestones to roll out new
lines every 2 months, with weekly deliveries to stores
Balanced mix of designers, optimizing fashion risk and enabling differentiation
Leveraging critical supplier relationships to bring external know-how to the process
Comprehensive detailed design process based on a wealth of data points
Efficient order strategy capitalizing on quick response production capabilities
Source: Company
IFC |
Favorable cost base with unique strategic partnerships
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Flexible and well-linked sourcing model enables cost optimization through unique market intelligence and know-how
Strategic suppliers (Third-party)
c.88%
Ozon Tekstil
28
c.12%
→ DeFacto is working with a mix of dedicated and outsourced workshops
→ DeFacto leverages Ozon Tekstil’s know-how in optimizing delivery times
across Turkey as well as East Asian countries, ranging in size and capability
and sourcing costs
→ The Company works with more than 500 suppliers individually
−
−
c.85% of the suppliers are located in Turkey
International suppliers are mostly used for the procurement of accessories or specific merchandise that cannot be bought within Turkey. Purchases from international suppliers make up c.10% of total procurements in 2021B
→ 70+ international
suppliers enable global
reach and proximity to
operational markets
→ DeFacto has built a special partnership model with around 25 key suppliers to further optimize its sourcing in each of its product categories. DeFacto makes capacity arrangements with these producers and guarantees the majority of its annual procurement needs at the beginning of the year
− Annual capacity arrangements enable clear visibility on sourcing and
production schedule
→ For DeFacto purchases, Ozon outsources production to third-party suppliers and coordinates production by guiding suppliers starting from raw material purchasing
− Ozon remains the largest supplier of DeFacto, with c.12% share of the
Company’s overall purchases in 2021
→ Ozon plays a critical role in the value chain by coordinating other suppliers via benchmarking their quality/costs with its own metrics. Ozon participates in DeFacto’s order tenders and allocates the production to relevant suppliers with desired capability and quality
→ Ozon’s market intelligence and production know-how stir up competition in the tender process, enabling DeFacto to benefit from favorable rates
→ DeFacto and Ozon teams come together
to critically assess order specifications in detail, which allows DeFacto to prevent any errors or misalignments from the start, thereby averting risks to the final product
DeFacto mitigates potential risks in supply chain through…
Flexible sourcing decisionmaking ability
Cost-effective approach
Secured capacity
Shorter lead times
% share in 2021B total purchases
Source: Company
IFC |
Ozon Tekstil: DeFacto’s strategic ownership driving key achievements
29
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Ozon Tekstil at a glance
Location overview
→ Established in 2000, Ozon is a leading textile producer in
Turkey; producing tricot, woven and knitwear groups
- Ozon Tekstil has two facilities with a total of c.20k sqm closed area. Factory 1 in Sivas produces jersey wear, while Factory 2 in Sivas is a print house
→ Acting as a key supplier for DeFacto across categories, Ozon is
constituting c.12% of DeFacto’s total purchases in 2021B
→ Ozon is fully outsourcing DeFacto products to third-party workshops and factories across Turkey and controlling their production process from raw material sourcing to final products
- Some factories are dedicated only to DeFacto’s production
→ Ozon acts as checks and balances mechanism, controlling the supply base for DeFacto, thanks to its rooted relationships with raw material suppliers and outsourced producers
→ Ozon sells c.80% of its products to DeFacto, outsourcing the orders to suppliers across Turkey. The remaining 20% is comprised of exports mostly to European retailers, mainly Primark and C&A
- Ozon’s own production sold only to export customers
HQ
Istanbul
2
Sivas
Selected blue-chip customer portfolio
Ozon applies best practices from multinational brands in both production technique and design variety
Ozon Tekstil enabling flexibility and favorable cost base throughout production
Flexible/visible production capability
Source: Company
Shorter lead-time
Product intelligence
Pricing architecture
# of facility 2
Total open area c.60k sqm
Capacity per month 30 mn pieces
Cutting per month 2 mn
Total Employees c.440
Total suppliers c.650
IFC |
Production facilities at global quality standards
30
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
1
Sivas facility I (Jersey wear)
2
Sivas facility II (Print house)
Best in class production facilities with significant capacity…
→ Opened in 2005 → Total capacity is 30 mn pieces per annum with the breakdown
of 70% jersey wear, 20% flat knit and 10% woven — 2 mn pcs cutting / month — 350k pcs garment / month
→ Opened in 2016 → 1 mn pcs / month → Equipped with latest technology → Capable of various print techniques
15k sqm Closed area
280 # of employees
30 mn pieces capacity per annum
5k sqm Closed area
160 # of employees
1 mn pieces capacity per annum
…adhering to sustainability guidelines
Source: Company
IFC |
Effective management of merchandise flow through DC network
31
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Integrated supply chain is key to fast-fashion delivery
Product preparation and production phase
Warehousing and product delivery to sales channels/end customers
Order initiated by DeFacto
Product flow from suppliers
Main warehouse in Çerkezköy
Stores/online consumers (Turkey)
International distribution center (“DC”)
Stores/online consumers (International)
Products are stored in the main warehouse, international DCs, to be distributed to B2B or B2C clients For Turkey warehouse, in-house Enterprise Resource Planning (ERP) system, provided by DeFacto Teknoloji, is used. International DCs employ third-party systems
located in Çerkezköy or in
The Company works with Solvoyo to run operations smoothly throughout its supply chain processes. Solvoyo system, which employs an algorithmic replenishment system covering DeFacto store network, forecasts customer demand via machine learning capability and provides recommendations regarding product dispatchments on a store basis
In response to the Covid-19 outbreak, the Company opted for multi-usage, dedicating selected stores partly to warehousing. Usage of such stores as local hubs paved the way for a more efficient and effective distribution system
DeFacto optimizes its shipping network through applying region-specific strategies. The Company works with over 10 logistics providers to deliver goods to customers on a timely and efficient basis
Source: Company
IFC |
Centralized logistics with fully-automated warehouse, supported by…
32
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Fully automated, best-in-class integrated distribution center
→ The Company centralized its operations in Turkey, conducting them through the distribution center
located in Tekirdağ, Çerkezköy with a total of c.100k sqm area
- Distribution center has a stock capacity of c.32 mn units
→ Products delivered by suppliers are received and dispatched to sales points through the distribution
center
→ Distribution center has four main sections; automated warehouse, manual warehouse, storehouse
and warehouse-to-warehouse
→ A major part of the operations in Turkey and half of the e-commerce operations are handled at the
distribution center
→ Fully automated, best-in class distribution center in Turkey enables shorter lead-times and faster
delivery from warehouse to customers
- International operations are supported through 22 local warehouses in international markets
→ DeFacto utilizes AI2 backed inventory management provided by strategic partners, to run efficient omnichannel operations across its store network and centralized warehouse, ensuring the right product store allocation at the right time
→ Wholly-owned subsidiary, DeFacto Teknoloji with its 60 engineers, provides a unique competitive
edge with the in-house ERP system tailored-made for the specific needs of the Company
DC
Turkey B2B
Turkey Manual
Turkey Bonded
Turkey Transfer
Turkey B2C
Turkey B2C-2
Main DC in Istanbul
Opening year
Area (sqm k)
Storage Capacity (unit mn)
Movement Capacity (unit mn)
2014
2009
2017
2012
2017
2019
Total
15.0
18.7
7.5
4.0
2.0
6.0
18.0
5.0
3.0
2.7
1.2
2.0
700.0
150.0
60.0
30.0
34.3
54.6
53.2
31.9
1,028.9
Operational excellence and agility secured by
Fully automated best in-class warehouse
AI backed inventory management
Internal IT powerhouse
Omnichannel integration
(1) Artificial intelligence Source: Company
IFC |
…international DC network enabling store/merchandise connectivity
33
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
DC
Opening year
Area (sqm k)
Storage Capacity (unit mn)
Movement capacity (unit mn)
B2B Egypt Morocco North Iraq South Iraq Albania Moldova Serbia Georgia Belarus Belarus Russia Kazakhstan Kazakhstan Kazakhstan Ukraine
B2C Kazakhstan Egypt Morocco Ukraine Poland UK Russia
B2B & B2C
2017 2017 2016 2017 2019 2021 2021 2019 2017 2021 2020 2014 2020 2021 2021 Total
2019 2020 2020 2021 2021 2021 2021 Total Total
1.0 1.2 3.6 1.2 0.3 0.2 0.4 0.4 1.4 1.1 1.5 1.7 0.9 2.3 1.1 18.3
0.8 1.0 1.0 0.5 6.5 0.9 0.4 11.0 29.3
0.5 0.6 0.8 0.4 0.1 0.1 0.1 0.2 0.3 0.3 0.3 0.6 0.2 0.6 0.3 5.3
0.1 0.3 0.1 0.1 0.4 0.0 0.0 1.0 6.3
15.2 20.6 4.2 6.2 0.0 0.0 0.0 0.0 4.2 4.2 13.0 15.1 0.4 6.3 9.4 98.8
1.0 2.1 1.0 1.2 1.4 1.8 0.8 9.3 108.1
B2B
B2C
Both
# of DCs
Widespread DC network
Source: Company
Key in achieving…
Proximity to each operational market
Ease of transfer and flow of merchandise across markets
Centralized approach for the inventory management
IFC |
Leveraging in-house production experience and capability
34
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
DeFacto’s strategic partner, Solvoyo, brings an important edge by leveraging artificial intelligence in supply chain
→ DeFacto started to cooperate with Solvoyo, a global digital service provider specialized in the retail industry. The working relationship developed through the years, as
the Company added more advanced supply chain modules to its system, and reaped the benefits of efficient forecasting and inventory management techniques
In-season
1
Pre-season
2
Pricing
3
→ Product allocations to individual stores
→ Demand forecasts of different attribute clusters
→ Predictive analytics for discount pricing
→ On time stock replenishment
→ Store to store transfer
→ Markdown optimization
→ Predictive analytics and machine learning
→ Product grading by store to optimize allocation
such as color, size, fit and climate
→ Dynamic store clustering based on demographics
→ Assortment planning based on store clusters
→ Life-cycle estimation
→ Merchandise financial planning
Proven results of technology in supply chain
Increased on shelf availability of products from c.65% to c.85%
c.95% demand forecast success rate
On time delivery of right product to the right store
Lower lost sales
Reduced stock-outs by c.25%
On time sourcing
Source: Company
IFC |
Route-to-market strategy shaped with multiple customer touchpoints
35
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Omnichannel model: DeFacto’s route-to-market strategy is shaped via integrating physical stores with online channel
1
Stores
c.75%1
2
Online
c.20%1
One-stop shop designed stores located at prime locations…
Multi-platform strategy executed across markets…
Turkey 301 Stores in Turkey with c.285k sqm net effective selling space
International markets 1942 Stores in int. markets with c.143k sqm3 net effective selling space
Own platform
Marketplaces
…capturing footfall across occasions
178
123
137
31
Defacto.com-originated sales’ share in total Online sales4 (2021B)
c.20%
Marketplace-originated sales’ share in total Online sales4 (2021B)
c.76%
…with sales derived from
c.53%
c.47%
Street mix
Mall mix
Turkey-originated online sales’ share in total Online sales (2021B)
International markets-originated online sales’ share in total Online sales (2021B)
DeFacto aims to offer holistic shopping experience for their customers by integrating offline and online worlds
(1) Remaining 5% belongs to Wholesale, Franchise and Ozon sales to 3rd parties (2) Includes 26 franchise stores (3) Excludes franchise stores (4) Excludes Pay-at-store with c.4% share Source: Company
% share in 2021B Net sales
IFC |
Bringing DeFacto quality through well-established store network in Turkey…
36
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
DeFacto’s wide store1 network commands an extensive catchment area to attract its target market
Marmara DeFacto stores: 46 DeFacto’s effective space per 1,000 people (sqm): 4.0
İstanbul DeFacto stores: 77 DeFacto’s effective space per 1,000 people (sqm): 5.4
Black Sea DeFacto stores: 24 DeFacto’s effective space per 1,000 people (sqm): 2.4
Eastern Anatolia DeFacto stores: 11 DeFacto’s effective space per 1,000 people (sqm): 1.5
77
46
47
24
43
37
11
16
Aegean DeFacto stores: 47 DeFacto’s effective space per 1,000 people (sqm): 3.9
Mediterranean DeFacto stores: 37 DeFacto’s effective space per 1,000 people (sqm): 2.9
Central Anatolia DeFacto stores: 43 DeFacto’s effective space per 1,000 people (sqm): 3.3
Southeastern Anatolia DeFacto stores: 16 DeFacto’s effective space per 1,000 people (sqm): 1.6
(1) As of October 2021 Source: Company, TUIK
store network covers
c.90%
c.95%
of Turkey’s population
of Turkey’s total GDP
DeFacto has successfully completed its land grabbing strategy and secured its foothold in high-traffic locations in almost every city in Turkey
IFC |
…and expanding international footprint from emerging to developed markets
37
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
DeFacto steps up its internationalization drive by expanding into developed markets, at the tailwind of growing online sales
First wave: Internationalization through emerging countries
Second wave: Expansion to developed markets with limited flagship stores
2012 -
2021 -
Expected store openings in 2022 in Germany, the UK, the Netherlands and Austria
Q4/2021: First flagship store in Berlin, Germany
168 international stores1 70 in MENA; 98 in CIS, CEE, Balkans and East Asian countries
Internationalization journey continues…
Established presence in emerging countries...
… planned expansion in emerging countries as well as in developed countries
Number of stores of top 6 countries by revenue in international market
33
29
24
Planned expansion in already penetrated markets
Planned expansion to developed countries with flagship stores
8
17
15
5
11
3
3
NEW MARKETS
2
2
1
1
1
Kazakhstan
Morocco
Iraq
Egypt
Russia
Belarus
Ukraine Russia
Egypt
Other CIS
Other MENA
Germany
UK
Austria
the Netherlands
(1) Excluding franchise stores Source: Company
# of stores as of October 2021
# of stores planned to be opened in 2022
IFC |
International footprint of DeFacto
38
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Global presence in over 90 countries through diverse operational models with its 2022 target to enter the UK, Austria and the Netherlands offline
Online & Offline
Online-only
Offline-only
14
68
4
Franchise
13
# of countries
Source: Company
IFC |
Multi-platform approach in online sales to maximize reach
39
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Online sales through…
Defacto.com platform
18+
20%
Marketplace
90+
76%
→ DeFacto has evolved into a true omnichannel retailer through sustained investments, adapting itself to changing trends and customer needs, thereby attaining robust sales growth, especially via its own platform
→ DeFacto invested heavily in its online platform over the years, collaborating
with its technology subsidiary, DeFacto Teknoloji
→ Defacto.com platform aims to provide users with a seamless customer journey through personalized offers, click and collect experience and top-notch recommendation tool
→ Distinctive omnichannel features such as Pay-at-store, click and collect and
ship from store are also executed through Defacto.com platform
→ Throughout the years, DeFacto increased its social media footprint via local celebrities and influencers, in order to attract more customers and support the growth of the platform
→ DeFacto leverages its strong relationships with marketplaces to gain easier
access to new markets, as part of its international expansion strategy
→ Online sales through marketplaces enable DeFacto to collect valuable customer data; identify market potential; gain insights into customer habits and preferences; and adapt to local conditions, before contemplating the costlier option of launching its Defacto.con site and opening physical stores in a new market
→ DeFacto follows this as its main online strategy to facilitate market penetration and establish brand awareness, which also serves as a tool to increase Defacto.com sales over medium/long term
→ The Company hired account managers with local language and market skills, as part of its one-year expansion plan comprising 90 countries. Recently, DeFacto started to collaborate with marketplaces in India and Latam region
Select list of strategic partner marketplaces
→ Platform is also designed to provide the same unique shopping experience from each device, facilitating shopping at each occasion
Multi-device availability
Pay-at-store
4%
→ The Company encourages customers to enjoy the convenience of innovative features such as Pay-at-store, Click and Collect thanks to its developed omnichannel
infrastructure
→ Pay-at-store and Click and Collect are available at every store in Turkey and has growing availability in international markets
# of countries
% share in 2021B Online sales
Source: Company
IFC |
DeFacto’s online journey over the years
40
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Being one of the early adopters of digital transformation in the fashion industry, DeFacto is well-equipped to deliver a seamless online shopping experience to its customers
2012
2013-2016
2017-2018
2018-2020
2021- Onwards
Step 1 – Launch
Step 2 – First steps
Step 3 – Strategy shift
Step 4 – Growth
Future is here
→ Set up online presence
→ Provided basic information
to customers
→ Offloaded excess
merchandise from previous seasons
→ Focus on clearing out stock from previous seasons
→ Product variety limited with
outlet products only
2016
→ Limited product variety
→ Initiated selling products on
→ No substantial growth
marketplaces
→ Appointed new team
→ Mobile application
→ Expansion of online presence in
→ Changed product mix from outlet to current stock
relaunched
→ Online website redesigned
90+ countries through marketplaces
→ Tested “click and collect” in
exceeding offline
enhanced
→ Increased product variety,
→ Online catalog styling
−
Exclusive product lines updated weekly
→ Increased inventory levels
→ First online sales in
Kazakhstan, Egypt, Morocco and Iraq
and size availability
→ Launch of Defacto.com in
→ In-store ordering in pilot
phase in Istanbul
→ “Ship from Store” launched
in 2018
Germany and in the UK and surge in online sales
→ Improving shopping
experience initiatives:
−
−
Launch of Astrafit
Launch of Snap-by
→ “Ship from Store” expanded to 15 countries within 2018
→ Initiated collaborations with strong local players in new geographies such Latam, India and East Asia
→ Started working with locally-based account managers to gain deeper insights into customer demand and improve communication
→ Defacto.com platform constantly streamlined to support growth
Management’s target for online sales by 2026
% share of Online sales in Net sales
Source: Company
2018
2%
2020
17%
2021
c.20%
2026
c.50%
IFC |
Case study: DeFacto’s exemplary success with Zalando
41
Partnership
Two-tiered market expansion
Strong partnership continues…
1st phase
2nd phase
DeFacto live in 4 markets
DeFacto live in an additional 8 markets
Continuous expansion in Europe
March 2020
April 2020
May 2020
October 2020
→ In March 2020, DeFacto joined
Zalando via Partner Program, under the concept of reaching the widest fashion customer base possible
→ The program enables DeFacto to readily access a large and diverse, previously untapped customer potential
→ Based on data forecasts provided by the Partner Program, DeFacto went live in four markets
→ Testing its offer in these markets first, DeFacto became acclimated to this platform, especially with respect to assessing the right level of assortment depth and width to meet demand → DeFacto ensured a solid stock flow to Zalando Fulfillment Solutions warehouses
→ DeFacto went live in an additional eight markets in May, paving the way for an incremental net merchandise value (NMV) growth of 9,700+% from March to October 2020
→ DeFacto leveraged its Partner’s
logistical infrastructure in Europe, saving both time and money → Internationalization drive remains under way, to continue with other European countries → Increasing assortment width
through new category additions
→ Integration process in new
markets facilitated by integrator partner, ChannelAdvisor
Impressive expansion success with Zalando
12 markets in less than 4 months
4x sales in less than 4 months
9,700+% NMV growth in less than 4 months
Source: Company, Zalando website
IFC |
Diligent evaluation on store opening process
42
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Site identification
Site evaluation
Term negotiation
Fit out and recruitment
Opening
→ Search criteria
→ Site visits
→ Agent relationship
→ Feasibility analysis
→ Regular contact
→ Business case
→ Letter of intent
Go / No Go decision by Head of Expansion
→ Legal review by
→ Handover to
lawyers
technical team
→ Marketing activities
→ Lease agreed
→ Capex deployment
→ Pre-exchange check list
→ Store fitted out by store development team
→ Virtual
merchandising team handling final pre-opening phase
Up to 2 years before opening
Source: Company
c.8 weeks
c.2 weeks
c.10 weeks
The whole process is managed by a dedicated team of 11 employees
IFC |
One-stop shop concept promises pleasant in-store shopping experience…
43
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Store design of one-stop shop concept…
…offering visitors an enjoyable shopping experience
Sample DeFacto store layout
1
2
3
4
5
WOMEN [ ]
MATERNITY
8
7
6
HOMEWEAR
LINGERIE
KIDS GIRL
DEPOT
2
1
MEN F.R. MEN
HOMEWEAR
3
4
5
6
7
CASH DESK
CASH ACC
SMART
WOMEN ACC MEN ACC
WOMEN CASUAL
MEN CASUAL
[ C H N O
I
].
R. F S D K
I
C C A S D K
I
KIDS BOY
D E N M
I
WOMEN ACTIVEWEAR
MEN ACTIVEWEAR
WOMEN YOUNG
MEN YOUNG
D E N M
I
Visually appealing store designs
More light and more space
FASHION
ENTRANCE
ENTRANCE
ENTRANCE
Turkey
International
c.950 sqm
c.850 sqm
Average store size
Source: Company
Individual sections for each product category
Store sections suited to target customers
Comfortable and easy shopping experience
Employee incentivization at the register to promote cross-selling opportunities
Tailor-made employee ranking system creating a fair ground and visibility for high-performing staff
Smart fitting rooms equipped with a call staff button for customers requiring a different size or colored item
IFC |
…as well as displaying DeFacto’s popular product assortment to customers
44
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
Basics Repeated and updated style
Trendy basic Repeated and updated style
Acceptable fashion Proven and reordered
New fashion New offering
c.20%
c.25%
c.53%
c.2%
→ Value for money
→ Quality
→ Always in style
→ Broad appeal
→ Fashion details
→ Innovation
→ New trend
→ Easily adopted
→ Commercial details
→ Variety
→ Question mark
→ Test product
30% of product range are repeat styles, while 65% are re-orders of successful test styles
10-15% of the product assortment is made from regenerated yarn
% share in 2021B Net sales
Source: Company
IFC |
Supportive franchise model to foster international expansion efforts
45
Design
Procurement
Production
Distribution & Logistics
Sales operations
Store operations
DeFacto’s franchise model is based on supporting its franchisees at all aspects to ensure the same quality of service with its own stores
Model
No royalty in place DeFacto sells products to franchisees
Operational support
Global best practice
IT
Marketing
Integrated technology with DeFacto HQ
Traditional and new-age
Training model
Alignment with DeFacto staff training program
Construction
Cost effective build
DeFacto’s franchise opening criteria
Supporting franchisees in every step of the way
Well-defined franchise pre-qualification criteria
Continuously monitoring franchises according to key performance criteria
Long-term business relationships with operational franchisees
Global thinking and local approach for effectively penetrating markets with high barriers to entry
No inventory and consignment agreement risk
Integrated IT system enabling seamless monitoring of DeFacto
Kosova franchise
Tajikistan franchise
Source: Company
Azerbaijan franchise
IFC |
III. Business model overview - Operational flow - Key business functions
A. Sustainability B. HR C. Marketing D. Technology
IFC |
Sustainability at the heart of operations…
47
01
Supplier code of conduct
→ DeFacto suppliers DeFacto are required to comply with certain conditions, such as UNGC Principles, Universal
Declaration of Human Rights, ILO and DeFacto’s social values
→ Supplier audits are conducted regularly by the Company in order to examine the capabilities
→ Key supplier audits include child labor (not accepted under any circumstances), fire and safety, use of personal
protective equipment
02
Testing
→ Physical and analytical testing laboratories, in accordance with European Union Accreditation standards, analyze;
— Product quality — Non-fire safety
03
Sustainability
— Baby and kids apparel safety — Ecological standards and hazardous chemicals
→ Management of impacts arising from activities and products with awareness is DeFacto’s responsibility to the
environment, employees and society
Recycled 4 mn1 parcels and 3.6k1 tons of paper
Adoption of zero waste target of waste management
Reduced avg. yearly per sqm electricity consumption in stores by c.37%1,2 compared to 2015
7.7k1 tons water saved for 770k products
1.2k1 tons scraps reused for 4.3 mn1 products
04
Environmental and social responsibility initiatives
→ Committed member of Global Compact Alliance, as well as local initiatives
Sustainability is central to the strategy
10-15% of the product assortment is made from regenerated yarn
(1) 2020 figures (2) Turkey stores (2017-2019) Source: Company
IFC |
… and central to DeFacto’s strategy
48
Ethical and sustainable retailer compliant with ESG standards
Sustainability is embedded in DeFacto’s operations…
…aimed at generating the best combination of fashion and sustainability
Environmental
Social
Sustainability at core
Governance
DeFacto is a committed Global Compact1 and Women Empowerement Principles2 signatory since 2014, and uses Global Reporting Initiative (GRI) standards as a guide
(1) Since 2014 (2) Since 2015 Source: Company
→ DeFacto has a clear mission to deliver fashionable products at good quality
and at value prices by meeting exemplary sustainability criteria
1
Environmental
→ DeFacto’s main priorities are
— Reducing raw material consumption
— Preventing water and energy waste in production
— Efficient energy usage in stores
2
Social
→ DeFacto administers stringent audit measures to its suppliers, ascertaining
that good practices are applied throughout the supply chain
— DeFacto audited more than 500 suppliers in 2020
→ The Company tests all of its products’ compliance by Standard 100 Oeko-
Tex, certifying the highest quality and safety product standards
→ DeFacto organizes special days every year to evaluate creations and
exchange ideas with its suppliers
3
Governance
→ DeFacto established sound corporate governance principles (independent board, separation of ownership and management) and has well-operating audit and risk committees in place to prevent internal/external risk factors that could pose a threat to business
→ C-suite responsible for leadership and oversight of sustainability efforts
IFC |
DeFacto strongly committed to achieving sustainability goals
49
Sustainability is a core component of DeFacto’s long-term vision, with key targets scheduled for implementation
Achievements
2020-2021
Goals for the future
2023
2030
→ Use of parcels made from recycled paper has
been started. 4 mn waste parcels and 3.6k tons of wastepaper were recycled annually
→ Maintain cooperation with civil society
→ 100% sustainable cotton
organizations and associations to support
→ 100% recycled polyester
→ 100% sustainable linen
→ 100% renewable energy consumption at own
locations
→ 7.7k tons of water saved for 770k sustainable
sustainability
products
→ Prevented waste generation by reusing 1.2k
tons of scrap in 4.3 mn products
→ Conducted more than 500 supplier audits
→ Upholding environmental values, while creating fashion: With 3.5 mn recycled products and 260,000 tons of water savings, DeFacto has met the clean water needs of 4-member 11,682 households for one month
→ DoğaKalpBen collection constitutes 35% of total
goods sold
→ 100% zero waste in main stores and logistics
→ 100% Green to Pack
→ 100% plastic-free disposable materials
→ More than 500,000 people received seed tags
→ Eco-friendly stores
Social awareness campaign in back to school period to inspire social awareness at early ages
2.1 mn views 400k likes
Source: Company
IFC |
Strong HR culture dedicated to promoting best in class work environment
50
C-suite on charge of key departments…
CEO
CFO
Finance and e-commerce
CMO
Marketing
…managing a dedicated workforce of 13,000 people
CGO1
Expansion and offline operations
CSCO2
Supply chain, audit and project management
Headquarters
c.2,000
Stores
c.10,000
Warehouses
c.1,000
Like-minded talent pool connecting with DeFacto’s consumer base…
…retained and recruited through visionary corporate initiatives
→ At the forefront of DeFacto’s success lies its desire to understand its customer
→ Cognizant of the fact that its younger generation employees set it apart from
base, starting from its own employees
→ DeFacto’s young talent pool, 97% of which pertains to Generation Z and Y,
competition, DeFacto is keen to maintain a friendly and joyful workplace
− DeFacto employs a Happiness Director overseeing employee morale
enables the Company to connect with its customer base
− DeFacto encourages its employees to broaden their horizons through its
→ Taking cues from its employees, DeFacto excels in new designs, delineating
seasonal trends and next generation clothing ideas
own online learning system, DeFacto Academy
→ DeFacto conducts management trainee programs to attract new talent from
reputable universities
−
c.65% of DeFacto employees are university graduates
# of employees
(1) Chief Growth Officer (2) Chief Supply Chain Officer Source: Company
IFC |
360˚marketing with focused messaging across multiple customer points Effective use of both traditional and digital media marketing
51
Marketing efforts are scattered across the brand calendar, including those marking traditions and celebrations (Christmas, Ramadan, etc.)
5
4
Printed Media Magazines, Newspapers
Video All Video Content Platforms Yotube etc.
TV TVC, Scenario, Integrations, Garment Sponsorships
Events All Instore and Mall Events
1
E-mailing Mailing and Newsletter
Mobile Platforms Apps, SMS and Other Mobile Digital Media Channels
Radio National, Regional
Digital Media Web pages, All Other Platforms
Blogs Bloggers, Mass Web Pages
Social Media Proactive Social Media, e-dictionary
Search Engines Targeting, SEO and Traffic
DeFacto Channels Defacto.com.tr
3
2
Ratio of marketing expenses over net sales of c.1.5% in the historical period increased to c.2.5% in 2021B which is estimated to increase to c.3.5% in 2022 and gradually to c.6.5% by 2026; continuous brand investment to fuel growth, increase geographical footprint and increase online presence
Source: Company
1. One-stop Shop Strategy Effective use of all available communication media TV ads are key to sustaining brand awareness, both in Turkey and international markets For Women: Support “fashion” perception among women and promote women customers’ potential with continuous interaction For Men: Communicate seasons, Father’s Day, holiday periods For Kids: Special advertisements and collaborations and license collaborations to widen brand reach and to convert one-time shoppers to loyal customers
2. 365-Day Digital Support Enhanced collaboration with local influencers to reinforce bonds with customers both in Turkey and international markets Close interaction with customer base with professional social media account management Specialized discount campaigns for social media followers, to promote mobile application usage and brand awareness
3. Online and Offline, Integrated Projects 360 Support Continuous communication with customers to bridge online and instore shopping experiences, and drive omnichannel capabilities Loyalty card initiative launched to collect valuable customer data Plans include tailored shopping recommendations to customers, based on their past preferences Effective use of search engine optimization (SEO) marketing to attract traffic to Defacto.com 4. In-Store and Event Marketing 52-week new product and pricing communication Occasional event sponsorships 5. Content Marketing Available throughout the year to support all campaigns Theme-based campaigns to promote social awareness
DeFacto’s “Back to School” campaign to promote sustainability ideas among students
IFC |
Leveraging in-house production experience and capability
52
→ Employing 60 engineers, wholly-owned subsidiary DeFacto Teknoloji provides a unique competitive edge, with in-house ERP system tailored to DeFacto’s specific needs
In-house IT capabilities secured by DeFacto Teknoloji
E-Commerce
→ E-Commerce and Omnichannel
Platforms (in-house) → Mobile app & mobile web
IT Business Services
→ ERP applications (in-house) → 3rd party applications → Application integrations → B2B, web & mobile applications
Business Intelligence
→ Data warehouse → Reporting & analytics services → Big data platform
Source: Company
IT Infrastructure Services
→ Datacenter (Main & disaster
recovery)
→ Server and storage → Network → Database management → Monitoring (availability and capacity & performance)
→ Backup and replication services
Information Security
→ IT governance → Information security → Access & identity management → Security monitoring &
intervention
Service Desk
→ Incident management → Request fulfillment for all
DeFacto ecosystem with defined service-level agreements
IFC |
IV. Financial overview
IFC |
Basis of preparation
54
Proposed Transaction scope includes minority stake sale of 10.67% treasury shares of DeFacto owned by the Company, as described in Executive Summary
→ DeFacto prepares three sets of consolidated financial information with fiscal year being the 12-month period as of January 1 of the calendar year, ending on December
31 of the calendar year (i.e., 01.01.2020 – 31.12.2020)
−
Statutory accounts: DeFacto’s statutory accounts are prepared in accordance with the Turkish Commercial Code for tax filing purposes
− Management accounts: DeFacto keeps its management accounts IFRS-like in TL on a consolidated basis, and issues monthly accounts detailed at geography and
channel level
- Compatible with IFRS financials except for 2 applications: (i) IFRS 16 implementation and (ii) recording of some merchandise costs under COGS, as opposed to under OPEX
in IFRS accounts (Please refer to Appendix for further details)
−
IFRS financials: DeFacto’s consolidated IFRS financials issued on a quarterly basis are audited by Deloitte since 2020 and by KPMG theretofore
Historical financials presented in this section are based on the consolidated Management accounts of DeFacto
→ DeFacto management tracks its consolidated operational performance under 4 main segments; (i) Turkey operations, (ii) Developing markets, (iii) Developed markets and
(iv) Others including Wholesale operations, Franchise operations and Ozon sales to third-parties
→ For main segments; namely Turkey, Developing markets and Developed markets; the management follows both holistic and channel-based performance reporting,
analyzing the segments under 2 main channels, covering Store operations and Online operations which include performance of Defacto.com, Marketplace operations as well as Pay-at-store operations
− Although Pay-at-store operations are covered and reported under Online channel performance, management periodically reviews effective selling space performance
and direct costs for Store and Pay-at-store operations combined, for effective and efficient growth and profitability analysis
→ Management reports for segments and channels go up to the contribution level which comprises cost of goods sold as well as channel-based direct costs including
personnel, building, marketing and other operational expenses
2021 Budget and forecast period (2022-2026) presented in this section are prepared by DeFacto management, on a consolidated basis, as per below
→ 2021B – 2026E figures are on the same basis with Management accounts as explained above, presenting management estimates for the forecast period
→ c.15% of price and cost correction have been incorporated to the 2022E business plan by the management considering recent sharp devaluation of TL and increasing
inflationary environment; a portion of this correction has already been applied for prices as well as costs Management prepared forecast period Management accounts as per the macro assumptions below
Inflation (TL) USD / TL (Avg) USD / TL (EoP) EUR / TL (Avg) EUR / TL (EoP)
Source: Company, IMF
2019A
2020A
2021B
2022E
2023E
2024E
2025E
2026E
11.8% 5.68 5.95 6.35 6.66
14.6% 7.02 7.35 8.03 9.02
20.0% 8.90 13.80 10.50 15.59
18.0% 14.42 15.04 16.30 17.00
15.0% 16.17 17.30 18.27 19.55
15.0% 18.60 19.89 21.01 22.48
15.0% 21.39 22.88 24.17 25.85
15.0% 24.59 26.31 27.79 29.73
IFC |
Financial overview on DeFacto as a whole
55
Net sales1 (TL mn)
Key remarks
5%
17%
19%
22%
30%
37%
44%
50%
Covid-19
17%
vs
1,341
267 25
4,564
2,931 2019A
+27%
4,223 2,399 2020A
254 147 1,423
7,344
4,026
2021B
+40%
931
18,288 1,572 6,441
9,344
24,076 2,500 8,802
11,448
39,429 2,651 5,849
13,969
1,902
31,223
3,851
11,438
1,327
14,032
16,960
13,067
4,586
7,074
700 706
388 405 2,525
2022E
2023E
2024E
2025E
2026E
Turkey
Developing markets2
Developed markets3
Others
% share of online
International operations
EBITDA4 (TL mn)
14.4%
10.4%
14.6%
15.2%
15.9%
16.4%
16.1%
16.0%
14.3%
10.3%
13.8%
13.8%
13.8%
14.0%
14.4%
Covid-19
656 655
1
439 434
4
1,061 47 1,014
1,940 141 1,799
2,798 267
2,531
3,682 309
3,373
4,599 92
4,507
2019A
2020A
2021B
2022E
2023E
2024E
2025E
15.2%
5,640
5,978
-338 2026E
Topline growth across geographies and channels; focusing on further internationalization and online conversion
Targeting around 55% international sales and around 50% online sales by 2026E
Focusing on recently added categories such as kids and continuous shift to more value-added products
Sustained investment in technology and human resources enabling steady growth and profitability
Operational excellence and close monitoring of cost items facilitating margin improvement
Robust EBITDA margin despite Defacto.com’s international operations still at ramp-up stage contributing negative to EBITDA during the projection period
EBITDA
EBITDA exc. Defacto.com international
EBITDA %
EBITDA % exc. Defacto.com international
CPI
(1) Represents store and online operations for each market. Others constitute the total sales for Wholesale, Franchise and Ozon sales to third-parties (2) Consists of MENA, CIS, Balkan and East Asian countries (3) Consists of Western European countries (4) Excluding IFRS 16 effect Source: Company, TUIK
IFC |
DeFacto, a success story for profitable growth with a global vision from Day 1
56
DeFacto’s key strategies…
…enriched with regional strategies for agility and flexibility
Shift towards more profitable products
Maintain keener focus on baby and kids segment
Turkey operations
“Focus on further enhancing brand positioning, consumer acquisition and market share” → Focus on Defacto.com and marketplaces; online is a key pocket to deep-dive in Turkey
→ Continuously explore growth opportunities both for new marketplaces, as well as shifts to Defacto.com from
marketplaces
→ Enhance inventory management; avoid stock-outs and integrate effective AI system into online operations
→ Opportunistic new store openings; focus on enhancing efficiency at existing stores in terms of cost and sqm usage
Place emphasis on online, technology and HR
→ Continuous brand investment
Developing markets
Closely monitor consumer trends and be a leader
Be opportunistic and explore growth opportunities across geographies and channels
Better inventory management and SKU optimization
“Replicate the success in Turkey for continuous expansion and profitable growth across channels”
→ Grow in existing markets and explore new markets for geographical expansion (such as Latam, India, etc.)
→ Heavily invest in online growth (Egypt is priority), focusing on both Defacto.com and marketplaces; China is medium-
term target for online growth
→ Store openings are still important strategy where the shift from unorganized to organized retail is a key trend in
Developing markets; growth supported by increasing brand awareness and experience in store strategies
→ Opportunistically explore growth via franchises, especially for markets where local presence and know-how are key
Developed markets
“Key milestone for globalization with more online, less physical strategy”
→ Focus on online; enter with marketplace, establish brand awareness and continue with Defacto.com
→ Increase global presence with less capital and resource incentive strategy; mainly focusing on European countries and US
Big data analysis
→ Physical entry to Germany in 2021 will be followed with the UK, Austria and the Netherlands in 2022
→ Extending its global footprint, will seek to become the “sought after brand” by tourists in Developed markets
Source: Company
IFC |
Overview of store and online operations
Turkey operations
Developing markets
Developed markets
Others
57
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
# of effective stores
#
318
300
308
316
325
330
335
340
Turkey net sales
TL mn
2,931
2,399
4,026
7,074
9,344 11,448 14,032 16,960
17.2% 33.3%
growth
Store
% of net sales
Online
% of net sales
%
%
%
%
%
-18.1% 67.8% 75.7% 32.1% 22.5% 22.6% 20.9%
2,734
1,938
3,289
5,639
6,920
7,606
8,225
8,884
9.7% 22.0%
93.3% 80.8% 81.7% 79.7% 74.1% 66.4% 58.6% 52.4%
197
461
737
1,435
2,425
3,842
5,807
8,076
93.6% 61.4%
6.7% 19.2% 18.3% 20.3% 25.9% 33.6% 41.4% 47.6%
Gross profit
TL mn
1,341
1,057
1,965
3,319
4,449
5,497
6,738
8,127
21.1% 32.8%
margin
%
45.8% 44.1% 48.8% 46.9% 47.6% 48.0% 48.0% 47.9%
Operational costs
TL mn
773
684
1,000
1,683
2,144
2,544
3,095
3,742
13.7% 30.2%
% of net sales
%
26.4% 28.5% 24.8% 23.8% 22.9% 22.2% 22.1% 22.1%
Personnel expenses
TL mn
285
234
352
580
727
880
1,054
1,269
11.1% 29.3%
Building expenses
TL mn
326
248
360
570
696
734
790
851
5.0% 18.8%
Marketing expenses Operational expenses
TL mn
18
28
42
100
127
162
243
352
52.3% 52.8%
TL mn
144
174
246
434
595
768
1,007
1,270
30.8% 38.9%
Contribution
TL mn
568
373
965
1,636
2,305
2,953
3,643
4,385
30.4% 35.3%
margin
%
19.4% 15.6% 24.0% 23.1% 24.7% 25.8% 26.0% 25.9%
Source: Company
→ The figures on the left pertain to DeFacto’s Turkey operations,
comprising DeFacto stores and online operations
→ Management tracks Turkey operations under two main sales channels, stores and online, which account for c.82% and c.18% of 2021B Turkey net sales, respectively
→ As clearly denoted by historical figures, a shift to online
operations is evident, as DeFacto management has adapted its business strategy over the years in parallel with the changing global retail landscape and trends
→ With the Covid-19 pandemic having upended the retail
industry with forced store closures, DeFacto has successfully pivoted its operations to serve its customers through the online channel − Online sales’ share increased to 19% in 2020, as DeFacto quickly responded to the changing realities of the retail sector, thanks to its well-invested online infrastructure − Going forward, the weight of the online channel in Turkey net sales is projected to rise towards c.50% as of 2026E → DeFacto showed strong resilience against the uncertainties and disruptions caused by Covid-19 by closely controlling its cost base and store operations through constant efficiency improvements and monitoring of day-to-day operations − Gross profit margin improved in 2021B due to a longer inventory days as well as DeFacto’s substantial efforts towards managing demand fluctuations through Ozon’s supplier management expertise, ongoing supplier optimization and improved inventory management techniques; later 3 estimated to have permanent impact on gross profit margin
→ As a result of management’s cost-control approach,
operational cost increases were kept at a minimum in 2020, despite store closures due to Covid-19
→ Contribution margin is projected to improve to 26% from 24% over the next five years, due to improving category & brand mix, maturing online sales and scale impact
IFC |
Overview of store operations
Turkey operations
Developing markets
Developed markets
Others
58
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
# of effective stores
#
Effective net selling space
sqm k
318
279
300
223
308
241
316
292
325
300
330
307
335
313
340
319
Sales per sqm
TL/sqm 9,799
8,675 13,662 19,342 23,034 24,772 26,264 27,845
18.1% 15.3%
growth
%
-11.5% 57.5% 41.6% 19.1%
7.5%
6.0%
6.0%
Store net sales
TL mn
2,734
1,938
3,289
5,639
6,920
7,606
8,225
8,884
9.7% 22.0%
growth
%
-29.1% 69.7% 71.5% 22.7%
9.9%
8.1%
8.0%
→ In Turkey, DeFacto has implemented an effective land
grabbing strategy over the years, capturing strategic locations in frequented venues with high consumer traffic
−
Store network across Turkey reached more than 300 stores
→ After having taken DeFacto brand to almost every city in
Turkey, the Company decided to adapt store optimization and efficiency strategy
→ Pursuing an opportunistic approach to new store openings and being constantly on the lookout for new prime locations across Turkey, management targets 340 stores by 2026E
Gross profit
TL mn
1,265
867
1,640
2,663
3,330
3,712
4,030
4,353
13.8% 21.6%
−
margin
%
46.3% 44.8% 49.9% 47.2% 48.1% 48.8% 49.0% 49.0%
Operational costs
TL mn
712
560
805
1,291
1,565
1,678
1,802
1,945
6.3% 19.3%
% of store net sales
%
26.0% 28.9% 24.5% 22.9% 22.6% 22.1% 21.9% 21.9%
Contribution
TL mn
554
307
835
1,372
1,766
2,034
2,228
2,408
22.8% 23.6%
margin
%
20.3% 15.9% 25.4% 24.3% 25.5% 26.7% 27.1% 27.1%
Additional analysis with Pay-at-store performance1
CAGR
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
Store net sales
Pay-at-store sales
Total
TL mn
TL mn
TL mn
2,734
1,938
3,289
5,639
6,920
7,606
8,225
8,884
9.7% 22.0%
17
43
64
226
538
951
1,448
2,034
94.0% 100.0%
2,751
1,981
3,353
5,864
7,457
8,557
9,673 10,919
10.4% 26.6%
Sales per sqm2
TL/sqm 9,859
8,869 13,927 20,116 24,824 27,868 30,886 34,222
growth
%
-10.0% 57.0% 44.4% 23.4% 12.3% 10.8% 10.8%
Contribution
TL mn
557
315
848
1,447
1,953
2,370
2,743
3,132
23.5% 29.9%
margin
%
20.2% 15.9% 25.3% 24.7% 26.2% 27.7% 28.4% 28.7%
Sub-brand store openings such as DeFacto Fit are included in the targets
→ Store sales’ share is expected to gradually decrease to c.50% from c.80% in 2021B with an accelerating shift to online
→ Despite this demand shift, management plans to increase sales per sqm in 2022 and 2023 through improved category mix, more effective sqm usage and implementation of technological tools in stores
→ Gross profit margin improved in 2021B mainly due to slower inventory turnover and is expected to decrease in 2022 to c.47%, with slight improvements envisaged thereafter due to shift towards value-added products and supplier optimization; tactical moves by the management creating lasting margin improvements
→ Improvements in operational costs are mainly due to effective personnel and rental expense strategies, and better inventory management with omnichannel integration
−
Leveraging its anchor store status in malls, DeFacto exerts its bargaining power in rental term negotiations → As part of their holistic omnichannel strategy, management monitors the effect of Pay-at-store sales’ efficiency on sales per sqm and contribution, as denoted by figures on the left
(1) Pay-at-store sales are sales to store customers whereby payment is made at store and merchandise is shipped to customer (2) Calculated using effective net selling space presented in this page Source: Company
IFC |
Overview of online operations
Turkey operations
Developing markets
Developed markets
Others
59
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
Online net sales
TL mn
197
461
737
1,435
2,425
3,842
5,807
8,076
93.6% 61.4%
growth
%
134.3% 59.9% 94.6% 69.0% 58.4% 51.2% 39.1%
Defacto.com
TL mn
99
179
203
426
738
1,210
1,933
2,843
42.8% 69.6%
% of online net sales
%
50.5% 38.7% 27.5% 29.7% 30.5% 31.5% 33.3% 35.2%
Marketplace
TL mn
81
239
471
784
1,149
1,681
2,426
3,198 141.8% 46.7%
% of online net sales
%
41.0% 51.9% 63.9% 54.6% 47.4% 43.8% 41.8% 39.6%
Pay-at-store
TL mn
17
43
64
226
538
951
1,448
2,034
94.0% 100.0%
% of online net sales
%
8.6%
9.4%
8.6% 15.7% 22.2% 24.7% 24.9% 25.2%
Gross profit
TL mn
76
190
325
656
1,118
1,785
2,707
3,774 107.1% 63.3%
margin
%
38.5% 41.1% 44.1% 45.7% 46.1% 46.5% 46.6% 46.7%
Operational costs
TL mn
61
124
195
393
580
866
1,293
1,797
78.1% 55.9%
% of online net sales
%
31.2% 26.8% 26.4% 27.4% 23.9% 22.5% 22.3% 22.3%
Contribution
TL mn
14
66
130
263
539
919
1,415
1,976 201.4% 72.3%
margin
%
7.3% 14.3% 17.6% 18.4% 22.2% 23.9% 24.4% 24.5%
Source: Company
→ For online business, management tracks the performance under three main sub-channels: Own online platform “Defacto.com”; 3rd party marketplaces such as Trendyol and Hepsiburada; and omnichannel feature of Pay-at-store option
→ Online sales posted massive growth in 2020, accounting for
c.19% of total Turkey net sales, taking leverage from increasing online shopping habit during Covid-19
−
The Company was able to handle the spike in online sales, thanks to its well-established tech infrastructure
→ Marketplaces, where DeFacto’s sales doubled year over year, were the main growth driver of online sales in 2020 and 2021B, surpassing Defacto.com
→ Capitalizing on its strong online infrastructure and supply
chain, the Company focused on boosting its online existence via marketplaces and going forward, DeFacto seeks greater shift to Defacto.com from marketplaces
→ Operational costs are expected to increase in 2022 mainly as a result of new marketplaces being introduced to the system, driving marketing expenses to Turkey online sales up by c.1% − Marketing expenses decrease over time and normalize at
c.4% of Turkey online sales
→ Personnel expenses grow in tandem with a larger account management team to cover a wider marketplace network → Management has identified several improvement areas to
increase contribution margin by gaining further efficiencies in operational costs mainly through
−
Reducing logistics costs by distribution of merchandise from fewer stores, deepening inventory and integrating smaller warehouses into the main DC in Çerkezköy → DeFacto aims to quickly replicate the profit ramp-up captured in the contribution margin in Turkey to international markets, which are currently at a slightly earlier stage
IFC |
Overview of store and online operations
Turkey operations
Developing markets
Developed markets
Others
60
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
# of effective stores
#
146
149
160
179
198
217
233
245
Developing net sales
growth
Store
TL mn
1,341
1,423
2,525
4,586
6,441
8,802 11,438 13,969
37.2% 40.8%
%
6.1% 77.5% 81.6% 40.4% 36.7% 30.0% 22.1%
TL mn
1,329
1,324
2,264
3,852
4,744
5,701
6,609
7,188
30.5% 26.0%
% of net sales
%
99.2% 93.1% 89.6% 84.0% 73.7% 64.8% 57.8% 51.5%
Online
TL mn
11
99
261
734
1,696
3,101
4,830
6,781
n.m.
91.8%
% of net sales
%
0.8%
6.9% 10.4% 16.0% 26.3% 35.2% 42.2% 48.5%
Gross profit
TL mn
706
718
1,323
2,388
3,409
4,685
6,094
7,461
36.9% 41.3%
margin
%
52.7% 50.4% 52.4% 52.1% 52.9% 53.2% 53.3% 53.4%
Operational costs
TL mn
351
414
748
1,244
1,846
2,598
3,372
4,128
46.0% 40.7%
% of net sales
%
26.2% 29.1% 29.6% 27.1% 28.7% 29.5% 29.5% 29.5%
Personnel expenses
TL mn
Building expenses
TL mn
Marketing expenses Operational expenses
TL mn
TL mn
105
176
5
64
Contribution
TL mn
355
105
187
8
114
304
184
309
24
315
485
51
423
580
166
587
682
313
787
792
364
986
32.1% 39.9%
861
32.7% 22.7%
438 111.0% 78.3%
231
393
678
1,016
1,429
1,843
89.3% 51.5%
575
1,144
1,563
2,086
2,722
3,333
27.2% 42.1%
margin
%
26.5% 21.3% 22.8% 24.9% 24.3% 23.7% 23.8% 23.9%
Contribution1
TL mn
357
305
576
1,139
1,588
2,130
2,656
3,181
27.1% 40.7%
margin1
%
26.6% 21.8% 23.3% 25.8% 26.3% 26.6% 26.2% 26.0%
→ On top of its growth in Turkey, DeFacto focused on
establishing a sound market presence by investing heavily in brand equity in Developing markets over the years
→ The Company first targeted MENA and CIS regions due to their attractive fundamentals and growth potential on the back of i) young and growing populations ii) low level of global brand penetration and iii) ample room for online penetration
→ The Company later penetrated to Malaysia and CEE region as part of its globalization journey, reaching 168 stores as of October 2021
→ Store sales, which constitute c.90% of Developing market sales as of 2021B, are estimated to post 26% CAGR over the next five years, underpinned by solid store openings in MENA and CIS regions and organic growth for existing stores
→ Online channel, on the other hand, is projected to generate
92% CAGR, capturing further share within Developing market operations
− Online sales in Developing markets are forecasted to
constitute c.50% of Developing markets net sales in 2026E, up from c.10% levels in 2021B, on the back of growing partnerships with several marketplaces in the region with extensive local market knowledge
→ Gross profit margin is projected to edge up c.1.5% through the forecast period, supported by DeFacto’s established knowhow in textiles and supplier optimisation
→ Operational costs increase along with higher marketing and operational expenses to support market penetration in both physical and online worlds
→ Contribution margin1, stabilizing at c.26% over the years, is to be analyzed excluding Defacto.com which is at ramp-up stage
(1) Excluding Defacto.com at ramp-up stage Source: Company
IFC |
Overview of store operations
Turkey operations
Developing markets
Developed markets
Others
61
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
# of effective stores
#
Effective net selling space
sqm k
146
119
149
97
160
132
179
161
198
186
217
212
233
232
245
247
Sales per sqm
TL/sqm 11,138 13,660 17,193 23,978 25,444 26,931 28,538 29,150
24.2% 11.1%
growth
%
22.6% 25.9% 39.5%
6.1%
5.8%
6.0%
2.1%
Store net sales
TL mn
1,329
1,324
2,264
3,852
4,744
5,701
6,609
7,188
30.5% 26.0%
growth
%
-0.4% 71.0% 70.2% 23.2% 20.2% 15.9%
8.8%
Gross profit
TL mn
701
662
1,169
1,985
2,478
3,005
3,483
3,788
29.1% 26.5%
margin
%
52.7% 50.0% 51.6% 51.5% 52.2% 52.7% 52.7% 52.7%
Operational costs
TL mn
348
363
592
928
1,115
1,317
1,524
1,652
30.4% 22.8%
% of net sales
%
26.2% 27.4% 26.2% 24.1% 23.5% 23.1% 23.1% 23.0%
Contribution
TL mn
353
298
577
1,057
1,363
1,687
1,958
2,136
27.9% 29.9%
margin
%
26.6% 22.5% 25.5% 27.4% 28.7% 29.6% 29.6% 29.7%
Additional analysis with Pay-at-store performance
CAGR
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
Store net sales
Pay-at-store sales
Total
TL mn
TL mn
TL mn
1,329
1,324
2,264
3,852
4,744
5,701
6,609
7,188
30.5% 26.0%
0
0
0
83
226
562
892
1,331
n.a.
n.a.
1,329
1,324
2,264
3,935
4,970
6,264
7,501
8,519
30.5% 30.4%
Sales per sqm1
TL/sqm 11,138 13,660 17,193 24,495 26,655 29,586 32,390 34,549
growth
%
22.6% 25.9% 42.5%
8.8% 11.0%
9.5%
6.7%
Contribution
TL mn
353
298
566
1,077
1,417
1,836
2,205
2,520
26.7% 34.8%
margin
%
26.6% 22.5% 25.0% 27.4% 28.5% 29.3% 29.4% 29.6%
(1) Calculated using effective net selling space presented in this page Source: Company
→ Following an aggressive land grabbing strategy pursued in
Turkey, the Company’s international expansion started with Kazakhstan, where its debut store was launched in 2012. The Company quickly expanded its international presence over the past two years, penetrating 10+ countries
→ As of October 2021, DeFacto has 168 stores in Developing
markets; top 5 countries on store count are Kazakhstan (33), Morocco (29), Iraq (24), Egypt (17) and Russia (15)
−
In Q3 2021, the Company solidified its presence in CEE by expanding into two new countries, Macedonia and Montenegro, alongside existing ones like Serbia, Romania, Bulgaria, Bosnia, and Albania, hence reaching 14 stores
→ Strong store sales growth was interrupted by forced store closures due to Covid-19 in 2020. With stores starting to operate at higher capacity in 2021B, store sales are expected to achieve 71% growth and reach sales of c.TL 2.3 bn
→ DeFacto aims to open more than 80 stores over the next 5 years, with 75% of openings envisaged in the CIS region
− DeFacto’s agile management strategy enables the
Company to adjust to shifts in competitive landscape and macroeconomic conditions. To reach the intended topline, management can modify growth plans by interchanging country specific targets
→ Gross profit is expected to be slightly higher on better
inventory management, going forward
→ Operational costs are estimated to decrease on the back of better rental terms, as DeFacto’s pricing power increases in line with an expanding presence and store count, and more efficient personnel utilization
IFC |
Overview of online operations
Turkey operations
Developing markets
Developed markets
Others
62
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
Online net sales1
TL mn
11
78
211
555
1,303
2,300
3,533
5,056
n.m.
88.8%
growth
%
633.5% 169.6% 163.2% 134.8% 76.6% 53.6% 43.1%
Marketplace
TL mn
11
78
211
472
1,077
1,738
2,641
3,725
n.m.
77.6%
% of online sales
%
100.0% 100.0% 100.0% 85.0% 82.7% 75.6% 74.8% 73.7%
Pay-at-store
TL mn
0
0
0
83
226
562
892
1,331
n.a.
n.a.
% of online sales
%
0.0%
0.0%
0.0% 15.0% 17.3% 24.4% 25.2% 26.3%
Gross profit1
TL mn
5
47
130
317
740
1,290
1,979
2,826 404.7% 85.0%
margin
%
48.0% 59.7% 61.8% 57.1% 56.8% 56.1% 56.0% 55.9%
Operational costs1
TL mn
1
40
131
235
514
848
1,282
1,781
n.m.
68.5%
% of online sales
%
13.7% 51.0% 62.2% 42.3% 39.5% 36.9% 36.3% 35.2%
Contribution1
TL mn
4
7
-1
82
225
442
697
1,045
n.a.
-507%
margin
%
34.3%
8.7% -0.4% 14.7% 17.3% 19.2% 19.7% 20.7%
CAGR
Defacto.com
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
Net sales
Gross profit
margin
TL mn
TL mn
1
0
21
9
51
24
179
87
394
192
801
390
1,297
1,725
n.m. 102.6%
633
847
n.m. 104.7%
%
11.0% 45.1% 46.7% 48.4% 48.7% 48.7% 48.8% 49.1%
Operational cost
TL mn
2
11
25
81
217
433
566
695
n.m. 93.9%
% of net sales
%
215.4% 53.1% 50.1% 45.4% 55.0% 54.1% 43.7% 40.3%
Contribution
TL mn
-1
-2
-2
5
-25
-43
67
152
9.5% -344.7%
margin
%
-204% -8.0% -3.4%
3.0% -6.3% -5.4%
5.2%
8.8%
(1) Excluding Defacto.com at ramp-up stage Source: Company
→ Online operations presented on the left include marketplace and Pay-at-store, but exclude Defacto.com figures due to its early operational stage; presented separately below
→ Online operations are heavily managed through marketplaces to establish familiarity and awareness with customers and support DeFacto’s online brand visibility, alongside established physical operations with stores
→ DeFacto mainly works with leading marketplaces in MENA
including Jumia, Souq, Noon and Lamoda, Wildberries in CIS
−
In 2022E, DeFacto plans to build partnerships with strong marketplaces in new regions such as Latam and India
→ Following 2021B, the Company plans to sharpen its focus on
Defacto.com and developing Defacto.com operations first at a pilot country (Egypt) and thereafter extending to other countries building on its accumulated experience
→ Management plans to designate Egypt as its center focus for Defacto.com operations, given its growing consumption base and established DeFacto presence − Modest and kids' categories carry strategic importance to
drive sales growth
− As the next step, Defacto.com operations are planned to be expanded to other countries in MENA & CIS regions − As of October 2021, DeFacto is present in Morocco, Egypt, Russia, Kazakhstan, Ukraine and Iraq through Defacto.com
→ Pay-at-store is also expected to play a significant role with
increasing omnichannel integration
→ Gross profit margin1 is projected to drop c.5% over the next
five years, with increasing volume and related pricing strategy → Operational costs1 are expected to stabilize following 2021B,
driving contribution margin1 up to c.20% as of 2024E
→ Contribution margin of Defacto.com will slowly ramp-up, as
economies of scale start to kick in, turning to positive in 2025E
IFC |
Overview of store and online operations
Turkey operations
Developing markets
Developed markets
Others
63
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
# of effective stores
#
Developed net sales
TL mn
0
25
0
0
2
9
13
17
21
147
405
706
1,572
2,500
3,851
5,849 299.6% 70.6%
growth
Store
%
479.6% 175.4% 74.5% 122.6% 59.0% 54.1% 51.9%
TL mn
0
0
3
65
284
476
703
980
n.a. 230.1%
% of net sales
%
0.0%
0.0%
0.6%
9.3% 18.1% 19.0% 18.2% 16.8%
Online
TL mn
25
147
402
641
1,288
2,024
3,148
4,869 298.3% 64.7%
% of net sales
%
100.0% 100.0% 99.4% 90.7% 81.9% 81.0% 81.8% 83.2%
Gross profit
TL mn
12
88
250
408
898
1,431
2,225
3,419 353.5% 68.7%
margin
%
48.0% 59.7% 61.8% 57.7% 57.1% 57.2% 57.8% 58.5%
Operational costs
TL mn
3
78
275
472
946
1,387
1,919
2,549 789.6% 56.1%
% of net sales
%
13.7% 52.9% 67.9% 66.9% 60.2% 55.5% 49.8% 43.6%
Personnel expenses
TL mn
Building expenses
TL mn
Marketing expenses
TL mn
Operational expenses
Contribution
TL mn
TL mn
0
0
0
3
9
3
3
4
67
10
23
9
57
186
-25
67
25
152
228
-65
169
85
311
382
-49
264
115
496
512
43
369
149
674
727
306
527
n.m.
86.8%
193
n.m.
84.4%
893
n.m.
73.6%
937
n.m.
38.2%
870
n.a.
n.m.
margin
%
34.3%
6.8% -6.1% -9.1% -3.1%
1.7%
7.9% 14.9%
Contribution1
TL mn
9
13
20
82
194
309
465
684
53.4% 101.8%
margin1
%
34.3%
8.7%
5.3% 13.6% 15.6% 17.8% 18.9% 19.8%
(1) Excluding Defacto.com at ramp-up stage Source: Company
→ DeFacto has targeted Europe in line with its vision of becoming
a global brand, as the next major step in its internationalization strategy
−
Turning Covid-19 pandemic into an opportunity, the Company leaned towards online channels thanks to its agile management and infrastructure
→ As part of this strategy, DeFacto has been forging strong relations with multiple marketplaces to create brand awareness, so as to enable easier market access when contemplating physical presence
→ DeFacto aims to expand presence built on marketplaces with own Defacto.com platform and subsequently flagship stores → DeFacto works with leading marketplaces in Europe such as
Zalando, Amazon and Aliexpress
→ Along with its first store in Berlin, DeFacto aims to become a brand of choice for tourists in selected cities across Europe − New entries into Developed markets; Germany will be
followed by the UK, Austria and the Netherlands by 2022E
→ In line with DeFacto’s “more online, less physical” strategy,
Developed markets store sales are expected to stall at c.17% of sales, with a bounce in 2022E and 2023E on new store openings
→ Online sales in Developed markets through marketplaces are expected to constitute c.85% of Developed market sales → Gross profit margin is expected to normalize around 58-59% → Operational costs are expected to decline along with
−
operational efficiencies gained through economies of scale Personnel and marketing expenses are projected to increase in 2022E, due to expanding physical presence and heavier advertising spending to generate brand awareness → Contribution margin1, which increases with scaling operations
in 2022E, is projected to climb up to c.20%
IFC |
Overview of store operations
Turkey operations
Developing markets
Developed markets
Others
64
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
# of effective stores
#
Effective net selling space
sqm k
Sales per sqm
TL/sqm
2
3
9
13
13
18
17
23
21
28
21,198 22,599 26,115 30,267 34,737
n.a.
2.3%
growth
%
-31.7%
6.6% 15.6% 15.9% 14.8%
Store net sales
TL mn
65
284
476
703
980
n.a. 230.1%
growth
Gross profit
margin
%
TL mn
%
n.m.
n.m.
67.2% 47.7% 39.5%
36
155
261
390
544
n.a. 193.4%
54.3% 54.6% 54.9% 55.5% 55.5%
Operational costs
TL mn
24
113
165
226
300
n.a. 369.9%
% of net sales
%
36.6% 39.6% 34.7% 32.2% 30.6%
Contribution
TL mn
12
43
96
164
244
n.a. 152.6%
margin
%
17.7% 15.0% 20.2% 23.3% 24.9%
→ DeFacto stepped into Europe by opening its first store in
Berlin, Germany, expected to be operational before end of the year 2021
−
The store is designed as a flagship store located at a prime location with high traffic to act as an attraction center to promote DeFacto brand
→ The Company aims to replicate this strategy across selected
cities in Europe with popular tourist attractions, to lift DeFacto brand recognition to a higher level
→ Following the launch in Germany, management aims to
expand DeFacto brand to other major European countries including the UK, the Netherlands and Austria
− DeFacto forecasts c.20 store openings over the next five-
year period
→ Gross profit margin in Developed market store operations is expected to be higher vs. Developing markets, due to higher priced products
− Delivery and return costs incorporated into prices are
typically higher compared to other markets
→ Contribution margin improves after 2023 with positive mix
effect of new flagship stores and scale impact
→ No pay-at-store assumed for Developed markets during the
projection period
Source: Company
IFC |
Overview of online operations
Turkey operations
Developing markets
Developed markets
Others
65
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
Online net sales1
TL mn
25
146
380
536
955
1,258
1,761
2,483 287.0% 45.6%
growth
Marketplace
Gross profit1
%
TL mn
TL mn
n.m. 159.2% 41.2% 78.0% 31.8% 39.9% 41.0%
25
12
146
87
380
235
536
314
955
1,258
1,761
2,483
n.m.
45.6%
557
733
1,024
1,442 339.2% 43.8%
margin
%
48.0% 59.7% 61.8% 58.5% 58.4% 58.3% 58.2% 58.1%
Operational costs1
TL mn
3
75
217
243
406
520
724
1,001 689.6% 35.8%
% of online sales
%
13.7% 51.0% 57.0% 45.4% 42.5% 41.4% 41.1% 40.3%
Contribution1
TL mn
9
13
18
70
151
213
301
441
44.2% 89.4%
margin
%
34.3%
8.7%
4.8% 13.1% 15.8% 16.9% 17.1% 17.8%
→ DeFacto pursues a multi-platform online strategy, enabling
easier access with limited initial investments, while establishing brand awareness as well as gaining valuable market insights and learning customer behavior
→ The Company first entered Germany with its strategic partner Zalando in 2020 via Partner Program to reach a wide and established fashion customer base
→ DeFacto expanded to 12 other markets in less than four months while ensuring a steady merchandise flow and increasing level of assortment depth (Please refer to Zalando case study on page 41 for further details)
→ The Company plans to increasingly incorporate new countries
as well as new marketplaces across countries
→ Gross profit margin1 expected to normalize in 2022E trends at
58% going forward
→ Improvement in contribution margin is mainly due to;
−
Profit-oriented strategy for Zalando, with merchandise portfolio optimized, keeping higher priced items in focus
CAGR
− UK warehouse becoming operational, with positive
ramifications in terms of logistics and distribution costs
Defacto.com
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
Net sales
Gross profit
margin
TL mn
TL mn
%
0
0
0
0
22
13
104
59
333
185
766
437
1,387
811
2,386
1,434
n.a. 154.2%
n.a. 156.3%
n.a.
62.9% 57.6% 56.1% 55.6% 57.0% 58.5% 60.1%
Operational cost
TL mn
0
3
58
% of net sales
Contribution
margin
%
TL mn
%
n.a.
n.m.
n.m.
0
n.a.
-3
n.m.
-45
n.m.
(1) Excluding Defacto.com at ramp-up stage Source: Company
205
n.m.
-146
427
n.m.
-242
702
969
1,248
n.a.
84.6%
91.7% 69.9% 52.3%
n.m. -72.9% -34.7% -11.4%
-266
-158
n.a.
-232.7%
186
7.8%
→ DeFacto also contemplates focusing on its Defacto.com
operations by investing heavily in branding and marketing. The Company expects to achieve ramp-up level by 2026E
→ The Company will focus on channeling a growing number of
customers from marketplaces to its own Defacto.com platform, with a view to creating a loyal customer base, and achieving significant scale to help it attain ramp-up stage
IFC |
Others
Turkey operations
Developing markets
Developed markets
Others
66
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
Others net sales
TL mn
267
254
388
700
931
1,327
1,902
2,651
20.5% 46.9%
growth
%
-5.1% 52.8% 80.5% 33.0% 42.5% 43.3% 39.4%
Wholesale
TL mn
128
140
165
204
239
279
326
380
13.4% 18.2%
growth
%
9.7% 17.2% 23.8% 17.1% 17.0% 16.8% 16.6%
→ Others include sales excluding store sales and online; i.e.
Wholesale, Franchise and Ozon sales to 3rd parties
→ Others’ share in total sales is forecast to pick up from c.5% of
total sales in 2021B to c.7% in 2026E
→ Wholesale channel, which represents DeFacto’s sales to local department stores in Turkey, is expected to trend at c.1% of total sales going forward
Franchise
TL mn
99
69
115
264
374
618
1,008
1,533
8.1% 67.8%
→ The Company leverages franchises as a strategic tool in
growth
%
-29.7% 66.3% 129.2% 41.5% 65.1% 63.2% 52.1%
Ozon
TL mn
41
44
108
232
319
430
568
738
62.8% 46.9%
growth
%
8.1% 145.2% 115.0% 37.3% 35.0% 32.0% 30.0%
selected international markets, where local expertise entails significant advantages. Franchising acts as an additional mechanism to drum up growth, helping DeFacto in its bid to expand its presence globally
−
Franchising also allows the Company to expand with limited financial, operational risk and CAPEX
Gross profit
TL mn
81
82
94
186
255
368
535
756
8.0% 51.7%
→ Franchise sales, which stand at c.2% of total sales in 2021B,
margin
%
30.1% 32.1% 24.2% 26.6% 27.4% 27.8% 28.1% 28.5%
Operational costs
TL mn
7
4
5
11
15
21
29
39 -19.7% 51.8%
% of net sales
%
2.8%
1.4%
1.2%
1.6%
1.6%
1.6%
1.5%
1.5%
Personnel expenses Marketing expenses Operational expenses
TL mn
TL mn
TL mn
3
3
1
3
0
1
3
0
1
7
0
4
9
0
6
13
0
8
17
0
11
23
0.2% 45.8%
0 -93.7% 42.2%
16
-1.6% 63.9%
Contribution
TL mn
73
78
89
175
241
348
507
718
10.5% 51.7%
margin
%
27.3% 30.7% 23.0% 25.0% 25.8% 26.2% 26.6% 27.1%
Source: Company
are expected to gradually increase to c.4% in 2026E
→ The figures presented on the left for Ozon represent Ozon
sales to 3rd parties and account for c.1% of total sales in 2021B
− Ozon sales are forecasted as stable over the next five years
− Ozon exports predominantly to European retailers, such as
C&A and Primark
→ Gross profit margin is estimated to increase from 24.2% in
2021B to 28.5% in 2026E, due to the mix effect
→ A modest improvement in contribution margin is projected within the forecast period, along with growing operational efficiency and mix effect
IFC |
Central costs
67
CAGR
Remarks
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
19-21
21-26
Total central costs
TL mn
359
360
615
1,116
1,558
2,092
2,713
3,379
30.8% 40.6%
% of net sales
% of net sales exc. marketing exp. Personnel expenses
%
%
7.9%
8.5%
8.4%
8.5%
8.5%
8.7%
8.7%
8.6%
7.1%
7.7%
7.5%
7.3%
6.7%
6.5%
6.3%
6.2%
TL mn
216
207
374
669
900
1,136
1,443
1,782
31.8% 36.6%
% of net sales
%
4.7%
4.9%
5.1%
5.1%
4.9%
4.7%
4.6%
4.5%
Building expenses
TL mn
16
17
24
35
46
55
66
75
24.3% 25.6%
% of net sales
%
0.3%
0.4%
0.3%
0.3%
0.3%
0.2%
0.2%
0.2%
Marketing expenses
TL mn
36
34
63
163
329
539
749
946
32.5% 71.8%
% of net sales
%
0.8%
0.8%
0.9%
1.3%
1.8%
2.2%
2.4%
2.4%
Operational expenses
TL mn
73
67
112
193
219
289
375
473
23.8% 33.3%
% of net sales
%
1.6%
1.6%
1.5%
1.5%
1.2%
1.2%
1.2%
1.2%
Ozon opex
TL mn
19
34
41
55
64
72
81
103
47.4% 19.9%
→ All HQ-related costs are followed within central costs, where
share in net sales is forecasted at around 8.5%
→ Central costs excluding marketing expenses, which stood at 7.1% of net sales in 2019, saw Covid-19 related increases in 2020 and 2021B. Those are expected to gradually decrease to 6.2% of net sales by 2026E due to increasing net sales, operational efficiencies and economies of scale
→ The Company is planning to invest heavily in marketing to build brand awareness across geographies during 2022E2026E; especially in new countries
− Marketing expenses include advertising costs, digital advertising, marketing research expenses and agency service expenses
− Marketing expenses over net sales is estimated to settle at around 2-2.5% in the long-term when DeFacto reaches saturation in terms of global footprint
→ Other than marketing expenses, central costs mainly consist of personnel, building, operating expenses and opex for Ozon
−
The largest item in central costs, personnel expenses, include HQ and warehouse staff which is estimated to decrease to 4.5% of net sales in 2026E, from 5.1% as of 2021B
% of net sales
%
0.4%
0.8%
0.6%
0.4%
0.4%
0.3%
0.3%
0.3%
−
Building expenses comprise HQ’s rental expenses
− Operational expenses consist mainly of licence fees, outsourced services, domestic & overseas travelling, vehicles expenses, cleaning, security expenses, mail, shipping cost, communication and utility expenses
-
This item is estimated to decrease to 1.2% of net sales in 2026E, from 1.5% as of 2021B
− Ozon opex includes Ozon’s 3rd party sales related
operational expenses
Source: Company
IFC |
Net working capital (“NWC”)
68
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
Remarks
Trade receivables
TL mn
94
152
321
528
798
1,129
1,565
2,103
Inventory
TL mn
964
1,291
2,008
2,873
3,685
4,640
5,781
7,004
Trade payables
TL mn
815
1,210
1,620
3,062
4,319
5,748
7,530
9,600
Trade working capital
TL mn
243
234
709
339
165
20
-184
-493
share of net sales
%
5.3%
5.5%
9.7%
2.6%
0.9%
0.1% -0.6% -1.2%
Other current assets
TL mn
210
282
446
794
1,111
1,463
1,897
2,396
Other current liabilities Other working capital
TL mn
142
159
231
410
574
756
981
1,238
TL mn
68
123
216
384
537
707
917
1,157
Net working capital
TL mn
311
357
925
723
702
726
733
665
share of net sales
%
6.8%
8.4% 12.6%
5.5%
3.8%
3.0%
2.3%
1.7%
→ The Company’s NWC ratio of 6.8% in 2019 deteriorating to 12.5% in 2021 is
estimated to gradually improve to around 2% of net sales by 2026E
→ Collection period of around 6 days increased to 11-14 days partially due to Covid-19 pandemic and partially due to increasing share of online sales / marketplace sales
→ Collection period is estimated to slightly decrease to 12.5 days in 2022, mainly eliminating Covid-19 impacts which is estimated to gradually increase to 16.5 days by 2026E mainly on the back of increase share of online sales in overall DeFacto sales
→ Inventory turnover of 145 days in 2019 increased to around 200 days due to
Covid-19. Inventory turnover is estimated to reach its 2019 levels in 2023 and further improve over years and reach to 130 days by 2026 mainly driven by SKU optimization and technological investments to better inventory management as well as eliminating stock outs
→ For payment terms, the Company foresees an improvement of c.15 days over the projection period mainly due to its ongoing supplier optimization strategy and increasing scale
Trade receivables
days
6
11
14
13
14
15
16
17
Inventory
days
145
207
198
155
145
140
135
130
Trade payables
days
104
164
135
140
144
147
149
151
Cash conversion cycle
days
47
54
76
28
15
8
2
-5
Source: Company
IFC |
Capital expenditures (“CAPEX”) and Net debt
69
CAPEX
Unit
2019A 2020A 2021B 2022E
2023E
2024E
2025E
2026E
Remarks
New store openings
Turkey
Developing markets Developed markets
Store
New
Renewal
Online
Warehouse
Others
CAPEX
#
#
#
#
0
0
0
37
11
21
5
29
5
19
5
28
5
19
4
21
5
12
4
21
5
12
4
CAPEX
→ Main CAPEX items for DeFacto are (i) store CAPEX, (ii) CAPEX spent for online
activities, (iii) CAPEX for warehouse and (iv) other CAPEX
→ Store CAPEX includes CAPEX for new stores, as per new openings during the
business plan period in Turkey, Developing markets and Developed markets; as well as renewal and maintenance CAPEX for existing stores
TL mn
116
93
150
395
488
625
851
1,028
→ Online CAPEX is key to ensuring robust growth at DeFacto’s online operations
286
348
440
434
574
109
140
186
416
454
across regions. Considering the existing well-invested nature of the technology investments of DeFacto and its alliances with 3rd party service providers, Online CAPEX is estimated at c.0.3% of Online net sales in 2022E, edging back to 0.1% as of 2026E
11
14
18
24
→ Warehouse CAPEX includes CAPEX of warehouse-related requirements of
TL mn
TL mn
TL mn
TL mn
5
4
6
2
9
6
TL mn
16
16
16
8
60
73
100
150
250
350
110
120
31
20
DeFacto to ensure seamless supply chain systems for the operations, both for store network and for online operations including Defacto.com and marketplace globally
→ Other CAPEX, which is forecasted to enhance the business plan in terms of
store experience and operational excellence, is estimated to be around 0.2% of net sales in 2021B, goes up to 0.5%-0.6% in 2022E-2024E. For the remaining years, it is estimated to be around 0.1% of net sales
→ Terminal CAPEX of 2% once projection period CAPEX is completed enabling the
projected expansion and growth
Net debt
→ Financial debt summary presented on the left excludes IFRS 16 effect
→ c.55% of the financial debt is short-term (including short-term portion of the
long-term debt) and the rest is long-term
→ Estimated cash balance of c.TL 2 bn as of year end 2021B
TL mn
141
116
181
535
708
910
1,150
1,421
share of net sales
%
3.1%
2.8%
2.5%
4.1%
3.9%
3.8%
3.7%
3.6%
Financial debt (mn)
TL
EUR
USD
KZT
MAD
Source: Company
2021B
972
91
104
2,100
29
IFC |
V. Appendix
IFC |
Store closures due to Covid-19
71
DeFacto proved resilient in both 2020 and 2021, despite challenges posed by forced store closures due to Covid-19 in many operating markets
Region / Country1
Turkey
Developing markets
A N E M
s r e h t O & S I C
Egypt
Morocco
North Iraq
South Iraq
Albania
Belarus
Bosnia
Bulgaria
Georgia
Kazakhstan
Malaysia
Moldova
Romania
Russia
Serbia
Ukraine
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Q3 2021
13.0%
9.4%
5.4%
13.4%
19.2%
20.5%
21.2%
0.3%
17.6%
n.a.
12.1%
7.7%
11.5%
12.5%
5.9%
2.9%
12.4%
3.8%
47.3%
44.3%
15.3%
15.3%
35.6%
79.3%
45.9%
0.3%
50.0%
0.0%
57.5%
54.7%
29.4%
54.2%
27.5%
56.3%
32.1%
13.4%
0.1%
13.4%
0.0%
0.9%
6.4%
25.5%
0.0%
0.6%
0.5%
0.0%
0.5%
56.8%
0.0%
0.0%
0.0%
2.9%
0.0%
0.0%
7.9%
4.1%
0.2%
0.0%
0.0%
0.9%
0.0%
0.1%
0.5%
37.0%
20.2%
14.3%
3.0%
0.0%
4.3%
0.0%
4.9%
2.5%
21.6%
33.1%
7.4%
0.0%
0.0%
2.2%
24.1%
1.1%
0.6%
4.4%
45.6%
31.0%
9.5%
31.1%
3.3%
0.7%
0.3%
11.7%
12.2%
4.3%
0.0%
1.1%
2.1%
9.3%
0.0%
0.2%
1.1%
16.5%
0.0%
7.4%
35.2%
0.4%
0.7%
0.0%
3.8%
12.2%
0.1%
3.9%
0.0%
1.1%
0.7%
1.6%
1.1%
0.0%
0.5%
0.0%
0.0%
13.0%
50.5%
0.0%
0.0%
0.6%
0.0%
0.0%
(1) Countries penetrated in 2021 are excluded for analysis purposes Source: Company
Ratio of non-operational days of stores due to Covid-19 per country
≤1%
≤20%
≤50%
>50%
IFC |
Income statement 2019-2020 from IFRS audit report and rest as per Management accounts
(TL mn)
2019A
2020A
2021B
2022E
2023E
2024E
2025E
2026E
7,344 3,712 3,632 49.5% 562 678 123 664 2,028 1,604 21.8% 374 24 63 112 41 615 25 1,014 13.8% 256 - - 758 10.3%
13,067 6,766 6,301 48.2% 969 1,079 303 1,059 3,411 2,890 22.1% 669 35 163 193 55 1,116 25 1,799 13.8% 309 - - 1,490 11.4%
18,288 9,277 9,011 49.3% 1,329 1,361 603 1,660 4,952 4,060 22.2% 900 46 329 219 64 1,558 30 2,531 13.8% 380 - - 2,151 11.8%
24,076 12,096 11,980 49.8% 1,744 1,532 971 2,304 6,550 5,430 22.6% 1,136 55 539 289 72 2,092 36 3,373 14.0% 471 - - 2,903 12.1%
31,223 15,631 15,592 49.9% 2,227 1,732 1,281 3,175 8,414 7,178 23.0% 1,443 66 749 375 81 2,713 43 4,507 14.4% 568 - - 3,939 12.6%
39,429 19,666 19,763 50.1% 2,804 1,905 1,683 4,065 10,458 9,306 23.6% 1,782 75 946 473 103 3,379 51 5,978 15.2% 710 - - 5,267 13.4%
Net sales COGS Gross Profit ex. DA % of net sales Personnel expenses Building expenses Marketing expenses Operational expenses Total operational costs Contribution
% of net sales Personnel expenses Building expenses Marketing expenses Operational expenses Ozon opex Total central costs Other income (Turquality) EBITDA
EBITDA margin Depreciation expenses Other income Other expense EBIT
EBIT margin
Total financial income/(expense) Other financial income/(expense) PBT Tax expense/(income) Net income
Net income margin
EBITDA - IFRS 16
EBITDA margin
Source: Company, Deloitte IFRS audit report
4,564 2,424 2,140 46.9% 394 502 27 213 1,135 1,005 22.0% 216 16 36 73 19 359 9 655 14.3% 144 12 38 484 10.6% (362) 7 129 34 95 2.1% 1,051 23.0%
1
2
3
4
5
4,223 2,278 1,944 46.0% 345 438 40 356 1,180 765 18.1% 207 17 34 67 34 360 30 434 10.3% 161 4 18 260 6.2% (306) 109 63 15 48 1.1% 778 18.4%
72
CAGR 19-21 26.8%
CAGR 21-26 40.0%
30.3%
40.3%
26.3%
42.1%
24.4%
42.6%
IFC |
Convenience conversion of Income statement in US Dollars1 2019-2020 from IFRS audit report and rest as per Management accounts
(USD mn)
2019A
2020A
2021B
2022E
2023E
2024E
2025E
2026E
825 417 408 49.5% 63 76 14 75 228 180 21.8% 42 3 7 13 5 69 3 114 13.8% 29 - - 85 10.3%
906 469 437 48.2% 67 75 21 73 237 200 22.1% 46 2 11 13 4 77 2 125 13.8% 21 - - 103 11.4%
1,131 574 557 49.3% 82 84 37 103 306 251 22.2% 56 3 20 14 4 96 2 157 13.8% 24 - - 133 11.8%
1,295 650 644 49.8% 94 82 52 124 352 292 22.6% 61 3 29 16 4 113 2 181 14.0% 25 - - 156 12.1%
1,460 731 729 49.9% 104 81 60 148 393 336 23.0% 67 3 35 18 4 127 2 211 14.4% 27 - - 184 12.6%
1,603 800 804 50.1% 114 77 68 165 425 378 23.6% 72 3 38 19 4 137 2 243 15.2% 29 - - 214 13.4%
Net sales COGS Gross Profit ex. DA % of net sales Personnel expenses Building expenses Marketing expenses Operational expenses Total operational costs Contribution
% of net sales Personnel expenses Building expenses Marketing expenses Operational expenses Ozon opex Total central costs Other income (Turquality) EBITDA
EBITDA margin Depreciation expenses Other income Other expense EBIT
EBIT margin
Total financial income/(expense) Other financial income/(expense) PBT Tax expense/(income) Net income
Net income margin
EBITDA - IFRS 16
EBITDA margin
804 427 377 46.9% 69 88 5 37 200 177 22.0% 38 3 6 13 3 63 2 115 14.3% 25 2 7 85 10.6% (64) 1 23 6 17 2.1% 185 23.0%
602 325 277 46.0% 49 62 6 51 168 109 18.1% 30 2 5 10 5 51 4 62 10.3% 23 1 3 37 6.2% (44) 16 9 2 7 1.1% 111 18.4%
(1) Income statement converted to USD (for convenience purposes) using the USD/TL averages (as provided on page 54) for each corresponding year Source: Company
73
CAGR 19-21 1.3%
CAGR 21-26 14.2%
4.0%
14.5%
0.9%
16.0%
-0.6%
16.4%
IFC |
Balance sheet in TL as reported and in USD1 converted for convenience 2019-2020 from IFRS audit report and rest as per Management accounts
74
(TL mn)
Cash and cash equivalents
Trade receivables
Inventory
Other current assets
Others
Short term assets
Tangible assets
Intangible assets
Other non-current assets
Long term assets
Total assets
Short-term borrowings
Trade payables
Other current liabilities
Others
Short term liabilities
Long-term borrowings
Other non-current liabilities
Long term liabilities
Total liabilities
Paid in capital
6
7
8
7
Reserves, share prem., reval. of FA
Retained earnings
Net income/loss for the period
Equity
Total liabilities & SH equity
IFRS 16 impact to liabilities
5
2019A
2020A
(USD mn)
2019A
2020A
623
94
964
210
23
1,914
767
53
74
894
2,808
785
815
142
18
1,760
723
15
738
2,498
213
(143)
145
95
309
2,808
1,482
922
152
1,291
282
106
2,753
1,004
72
98
1,174
3,927
1,280
1,210
159
11
2,660
856
71
928
3,587
213
(131)
211
48
340
3,927
1,631
Cash and cash equivalents
Trade receivables
Inventory
Other current assets
Others
Short term assets
Tangible assets
Intangible assets
Other non-current assets
Long term assets
Total assets
Short-term borrowings
Trade payables
Other current liabilities
Others
Short term liabilities
Long-term borrowings
Other non-current liabilities
Long term liabilities
Total liabilities
Paid in capital
Reserves, share prem., reval. of FA
Retained earnings
Net income/loss for the period
Currency translation adjustment
Equity
Total liabilities & SH equity
105
16
162
35
4
322
129
9
12
150
472
132
137
24
3
296
122
2
124
420
36
(24)
24
17
(1)
52
472
126
21
176
38
14
375
137
10
13
160
535
174
165
22
1
362
117
10
126
488
29
(18)
29
7
(0)
46
535
(1) Balance sheet converted to USD (for convenience purposes) using the USD/TL year-end figures (as provided on page 54) for each corresponding year Source: Company, Deloitte IFRS audit report
IFC |
Additional notes for Income statement and Balance sheet
75
1
2
3
4
5
6
7
8
Some merchandise costs are recorded under COGS in Management accounts as they are directly related to COGS (Recorded under OPEX in IFRS accounts; TL 16.1 mn in 2019, TL 22.5 mn in 2020)
Other income, which has non-recurring nature, comprises gain on sale of property and equipment, insurance reimbursements and some other smaller items Other expense, which has non-recurring nature, consists of loss on sale of property and equipment, some provision expenses, other taxes and duties
Interest income on installment
Interest expense on credit purchases
Bank commissons
Interest income/(expense) & FX gain/(loss), net
Total financial income/(expense)
Unit
TL mn
TL mn
TL mn
TL mn
TL mn
2019A
32
-75
-70
-250
-362
2020A
11
-36
-56
-225
-306
Other financial income includes net gain on unrealized firm commitments, net gain on financial instruments at fair value through profit or loss, effective interest income on financial assets and liabilities other than bank borrowings and revaluation of fixed assets
IFRS 16 impact on EBITDA
Reported EBITDA exc. IFRS 16 IFRS 16 impact Cost of sales S&M exc. D&A G&A exc. D&A
Reported EBITDA with IFRS 16
Unit
TL mn TL mn TL mn TL mn TL mn TL mn
2019A
2020A
IFRS 16 impact on total debt
655 396 1 383 12 1,051
434 344 - 332 12 778
Loans and financial liabilities exc. IFRS 16 impact
LT loans and borrowings LT lease liabilities ST loans and borrowings ST lease liabilities
Loans and financial liabilities with IFRS 16 impact
Unit
TL mn TL mn TL mn TL mn TL mn TL mn
2019A
2020A
1,508 - 1,305 -1 178 2,990
2,136 - 1,370 -5 265 3,767
Other current assets comprise primally prepayments related to rent, insurance and advances given to suppliers; VAT receivables, receivable from Turquality program, current tax asset, advances given to personnel, job advances, deposits and guarantees given
Others consist of derivative financial asset and liabilities such as cross currency swaps and forward exchange contracts on both sides of the balance sheet
Other current liabilities predominantly comprise employee benefits, expense accruals, payable to employees and social security premiums payable
Source: Company, Deloitte IFRS audit report
IFC |
Disclaimer
76
Information, opinions and projections in this document have been compiled or arrived at by ÜNLÜ Yatırım Holding A.Ş. (“ÜNLÜ & Co”) from the data provided by the Company and its shareholder, and publicly available information, without our own separate verification. The Company and its shareholder have been consulted about and have confirmed the appropriateness of the basic principles and assumptions used by ÜNLÜ & Co to perform the analyses / projections.
However, no representation or warranty, expressed or implied, is made as to the accuracy or completeness of the information contained in this document. It should be noted that we have not sought independent verification of the information. This document is not to be relied upon as authoritative or taken in substitution for the exercise of judgment by the Recipient and ÜNLÜ & Co accepts no liability whatsoever for any direct or consequential loss arising from the use of this document or its contents. This document and the opinions, projections and conclusions contained in this document are for the exclusive use of the Recipient and its officers and employees. Distribution or disclosure thereof to any parties is subject to the prior written permission of ÜNLÜ & Co. The information, comments and opinions contained in this document fall outside of the scope of Turkish Capital Markets legislation and do not include a personal recommendation. This document does not include a personal recommendation and does not constitute an offer, or the solicitation of an offer for the sale or purchase of any financial product, service, investment or security.
All communications, inquiries and/or requests relating to this document and/or the possible process contemplated should only be addressed to ÜNLÜ & Co.
For further information please contact:
İbrahim Romano Head of Investment Banking ibrahim.romano@unluco.com +90 (533) 960 0122
Simge Ündüz Managing Director simge.unduz@unluco.com +90 (533) 283 8113
Zeynep Koçak Director zeynep.kocak@unluco.com +90 (532) 242 5378
Can Ölger Vice President can.olger@unluco.com +90 (536) 209 5566
IFC |
Project Knight Confidential Information Memorandum February 2022
Strictly private and confidential
Türk Tuborg |
Table of contents
Section
I
II
III
IV
Executive summary
Key investment highlights
Business overview
Financial overview
1
Page
2
9
27
44
Türk Tuborg |
I. Executive summary
Türk Tuborg |
3
4 main categories
Garbage bags
Storage products
Cooking products
Cleaning products
Executive summary The leading kitchen consumables company in Turkey
Company overview
→ Established 40 years ago, Koroplast (the “Company”) is the undisputed leader of Turkish kitchen consumables (“KC”) market with a 47% market share1, drawing on a rich brand heritage, an extensive distribution network, and a diverse portfolio of innovative, premium quality products
−
Turkish kitchen consumables, a high-growth and underpenetrated sub-segment of FMCG market, generated 39% CAGR in value through 2017 – 2020
→ The Company offers a wide portfolio of garbage bags, storage products, cooking products and the
newly launched cleaning products, addressing everyday household needs
→ Being the first company to introduce garbage and freezer bags to Turkish consumers in the 1980’s,
Koroplast is acknowledged as a market-leading innovator and trendsetter in KC market
Product portfolio overview
Reputable brands
Main brand
100+ SKUs
−
Koroplast has introduced a number of innovative solutions to the market, such as odor-block technology, fresh keeping storage bags, and scented garbage bags
− Alongside an exemplary commitment to environmental sustainability, the Company also sets the
Tactical brand İdeal
bar high with powerful social awareness campaigns
→ In addition to its main brand “Koroplast” and sub-brand targeting price sensitive consumers “Ideal”,
the Company also serves discounters and retailers with private label (“PL”) production
Key figures (TL mn)
− Branded product sales account for c.85% of net sales in 2022B
−
Koroplast is the sole brand with continuous listing in discount stores
→ The Company sells its products through national chains, local chains, discount stores, traditional
stores and out-of-home markets, reaching more than c.69k sales points nationwide
−
Koroplast recently started to offer its products in fast-growing online groceries
→ Additionally, exports, mainly to Europe, account for 6% of net sales. Expansion to export markets is
reserved as an important upside going forward
→ Located in Istanbul and dedicated exclusively to Koroplast products, the production facility has
c.15.5k tons of extrusion and c.2.6k tons of wrapping capacity
−
Fully integrated production process enables in-house production of main products, namely, garbage, fridge and freezer bags, providing cost competitiveness
→ Koroplast has delivered a solid financial performance through 2018-2022B, with 46% and 51% CAGR
in sales and EBITDA, respectively
→ The Company budgets TL 730 mn in revenue for 2022B, with an EBITDA margin of 25% → Koroplast has 313 employees2 with an average tenure of 6.6 years
22.1%
23.8%
25.6%
25.9%
24.8%
26.9%
+24%
1,705
+46%
730
159
35
200
48
410
281
72
106
181
458
2018
2019
2020
2021
2022B
2026F
CAGR
Net sales
EBITDA
EBITDA margin (%)
(1) 2020 revenue market share excluding discount markets. Nielsen Kitchen Consumables Reports include garbage bags, storage bags, baking sheets, oven bags, ice bags, microwave bags (2) As of February 2022 Source: Koroplast, Nielsen market intelligence, PwC Financial VDD report
Türk Tuborg |
Executive summary Leadership journey: Innovation at the heart of Koroplast brand DNA
4
Korozo Group established
Koroplast brand introduced
First to produce freezer bags and garbage bags in Turkey
Introduced cling wrap, aluminum foil and zip-lock freezer bags
First to produce recyclable garbage bags in Turkey
First biodegradable garbage bag
Introduced the first microwave cooking bag in Turkey
1973
1981
1997
2004
2004
2009
2014
2015
2017
2018
2019
2020
2021
Continued profitable growth & innovation
Introduced zipper and double zipper bags
Participated in Turkish Waste Management Committee
Parent group Korozo acquired by Actera, a leading PE fund in Turkey
Kidzania Recycling and Waste Management Project
Source: Koroplast
Trashtag Turkey campaign
Launched cleaning category in the last quarter of 2020
Türk Tuborg |
Executive summary Wide range of product offerings under 4 main categories
5
Garbage bags
42.3%
Storage products
33.4%
Cooking products
15.5%
Cleaning products
6.2%
→ Market leader with c.42% market share1 in Turkey
→ Market leader with c.55% market share1 in Turkey
→ Market leader with c.49% market share1 in Turkey
→ New product category, introduced in 2020
→ Significant room for further growth in local market
→ New and Growing: Benefits from the brand power of other categories
Branded
70%
PL
30%
Branded
96%
PL
4%
Branded
89%
PL
11%
Branded
100%
Offers a variety of top-quality…
Offers freezer bags, storage bags…
Offers cooking bags and cooking paper
Offers microfiber & nonwoven cleaning cloths and dish sponges
… and innovative garbage bags
… and aluminum foil, cling film, zipper bags
Overview
Brands
Product portfolio
+40%
Net sales2 (TL mn)
81
97
119 190
+24%
730
309
+48%
51
61
131
86
+21%
515
244
+53%
+27%
297
113
+27%
118
45
21
23
42
52
7
13
2018
2019
2020 2021 2022B
2026F
2018
2019
2020
2021
2022B
2026F
2018
2019 2020
2021
2022B
2026F
2018
2019 2020
2021
2022B 2026F
% of 2022B Net sales2
% of 2022B Branded and PL in respective category Net sales
CAGR
New category
(1) 2020 revenue market share excluding discount markets. Nielsen Kitchen Consumables Reports include garbage bags, storage bags, baking sheets, oven bags, ice bags, microwave bags (2) Basket products sales (bundled promotional items) and other sales (scrap, raw material and semi-finished goods sales) are not shown on this page; i.e. 2.6% of Net sales in 2022B Source: Koroplast, PwC Financial VDD report, Nielsen market intelligence
Türk Tuborg |
Executive summary Well-established sales network with strong nationwide coverage
6
Retailers
32.7%
Distributors
42.3%
Discounters
14.6%
Out-of-home
3.3%
Export
6.1%
Overview
→ Koroplast’s main
channel. Established relationships with prominent national chains over the years
→ Growing sales from online retailers
→ Accessing local chains and traditional shops (e.g. grocery stores, mom-and-pop shops, etc.) through 45 distributors in 6 regions, ensuring wide coverage and accessibility
→ Established presence in major discounters through Koroplast as well as PL products
→ Working with large wholesalers selling Koroplast products to major Horeca chains and other institutions such as municipalities
→ Sale of branded and PL
products to 11 countries, mainly in Europe
Branded
77%
PL
23%
Branded
100%
Branded
80%
PL
20%
Branded
100%
Branded
14%
PL
86%
Key clients
National chains
Cash & carry
Online retailers
Local chains and traditional shops
Through 45 distributors in 6 regions
Discounters
Horeca
Major distributors
Corporate
+49%
Net sales1 (TL mn)
49
66
85 133
+23%
550
239
+47%
+22%
694
309
164
66
74
97
+59%
+28%
288
106
60
52
17
23
+11%
16
12
12
8
+24%
57
24
+29%
+23%
104
45
33
16
17
17
2018
2019
2020 2021
2022B
2026F
2018 2019
2020
2021 2022B
2026F
2018
2019
2020 2021
2022B
2026F
2018 2019
2020
2021
2022B
2026F
2018
2019
2020
2021
2022B
2026F
% of 2022B Net sales
CAGR
% of 2022B Branded and PL in respective channel Net sales
Historically, Koroplast did not focus on growth in out-of-home and export markets as a business strategy
(1) Other sales are not shown on this page Source: Koroplast, PwC Financial VDD report
Türk Tuborg |
Executive summary Key pillars differentiating Koroplast
7
Sustainable market leadership position ensured by purpose-led brand and rooted management culture
Leading market position
Purpose-led brand
Rooted management culture
Highest market share1 in all key categories, beating its closest competitor
Garbage bags
Storage products
Cooking products
15%
42%
16%
55%
20%
49%
Comp.1
Koroplast
Comp.1
Koroplast
Comp.1
Koroplast
Has access to largest points of sale to consumers with extensive physical availability
95%
Covers c.95% of points of sale of organized retail universe2, reaching more than 36k points
60%
Dominates physical shelf space in national chains with 60% shelf space share
Agile responsiveness
FMCG-oriented mindset
Trend-driven portfolio, swiftly responding to changing customer needs
Innovation skills complemented by strong marketing capabilities
Impactful innovation
Committed to improving people’s wellbeing and creating quality time
A strong and responsible brand
Actively engaged in addressing today’s most urgent and deepseated social and environmental challenges
Consumer first approach
Spearheading a culture of listening to and acting on feedback from consumers and building a community
Brand-focused company culture Utilizing the power of employees to drive continuous brand improvement
(1) 2020 revenue market share. Nielsen Kitchen Consumables Reports include garbage bags, storage bags, baking sheets, oven bags, ice bags, microwave bags (2) Includes national chains, local chains and discount stores, c.38k points Source: Koroplast
Türk Tuborg |
Executive summary Transaction overview
8
Transaction scope
Envisaged transaction timeline
→ Project Knight refers to the contemplated sale of 100% stake in Koroplast
Phase I
Phase II
(the “Proposed Transaction”)
→ Koroplast is a wholly-owned subsidiary of Korozo, leading flexible packaging group in Turkey. Korozo is considering a potential divestment of Koroplast, with a view to strengthening its presence in flexible packaging in Europe
→ Koroplast represents a unique opportunity for potential investors with its leading market position, pioneer brand image, premium product quality and further growth potential
→ Korozo has appointed ÜNLÜ & Co to act as the exclusive financial advisor in
the Proposed Transaction
→ Korozo Group consolidated all of its KC operations under Koroplast between 2017-2019, and transformed Koroplast into an operationally stand-alone company
NDA
IM distribution
Limited Q&A
Nonbinding offers
Initiation of due diligence
Binding bids
Signing
Phase I details
→ Distribution of the IM
→ Limited Q&A process for key questions and clarification requests
→ Selected potential investors will be granted access to a virtual dataroom
Shareholding structure
Phase II details
Korozo
100%
Koroplast
Shareholding
Source: Koroplast
→ Due diligence period for a limited number of selected potential investors
→ Virtual dataroom access along with Q&A process
→ Access to PwC Financial Vendor Due Diligence Report (“PwC Financial VDD Report”), covering years 2018-2020 and PwC Tax Vendor Due Diligence Report (“PwC Tax VDD Report”), covering years 2016-2020
→ Management presentations and site visits
→ Exact timetable for Phase II to be circulated in a separate process letter for
short-listed potential investors
Türk Tuborg |
II. Key investment highlights
Türk Tuborg |
Strategic positioning of Koroplast Key investment highlights
10
1
Sizeable and high-growth domestic market with ample growth prospects on attractive fundamentals
2
Undisputed market leader with solid market share, targeting continuous growth across categories with diversification strategy
3
Broad product portfolio catering to everyday household needs with deep-rooted innovation culture
4
Reputable and high-quality brand image cemented by growing customer awareness
Market leading producer of kitchen consumables in Turkey
5
Strong nationwide coverage and growing export base with multi-faceted go-to-market strategy
6
Largest production facility with vertical integration in key product lines
7
Competent professional management delivering solid financials with strong growth strategy and vision
8 Multiple untapped value enhancers beyond the business plan
Türk Tuborg |
1
Sizeable and high-growth domestic market…
11
Strong growth in Turkish KC market…
…offering further growth potential
Garbage bags
Garbage bag market size (mn pieces)
Garbage bag penetration
1,016
1,092
+26%
1,427
2,010
1.6x
50%
32%
80%
Target in the next five years
1.6x
2017 Storage products2
2018
2019
2020
2017
2020
2025
Storage category market size (mn pieces)
Storage category2 penetration
2,663
2,930
2,988
+11%
3,607
2017 Cooking products3
2018
2019
2020
60%
30%
2020
Seasonal buyers during the Eid alAdha bringing in significant volumes
57%
2020
Cooking category market size (mn pieces)
Cooking category3 penetration
+21%
33
34
47
2018
2019
2020
Turkey is relatively underpenetrated when compared with developed countries
43%
c.53%
2020
2020
27
2017 CAGR
Garbage bags category posted 26% CAGR, reaching 2,010 mn pieces in 2020
Retailers’ free distribution of plastic bags, which were used in lieu of garbage bags by consumers, was banned in 2019, contributing to the category’s growth
Turkish consumers have a lower repeat rate1 (c.3/4 of EU) and amount per purchase, implying significant growth potential
Storage category market size reached 3,607 mn pieces, growing steadily with 11% CAGR
Base penetration rate of frequent users stands at c.30%, while conversion of seasonal users will be a crucial driver
its
strong
growth,
Despite cooking category remains highly underpenetrated, with annual sales of 47 mn pieces (1.9 piece per household) in 2020
from Repeat rate, despite the increase 31% to 44% between 2017 and 2020, is still below EU benchmarks
(1) Percentage of households that purchase a product more than once in a year (2) Storage products data include only freezer bags (3) Cooking category data include cooking paper and oven bag data Source: Koroplast, Nielsen market intelligence (Market size data, provided by Nielsen, account for approximately 70% of the total market), IPSOS, Europanel
Türk Tuborg |
1
… with ample growth prospects on attractive fundamentals
12
Strong country fundamentals
Growth drivers
2020
CAGR
2030F
1
Increasing sizeable population
c.84 mn
c.1.2%
c.95 mn
2
3
4
5
Growing GDP (2020 GDP at current prices)
c.USD 650 bn
c.4.0%
c.USD 962 bn
Continuing urbanization (share in total population)
c.76%
c.80%
Declining average household size (# of people per household)
Expanding female workforce participation (share in females aged 15-65)
c.3.5
c.3.0
c.38%
c.40+%
(1) Inception year of the ban on free plastic bags in stores Source: Koroplast, IPSOS, Turkstat, World Bank, IMF, Fitch Ratings, European Commission, ÜNLÜ & Co estimates
Impact of free plastic bag ban
→ As of 2019, Turkey initiated a regulation
imposing charges on plastic bags, reflected to retail consumers
Plastic bag consumption per person, annually (unit)
420
20191
3.5x
120
2020
→ The decline in plastic bag usage in
shopping supported household garbage bag penetration Garbage bag penetration
45%
2019
5%
50%
2020
→ Plastic bag usage is expected to further
decrease to EU level
Plastic bag consumption per person, annually (unit)
120
2020
3.0x
40
2025
Türk Tuborg |
2
Undisputed market leader with solid market share…
13
Ownership
Established
Korozo
1981
Sedat Tahir
1984
Provel
2011
Sultanlar Grup
Gözde Girişim
1980’s
1993
e g a b r a G
e g a r o t S
g n i k o o C
Product categories
i
g n n a e C
l
42%
55%
49%
s g a b
s t c u d o r p
s t c u d o r p
s t c u d o r p
Shelf space share1
c.60%
c.20%
c.5-10%
<5%
<5%
3x market share
Koroplast’s superior market position over its closest competitor
Kitchen Consumables market share2
Extrusion Capacity
x% Kitchen Consumables market share2
47.3%
2020
15k tons
16.5%
2020
c.8k tons
8.7%
2020
5-6k tons
3.8%
2020
<2k tons3
3.1%
2020
<3k tons
(1) Shelf space in national chains (2) 2020 revenue market share excluding discount markets. Nielsen Kitchen Consumables Reports include garbage bags, storage bags, baking sheets, oven bags, ice bags, microwave bags (3) Mostly outsources its production Source: Koroplast, Nielsen market intelligence, company websites
Türk Tuborg |
2
… targeting continuous growth across categories with diversification strategy
14
Koroplast aims to grow its customer base through …
1
Growing market share by attracting new consumers and increasing penetration & frequency
2
Gaining share of wallet by introducing valueadded products
Source: Koroplast
Strategic guidance on competitive yet profitable pricing to regularly position Koroplast products as achievable for a wide customer base
Pricing strategy project with Simon Kucher, 2019
Continuous marketing activities across channels to increase penetration and frequency
Addressing a more diverse customer base through tactical brand and PL production, to increase profitable sales volume
Value-added and innovative product development strategy to accommodate diverse customer needs - Fresh keeping storage bags, scented and odor blocking garbage bags are recent examples of innovative products by Koroplast
Introducing new categories leveraging Koroplast’s brand image and quality
- Expanding presence in kitchen consumables aisle
with recently launched cleaning category
Private label production
Türk Tuborg |
3
Broad product portfolio catering to everyday household needs…
15
7.5
309
42%
1.8
113
16%
4.5
244
33%
44 SKUs
Garbage bags
9 SKUs
Cooking products
35 SKUs
13 SKUs
Storage products
Cleaning products
0.4
45
6%
Wide product portfolio with 100+ SKUs comprising top-quality products
Innovative products enriching the category
Becoming a cleaning expert, capitalizing on brand awareness and image
Environmentally friendly and sustainable product base
New category launched in Q4 2020
2022B Sales volume1 (k tons)
2022B Net sales (TL mn)
% of 2022B Net sales1
(1) Basket products sales (bundled promotional items) and other sales (scrap, raw material and semi-finished goods sales) are not shown on this page; i.e. 2.6% of Net sales in 2022B Source: Koroplast, PwC Financial VDD report
Türk Tuborg |
3 … with deep-rooted innovation culture
16
Leading brand with innovative product releases throughout the years
1980-90s
Early 2000s
Present
1981 First to produce garbage bags
1981 First to produce freezer bags
1997 Introduced zip-bags to the market
2008 First to release biodegradable garbage bag
2009 First to produce microwave bags
2014 Lemon scented garbage bags received best product of the year award
2017 Fresh keeping storage bags introduced to the market
2017 First to release odor blocking garbage bags
2021 and beyond Prospective new products: → Cleaning gloves → Antibacterial wipes → Single use food containers
Ability to develop new products with proven experience
Developing existing products with new features and technologies
Products tailored to consumer needs, yet to be released to the market
Source: Koroplast
Türk Tuborg |
Case Study: Koroplast’s successful new category strategy
17
Success of cleaning category is an example of how Koroplast can capitalize on its brand power in new categories
Key pillars
Positioning “Quality”
Pricing “Value for money”
Procurement “Supply security”
Marketing “Cares about the family”
Distribution “Visible and available”
Key considerations
→ Focus group study demonstrated strong affinity between Koroplast
and cleaning category consumers
→ Introduced cleaning clothes and sponges in Q4 2020
→ Planning to introduce additional products, e.g. cleaning mops in 2021
→ Competitive pricing at the beginning
→ Continuous monitoring including sales volume, market share,
competitors, etc.
→ Diversified supplier base with 5 main suppliers both in Turkey and
abroad to ensure supply security
→ Benefiting from Company’s existing brand heritage to build strong
branding in cleaning category
→ Dedicated advertisements in traditional and social media
→ Acquired shelf space to secure consumer reach
→ Secured availability in every national and local chain Koroplast
reaches
(1) 2020 December revenue market share excluding discount markets. Market data include sponges and cleaning cloths Source: Koroplast, Nielsen market intelligence, PwC Financial VDD report
Expanding category with products tailored to consumer needs
Increasing net sales through sustained expansion and growing presence
TL 13.3 mn
55%
TL 117.9 mn
2021
CAGR
2026F
Targeting market leadership in the next 2 years, capturing market share from the main competitor
6.2%
20201
15+%
2022F
Türk Tuborg |
4
Reputable and high-quality brand image…
18
Proven quality Trusted brand with high quality standards “Food safety is Koroplast’s ultimate priority”
Pioneer brand First to introduce kitchen consumable products to Turkish consumers in the 1980’s
Distinguished name for the category Leading brand with highest brand recognition and awareness scores
Innovation ingrained in brand DNA Functional and innovative products developed for diverse customer needs
High customer responsiveness Addressing customers needs with different brands and evolving product portfolio
Source: Koroplast
Türk Tuborg |
4
…cemented by growing customer awareness
19
Koroplast continues to improve its leading brand image among consumers and…
#1
Solid consumer perception scores (2020)
80%
99%
90%
88%
54%
7%
Comp.1
Koroplast
Comp.1
Koroplast
Koroplast
Top-of-mind awareness
Established brand with top recognition
High quality brand image
Koroplast
Trusted brand perception...stands out from close competitors with a well-established brand heritage
The first brand that comes to mind
Assisted brand awareness
80
74
85
99
6
7
Competitor 1
Competitor 2
Competitor 1
Competitor 2
Koroplast: The brand that introduced kitchen consumable products to Turkish consumers
Customer perceptions of Koroplast
“Truly a Pioneer”
“Innovative at heart”
“Makes life easier”
“Premium quality”
“Thinks green”
“Healthy”
Source: Koroplast, SOR research
Türk Tuborg |
Case study: Premium pricing strategy secured by brand equity and quality
20
Koroplast successfully reflected high quality and trusted brand image to its prices
Koroplast price index versus competitors based on average monthly prices
Garbage bags1
2020
100%
87%
83%
85%
74%
Freezer bags2
2020
100%
92%
72%
75%
51%
Cooking paper
2020
100%
96%
92%
72%
64%
(1) Regular medium-size garbage bag including 15 pieces, except for Sera and Piknik, packages of which contain 20 pieces each (2) 30 pieces Source: Koroplast, Nielsen market intelligence
Türk Tuborg |
5
Strong nationwide coverage and growing export base…
Retailers
4.9
239
33%
Distributors
In the domestic market
21
13.1
679
94%
5.6
309
42%
Long-tenured relationships with major retailers, reaching c.83% of national chains; strong consumption base
Has the highest visibility and availability, dominating physical shelf space with c.60% share in national chains
Multi-brand offering along with PL production to leading national chains, including Migros
Adaptation to emerging online channels: Partnering with top online groceries, expanding online presence
Extensive reach across Turkey via wide distributor network of 45 in 6 regions, accessing c.33k points
Reaches local chains through distributor channel
c.95% of distributors offer Koroplast products exclusively in kitchen consumables category
Out-of-home
0.7
24
3%
Discounters
1.9
106
15%
Diverse set of clients
Works with large restaurant chains
Strategic partner for discounters: Offers both branded and PL products to top 2 leading discounters in Turkey
Participates in tender processes of sizeable municipalities
Only premium brand listed continuously on discounter shelves
Maintains selective customer portfolio with profit-oriented mindset
Aims to increase share of branded sales in discounters
Utilizes distributor network to reach international customers
Storage products and garbage bags focused sales
Exports to 11 countries, mainly in Europe
In export markets
1.4
45
6%
2022B Sales volume (k tons)
2022B Net sales (TL mn)
2022B Share in Net sales (%)
Source: Koroplast, PwC Financial VDD report
Türk Tuborg |
5 … with multi-faceted go-to-market strategy
22
Koroplast can address diverse customer categories with different go-to-market strategies through branded and private label sales
Branded sales championed by Koroplast
83.2%
Strong PL business connections with major retailers/discounters
15.8%
47%
Market leader brand with premium positioning
Tactical brand offering value for money with high quality
Strategic and trusted business partner of the largest national chain in Turkey, Migros, as well as largest discounters A101 and BİM since their establishment
Positioning
Categories
✓ Well-known kitchen
consumables brand in Turkey
✓ High product quality compared to pricing
Key highlights
✓ Widely available in each
✓ Positioned to capture price
category
sensitive consumers
✓ Premium pricing power
✓ Lower level of customer
✓ Easy to penetrate other
categories due to reputation and brand recognition
interaction and marketing communication
✓ Higher portion of PL business generated via major retailers
✓ Accumulated working know-how with major local discounters
✓ Penetrates entire market and each customer segment
✓ Offers its PL products to customers in export markets as well
In addition to PL, continuous listing of Koroplast branded products, underpinned by solid relationships forged with local discounters
% of 2022B Net sales1
x% Kitchen Consumables market share2
Garbage bags
Storage products
Cooking products
Cleaning products
(1) Other sales (scrap, raw material and semi-finished goods sales) are not shown on this page; i.e. 1.0% of Net sales in 2022B (2) 2020 revenue market share excluding discount markets. Nielsen Kitchen Consumables Reports include garbage bags, storage bags, baking sheets, oven bags, ice bags, microwave bags Source: Koroplast, PwC Financial VDD report, Nielsen market intelligence
Türk Tuborg |
End of preview. Expand
in Data Studio
README.md exists but content is empty.
- Downloads last month
- 4