From a Biscuit Bakery to an Integrated Food Group
The abiding theme that runs through Ülker’s history from its origins as a small biscuit bakery in 1944 to a major integrated food group of today is entrepreneurship, confidence in the country, ambition, self-sufficiency and respect for society. With the world still bleeding from World War I, the Second World War started in Europe on September 1, 1939. Even though Turkey was neutral until the last few months of the War, the country faced great hardship as a result of the conflict. These difficult times affected Ülker, which had started its operations a mere 21 years after the founding of the Turkish Republic. The limited resources allocated for economic development prior to the war were channeled into defense and investment was virtually halted.
In 1944, when Ülker was established, Turkey’s GDP growth rate was minus 5.1 per cent, following a year when it had dropped an even more alarming 9.8 per cent. All economic indicators showed the Turkish economy was rapidly shrinking. There was a serious supply shortage of consumer goods because of the halt in investments and the limitations on imports. A high inflation rate coupled with these scarcities made living conditions barely tolerable. Even a National Protection Law and other measures were insufficient to stop price increases. Black-marketeering was widespread and the state had assumed distribution of many essentials. Ülker was born in this environment. Economic conditions were unfavorable but there was plenty of ambition and a growing excitement for the recreation of the country, and that proved sufficient for success.
By understanding the harsh conditions of those times, one appreciates that Ülker is a product of Asım and Sabri Ülker’s faith in the Republic and their confidence in the future of Turkey. In his memoirs, Sabri Ülker says about those days, “It is not difficult to see the phases that our nation has been through when one looks at those hard times. We established this Republic with whatever we had. I remember that not even a needle was being manufactured and all goods were imported. Never mind traveling form one city to another; it was even difficult to commute between neighborhoods within Istanbul. There were days when we hardly made a living, struggled with poverty but worked with ambition. We never gave up, struggled and put out our best to advance our state. We grew up with the blessings of the Republic. We had our education, our jobs and bread money thanks to the Republic.”
Distribution in the First Years
Sabri Ülker had chosen to produce biscuits to make a living. In those years, biscuit production was too rare to call it an industrial sector. In any case, industrial biscuit production is a relatively new industry in other countries. The historical record attributes the first industrial production of biscuits to J.H. Olibet, an Englishman, in the 1840s and it shows that Turkey first sampled industrial biscuit products through imports. Some Turkish entrepreneurs attempted to produce biscuits in small bakeries and Sabri Ülker worked in one of these factories when he was a child.
As a young graduate of the School of Economics and Trade, Sabri Ülker decided to purchase a small biscuit bakery that had gone out of production. Sabri Ülker relates, “As you might expect, it was difficult to find the necessary equipment for production in those troubled years of a Republic struggling with the problems created by the war. On one autumn day, early in the morning, I came to Nohutçu Han in Eminönü which was the main business center of Istanbul. I went up to the third floor and entered through a low door. It was a bakery of around 100m2 and I looked at the tools – the boilers, mixers, moulds and the oven. And I said to myself ‘I must do it’.”
Sabri Ülker was destined to succeed, not only in his own business but also in establishing the roots of the Turkish biscuit industry from that small bakery. The development of Turkey’s biscuit sector would henceforth run parallel to that of Ülker. The venture started operations with 6-7 boilers, a small oven, three workers and a daily production of 200 kilograms. In the first year, 75 tons of biscuits were produced. This level is quite low for today, but for those years, it was a significant and promising amount. In only four years, the company moved to larger premises in Topkapı and production capacity tripled. This increase in capacity was the most important investment in the first years and was a sign of the Company’s rapid success. Although product variety was limited in the first years, high quality, delicious Petit Beurre biscuits contributed to the Republican generations nutrition.
After the War, the 1950s heralded a period of economic transformation for Turkey that later led to an abandonment of state economic control in favor of a private sector that worked to accumulate capital and expand in the domestic market. Ülker, like many other companies, gained from this positive wind sweeping the country.
An increasing demand for Ülker biscuits also required arrangements for the distribution of the product as well. Products were distributed to sales points at factory gate prices, i.e. without charging transportation costs. Ülker’s products reached most grocery stores and candy sellers, which were numerous in those years, and they were available in almost every neighborhood.
No Teatime without Ülker!
Ülker made an important step forward in production in the 1960s in the form of a new factory equipped with four 20-meter furnaces. As investment increased Ülker’s production capacity, it also raised product quality and variety. The 1960s was a decade when everyone followed world developments but nobody thought of engaging in large scale production, in Turkey as in Europe. This was the point at which Ülker started to differentiate itself from its competition. With the aim of producing to the best international standards, Sabri Ülker invited specialists from abroad.
A Company press release of the time read, “Ülker factory, which produces the most delicious biscuits, has now launched its Cake Biscuits. Ülker’s new product is prepared by machines brought from Germany. There are eight different biscuit types and they are sold fresh. Your children will certainly love Ülker’s cake biscuits and you can also offer them to your guests.”
As a result, the slogan “No teatime without Ülker” was adopted in the 1960s along with this new product, the Cake biscuit, which was offered in several varieties, including hazelnut, marmalade, lemon, raisin, sesame and chocolate chip. One of the most notable features of this period was Ülker’s advertising and promotion approach. The features of these unique cake biscuits were communicated to the consumers via a press release. After the Topkapı factory increased its production capacity, Ülker decided to reach many small sales points that served villages in distant corners of the country under the tough conditions of the 1960s. Ülker, which today has the largest distribution network in Turkey, laid the foundation of this network at that time.
In the 1970s, economical and politically difficult times began. In these years, social peace was in jeopardy on the streets and in the factories. The economy was experiencing high inflation and a foreign exchange shortage. Ülker managed to overcome these tough times thanks to its strong foundation and its policy of investment-based growth rather than downsizing.
Exports Start in the 1970s
Ülker became an exporter. The Company’s $200,000-dollar investment in 1974 was a sign that Turkey’s biscuit industry was developing and gaining an international identity.
Ülker shared its export success with its consumers via an advertisement: “Ülker products, whose quality is confirmed by international quality awards, are in demand abroad. Ülker will continue to pioneer innovations in its field.” This export experience would later help Ülker meet the tough competitive environment of the 1980s. In 1974, to make it more competitive in the export market, the Company formed its R&D department. In the same year, modern chocolate production started at a second factory established in Istanbul. Ülker, which used to be known as a biscuit company, gradually became known as a chocolate producer.
The Topkapı factory also started producing for foreign markets in 1970s.
The 1980s were the years when Turkey’s economy and society first met the term “liberalization”. Turkey became more globalized as a result of the liberal policies of the 1980s and many companies in major sectors went through structural change. In other words, the 1980s were a period of renewal for everyone and everything. The changes experienced in the food sector were greater than those experienced in other sectors. First of all, the public still was unable to shake off the notion of scarcity that lingered through the 1970s and the pessimism created by waiting in long lines for all kinds of consumer goods. Towards the mid-80s, there was huge demand for every commodity entering customs. There was great demand for imported food items as well, and Chiquita bananas are a symbol of that era.
These developments meant competition for Ülker, just as they did for other local firms. However, thanks to the experience and vision of its founder, Sabri Ülker, Ülker was already prepared for the competitive environment of the 1980s. Starting in the 1980s, Ülker widened its product range and public demand was instantly met. Ülker products competed successfully with imported food items. Sabri Ülker explains: “Ülker Group determines the products that the consumers are demanding for a better living and produces them under hygienic conditions using carefully selected ingredients and environmentally friendly advanced technology.”
In the 1980s, Ülker adopted vertical integration as a management strategy. Sabri Ülker summarizes this decision: “What do you need to make biscuits and chocolate? Of course flour, butter, glucose, and packaging materials. We established factories, marketing companies and export companies with high logistics capacity and became integrated vertically.” Starting in the 1980s and continuing into the 21st century, Ülker integrated itself into world markets. Says Sabri Ülker: “We are the first Turkish biscuit manufacturer to bring experts from abroad and today some of the best international experts are working for our company. We have established partnerships with many foreign companies and benefited from their expertise and experience. We have made some of our companies public. Our most important priority has always been the health of our customers so we established a hygiene department. We have followed global developments and match the rhythm of the world. We have made investments and established factories to increase our capacity and we provide jobs. As a result, we produced new products that have won the hearts of our consumers.” Ülker’s most important innovation at the beginning of the 1990s was its investment in the food sector, in addition to its traditional operational areas of biscuits, chocolate and candy. In 1992, Ülker was operating in such segments as margarine, vegetable oil and industrial food oils. In the following years, the Company increased product variety still further. The partnerships with major international brands, so vital for Ülker’s integration to the world, were mainly established in the 1990s. Pendik Nişasta (a starch company) was the first partnership with foreign companies. This was followed by Fresh Cake which was a 50/50 partnership with French Harry’s, and many other partnerships.
Innovative Approaches in the 21st Century
2000 was an important turning point in the Company’s history. Sabri Ülker transferred active management to the next generation and became Ülker’s Honorary Chairman. He remained in close contact with the Company’s dealings but without the daily burden of management. He made a new management organization and appointed Murat Ülker chairman of the newly-established Board of Directors. Various production groups were formed under Ülker’s structure.
The 2000s are the era of globalization, with regional and local competition carried to a global platform. Ülker, which had started global integration in the 1980s, promotes growth within Turkey while it also invests abroad. The Company’s trend, started in the 1990s, of making partnership with international brands continued into the 2000s. One of the most significant aspects of the 2000s was that Ülker introduced innovative products to Turkish consumers at the same time as they were launched in international markets. Kalbim Benecol, which helps lower cholesterol levels, is a prominent example of this new approach.
With the Company’s present production, export and employment level, Ülker is a leader in terms of the added value it creates for the Turkish economy.
The foundation of Ülker’s history, from a small biscuit bakery in 1944 to a large integrated food group today, is entrepreneurship, confidence in the country, ambition, self-sufficiency and respect for society. This 64-year-old story continues.