Diageo targets local growth despite new legal difficulties

Wednesday, August 24, 2011

Gökhan Kurtaran

ISTANBUL

 

The new owner of Turkey’s biggest rakı brand says the market is shrinking in the country. The taxes on alcoholic drinks are also skyrocketing, says the company

Diageo, the global alcohol drink maker with a wide range of brands across spirits, wine and beer, expects growth in Turkey despite recent contraction in the market due to new government regulations, according to the top executive of its European business.

“Turkey has always been a dynamic market with a robust growth rate,” said Andrew Morgan, speaking during a press conference in Istanbul on Wednesday to mark the conclusion of the company’s acquisition of Mey İçki for 3.3 billion Turkish Liras ($2.1 billion).

Commenting on several reports questioning the brand’s into Turkey during a period of major regulation changes and tax hikes, Morgan said the company had already undertook extremely detailed analyses of the local environment.

‘I’m convinced’

Morgan said he personally met with Turkish ministers and officials and has confidence in the current Turkish administration, adding that he hopes the market will become more balanced.

 “Some members of the government choose not to consume alcohol, but they are still committed to Turkey’s open society that allows its people to make their own choices,” he said.

Diageo does not expect extreme treatment of alcohol drinks by the government in the long run, he said regarding the government’s recently implemented tax increases and strict regulations. “There is no example that the high taxes reduce abuse of alcohol in society,” he said.

Sales of alcohol have fallen since the Turkish government increased taxes on alcohol to meet budget targets and launched series of restrictions this year, according to Galip Yorgancıoğlu, chief executive officer of Mey İçki, speaking at the conference.

Mey is Turkey’s largest maker of rakı, the traditional Turkish alcoholic beverage.
Addressing journalists, Morgan said the company was currently planning to bring more international brands into the Turkish market. Still, “we are aware of the attractiveness and the importance of rakı in Turkish culture,” he said.

Noting that the fame of Yeni Rakı, the flag carrier rakı brand of the company, goes beyond a successful brand to an important part of Turkish cultural heritage, Morgan said Turkish rakı is considered “a national drink.”
Yeni Rakı continues to hold “very important potential outside of Turkey,” particularly in Germany and Middle Eastern countries and “even in the Chinese market,” the executive told the Hürriyet Daily News on the sidelines of the meeting.

Yorgancıoğlu said he expects the local rakı market to shrink 6 percent this year. He also said Diageo would sell Hare Liquor and Maestro gin this year to secure Turkish regulatory approval of the purchase.