The liberalised domestic market is still young so, for most brands – other than perhaps Yeni – there is still much work to do in building brands. Turkey is a dark market though. Only on-trade point of sale is permitted in the way of advertising so, while the population is culturally entwined with the spirit (an estimated 70% of all meals are eaten with raki, says Yorgancioglu) trading is tough. The status quo is hard to unsettle. Efe’s Demitrus says though his brand is seeded in 25 international markets the priority remains at home.
Mey’s portfolio’s (Yeni, Tekirdag, Kulüp, Altınbas, Izmir Rakisi and Yekta) has an almost insurmountable dominance of the domestic market. This has prompted an intervention by the Competition Board, which has issued a €14.5m penalty for “the misuse of the dominant market position in order to create difficulty for competitors’ activities”. Mey has the right to oppose what Efe’s Demirtas says is the largest fine issued to any FMCG company this year, but its leader Yorgancioglu seems resigned. “I don’t think we will be successful with appeal because nobody has before,” he told DI.
Demirtas is ambivalent. On the one hand he says it is very difficult to compete with Mey in the on-trade, which represents about 20% of total sales but is inversely important for establishing a brand. Mey’s portfolio has built brand loyalty over many years so new names struggle to gain a foothold.
In the off-trade brands might ordinarily compete on price but high taxation (the third highest in Europe behind Sweden and the UK, says Yorgancioglu) means price positions have concertinaed. “We feel that there’s unfair competition,” says Demirtas. “We are in favour of fair competition. If our competitors create dynamism in the market then we consider that to be a positive.”
In the 10 years since liberalisation, volumes in Turkey have dropped 4%. “It is not growing so competition is tougher than it would normally be – everyone is trying to find a place for themselves,” says Demirtas. Despite the challenges at home, the Efe boss believes this is the first battle that must be fought.
Time to fly
Diageo will have seen that raki is not growing at home (there was a 4% drop between 2004 and 2014, despite liberalisation) and must be planning for a Turkish market future that is more fragmented. But irrespective, Diageo doesn’t tend to let brands stand still without building outwards. Its export strategy is big and bold, building on Yorgancioglu’s long-standing vision to make “Yeni raki a global brand”.
At the moment exports of raki amount to 360,000 cases, according to the tobacco & alcohol regulator in Turkey. But Yorgancioglu has targeted three countries that have both Turkish diasporas and strong or emerging Turkish food cultures.
The US, Germany and the UK are all set for Diageo’s raki experience so far, but more will follow, if success is found. Spearheaded by Yeni, Diageo has a new distributor in the UK, which will target Turkish and ethnic restaurants and has deals in place with major supermarkets.
