With the liberalisation of Turkish state-run monopoly Tekel expected to take place next month, Euromonitor looks at its potential impact on the spirits sector and considers which players will be vying to acquire the company’s famous Raki brands.
In return for a loan deal from the International Monetary Fund, the Turkish government has pledged to privatise companies worth around US$4 billion with alcohol and tobacco giant, Tekel, first on the block, due to be sold in separate sales at the beginning of June.
Accounting for 94% of spirits sales in Turkey and with a virtual stranglehold on production and off-trade distribution, the liberalisation of Tekel’s alcoholic drinks arm will unquestionably be a major factor influencing volume and value sales of spirits in coming years. It paves the way for a wide number of products to hit the market.
Consequently, Euromonitor expects volume sales of spirits in Turkey to increase by more than 60% over the next four years – propelling the country from its current standing as the 26th largest market in the world to 19th by 2007.
In particular, sales of vodka, gin, brandy and Cognac are slated for dramatic growth. In volume terms, vodka is currently Turkey’s third largest spirits product, after raki and whisk(e)y, with estimated total sales of 2.3 million litres. Following the privatisation of Tekel’s alcoholic drinks arm, Euromonitor expects sales of vodka to double by 2007.
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By GlobalDataLikewise, brandy and Cognac sales are forecast to increase by more than 14% annually during the same period.
The recent development of Turkey’s whisk(e)y market gives a strong indication of the likely impact of the privatisation. In 1997, the import of whisk(e)y became independent from Tekel, which meant that any company could import it. Since then, it has become the most recognised drink after raki, a raisin or grape spirit re-distilled with aniseed which alone accounts for 89% of total spirits volumes. Whisk(e)y, meanwhile, is the most dynamic drink in Turkey, with 41% volume growth and 40% value growth during in 2001. Improved marketing, better packaging and more aggressive distribution as a result of the introduction of sophisticated private companies to the market were the main factors driving its performance. Such factors are also likely to play a positive role in the performance of spirits following the privatisation in June.
Restrictions on growth
While the sale of Tekel’s alcohol assets will undoubtedly be a major factor influencing spirits sales in coming years, there are several factors restricting growth. In fact, per capita consumption of spirits was just 1.2 litres in 2002, compared with 4.2 litres for Western Europe.
The influence of religion is a major factor affecting the sales of spirits. With Islam the main religion, there is strong pressure not to consume alcoholic drinks. Advertising is another restriction. The government does not allow alcoholic drinks to be advertised on television and only certain advertisements are allowed in the press.
Despite this, the growth in the number of on-trade outlets that sell a wide variety of beer, wine and spirits, the increasing acceptance of women consuming alcohol, and hikes in resort tourism all continue to be major factors influencing sales.
Potential Bidders
With rapid growth certain, foreign investors are once again in the leading list of possible buyers. Alcoholic beverage giant Diageo, the second largest vendor of spirits in Turkey after Tekel, has been cited as the most likely candidate. The London-based firm is well positioned to take one of Tekel’s raki brands, which it has expressed particular interest in, given its leading position in Turkey’s whisk(e)y market with a 60% volume share.
Of all the Tekel brands Yeni Raki, the country’s market leader in raki with a 93% volume share, is likely to be the most hotly contested. The brand is exported abroad, and, in total approximately 7m nine litre cases are sold every year. With the acquisition by private companies, raki will receive better promotional support and better packaging and new raki products may also be launched.
Turkey’s giant Koc Holding conglomerate has also been eyeing up Tekel’s alcohol drinks business. “We’re not interested in Tekel’s tobacco production section, but we may be interested in the Tekel sale,” Koc’s chief executive, Bulend Ozayandi announced recently.
Other potential investors include global drinks giants Allied Domecq and Pernod Ricard, as well as local players Taris, Turkey’s biggest brewer Efes Pilsen, media conglomerate Dogan Group and Oyak, the semi-autonomous military pension fund.
The liberalisation of alcoholic drinks in Turkey is certain to play a pivotal role in the range of products available and the overall performance of spirits in the coming years. It is true that Turkey is unlikely to become a major spirits market any time soon given limiting factors such as religion and bans on advertising. That said, raki will continue to offer further growth potential within Turkey, and with the current focus on pushing national specialities onto the international stage, as is currently happening with pisco and cachaça, the overall future for raki is also promising.
