Anadolu Efes to strengthen its global sustainability with USD 500m debenture capital

ANADOLU EFES, THE ONLY INVESTMENT GRADE ISSUER TURKISH COMPANY, ACCORDING TO BOTH STANDARD & POORS AND FITCH RATINGS, REFINANCED ITS 2022-DUE BOND WITH USD 500M 7-YEAR NOTES IT ISSUED IN LATE JUNE. RECEIVING MORE THAN SIX TIMES DEMAND FROM EUROPEAN AND U.

the Greek Word ‘Anotole’ meaning ‘East’, DERIVED FROM and referring to the direction where the sun rises, Anatolian civilizations are considered one of the earliest imbibers if beer. The third most consumed drink in the world, after water and tea, beer today is also at the heart of a Turkish company’s globalization story. Anadolu Efes earns more than two-thirds of its net sales in international markets. The company’s CE• and Beer Group President, Can Caka, who has been with the company since its first steps beyond Anatolia’s borders, is eager to base this story on the company’s financial strength.

Europe’s fifth and the world’s 10th largest brewer by production volume, Anadolu Efes recently issued USD 500m 7-year notes after its online roadshow in Europe and the U.S. in June. Refinancing its 2022-due bond with the issuance, Anadolu Efes maintained its interest rate despite changing market conditions nine years after its successful issuance in 2012, which was used for the company’s second biggest globalization move. At the time, Anadolu Group acquired all of SABMiller’s beer operations in Russia and Ukraine and entered the Southern Iraq market through a purchase that year. The company’s 3,375% coupon rate, 7-year maturity bond with a BBB(-) rating, priced at a 3.5% yield rate, received more than six times demand from institutional investors in Europe and the U.S.

This represents one of the lowest coupon rates for a USD-based bond issuance in Turkey’s history, nine years after the second best issuance made by Anadolu Efes. “The demand once again confirmed the confidence placed in Anadolu Efes’ strong financial position and international

position as a regional company,” says Caka.

Not only the investors, but also credit rating agencies reflect the company ’s strong financial structure, regional power, the growth of its operations and its continued potential on their credit ratings. Today, Anadolu Efes is the only Investment Grade Issuer in Turkey with an investment grade rating from two separate rating agencies, Standard & Poors and Fitch Ratings. “With these values, we are very pleased that Anadolu Efes has realized this refinancing with the assurance it has created regarding the size of its operations and the sustainability of the cash flow it can generate from there,” notes Caka, who served as Anadolu Group CF• for six years before being appointed CE• in January 2019.

Anadolu Group’s beer group increased its production volume to 36.2 million hectoliters (mhl) in 2020. A 0.2% increase compared to 2019. Sales revenues increased by 12% and reached TRY 12.4bn in 2020 while EBITDA came in at TRY 2bn, a 10% increase. Exports increased by 16% and reached TRY 663m. Anadolu Efes consolidated sales revenues were TRY 26.7bn, EBITDA was TRY 5.1bn and exports reached TRY 723m in 2020, 16%, 25% and 20% increases, respectively.

Caka’s CF• background is not the only reason this bond issuance excites him. He has been with Anadolu Efes, which is one of the few companies rising out of Turkey to become a global brand, since the first steps were taken to go beyond Anatolia’s borders.

CULTIVATING BEER CULTURE

Starting its journey in 1969 with two entrepreneurs pursuing their dreams by establishing two breweries in Istanbul and Izmir, Anadolu Efes quickly became the largest brewer in Turkey. The company contributed to the development of the market by cultivating beer culture and introduced many “firsts” to consumers.

The company’s first step in expanding abroad started in Kazakhstan in 1994, one year after Caka joined the company. “In 1998, after the financial crisis in Russia, Anadolu Efes decided to invest in Russia, establishing its first brewery in Moscow in 1999,” Caka says. Thus, Anadolu Efes became one of the first companies to bring brand diversity to Russia.

Anadolu Efes took another important step aimed at commercial sustainability in the global market in 2012, forming a strategic alliance with SABMiller Plc. In 2016, following the acquisition of SABMiller by Anheuser-Busch InBev, the world’s largest brewer, AB InBev became a 24% stakeholder in Anadolu Efes.

Running its international beer operations through Efes Breweries International NV, its 100% subsidiary based in Netherlands, Anadolu Efes is also the main shareholder of Coca-Cola Icecek A.S., which runs Coca-Cola operations in Turkey and abroad.

The company today serves a population of close to 700 million with beer and soft drinks brands in its portfolio. With 21 breweries, 5 malthouses, 1 hops processing facility and 1 preform plant in 6 countries, including Turkey, Ukraine, Kazakhstan, Moldova, Georgia and Russia, Anadolu Efes is the market leader whereever it has beer operations. With its 26 bottling plants in 10 countries, including Turkey, Anadolu Efes is operating as one of the most important players in its region and among top 10 largest Coca-Cola bottlers by sales volume. The company ships its products to more than 70 countries in Europe, Russia, the Commonwealth of Independent States and China.

INCREASING SALES IN CHINA

Among the countries Anadolu Efes exports to are Germany and England, which are considered world leaders in beer consumption. Anadolu Efes products are also drunk in China, the world’s largest beer market. Anadolu Efes entered the Chinese market in 2013, and has increased its sales there more than 30 times since. Nonrtheless, China remains a growth market, says Caka. “•ur performance in northern China is pretty good and southern China is among our targets in the coming period.”

But Caka adds that Anadolu Efes’s global expansion plans are even more ambitious. Its ultimate goal is to become the biggest brewer from the Adriatic to China. “For this, we are constantly improving ourselves and working to increase our presence. We aim to expand our export markets and further strengthen our visibility in the markets we are in by following the opportunities in the world markets closely,” he notes.

As required for all global brands, Anadolu Efes closely monitors consumer trends in every countries in which they operate and focus on understanding each market as fully as possible, according to Caka. “We analyze detailed insights, understand tastes and shape our product range accordingly, both in the countries where we operate and export to,” he says adding that they offer a wide range of product options that also meet the innovation demands of consumers. “We are very happy that

our flagship brand, which was born in Turkey, is appreciated by consumers around the world, as we can produce products specific to countries,” he remarks.

INVENTING A THIRD PRODUCTION TECHNIQUE

Anadolu Efes’s flagship brand ranks second among beer brands in Mediterranean countries. The fact that the company has become the leader in the world’s fifth largest beer market, such as Russia, outstripping its strong global competitors, is an important indicator of the strength of Anadolu Efes brands in foreign markets.

“The fact that tourists place their orders with our brand names when they come to Turkey shows that our brand awareness abroad is high. The medals we have earned from the world’s most prestigious international quality institutes, such as Monde Selection, where our products were awarded 12 medals in 2021, is also important for the global image of Turkish beer.”

Last year, Anadolu Efes undersigned a very important innovation that will strengthen Turkey’s position in the international beer industry.

As a result of two years of R&D activities, the company’s beer masters and engineers developed the ‘+1 Resting’ technique, which is a first in Turkey and in the world. Unique to Anadolu Efes, the technique, which doubles the resting time of malt during the production process, is a candidate to enter the world beer literature as the third production technique certified by the world’s leading beer standards institute, VLB Berlin. Patent applications have also been made for this innovation, which Caka thinks is a very important step for the industry.