Anadolu Efes
Table of contents
Overview of Anadolu Efes & Opportunity
What makes beer so special?
Turkish Beer Market
Anadolu Efes - Rough Math on Valuation
How to get comfort behind Turkey, Inflation, Russia?
Appendix - How does Coca Cola bottlers work
Coke distribution chain
Economics of bottling
Overview of Anadolu Efes & Opportunity
Anadolu Group is one of the largest conglomerates in Turkey, with businesses across beer, coke bottling, McDonald's franchises, and supermarkets. Within this group, we are interested in the beer and coke bottling businesses. Anadolu Efes (beer group) is Turkey’s largest beer company (with over 50% market share) and owns half of Coca-Cola Icecek, a Coca-Cola bottler with exclusive bottling rights in Turkey, the CIS countries, and Pakistan.
Obviously, this investment has a lot of complexities, starting with Turkey’s currency devaluation, inflation, their exposure to geopolitically less stable countries, and lack of reliable data. Handicapping this is extremely hard, which is why I want to start by prefacing that this is a 5% position in the Unfair Advantage Portfolio, unlike our typical 10% positions. However, we feel Anadolu Efes is a high-quality asset that is trading below its intrinsic value.
There are three pillars forming the thesis:
Anadolu Efes's Russian beer operations are estimated to be worth $2.6 billion (according to AB InBev estimates). The entire market capitalization of Anadolu Efes is $2.9 billion, which also includes $2.4 billion of Coca-Cola Icecek.
Anadolu Efes is a well-run company with honest promoters who are in it for the long term. Coca-Cola owns half of Coca-Cola Icecek, while AB InBev owns 25% of Anadolu Efes. These global brands are unlikely to partner with individuals who are dishonest.
Both beer and Coca-Cola are inflation-indexed products that respond very quickly to changes in input prices with little impact on demand. Over the long term, they are likely to be defensive if the macro-environment worsens. Moreover, their current valuation provides a sufficient margin of safety.
Anadolu Efes is one of the oldest beer brands in Turkey, rapidly capturing the market when alcohol was privatized in the late 1960s. Their flagship brand is Efes Pilsen, a light beer. Until the early 2000s, Efes dominated the Turkish market with over 85% market share. Since 2009, Efes has rapidly expanded into neighbouring countries such as Russia, Kazakhstan, Georgia, and Moldova.
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