Diageo Seeks Turkey Drink Limit Balance After Mey Icki Purchase

Diageo Plc (DGE), the world’s largest distiller of alcoholic beverages, said it’s seeking common ground with the Turkish government after lawmakers submitted a bill to restrict alcohol sales in the country.

Diageo “recognizes the strong likelihood that severe restrictions to the marketing and promotion of alcoholic beverages in Turkey are imminent,” Rowan Pearman, a spokeswoman for the company, said in e-mailed comments yesterday.

Lawmakers from Prime Minister Recep Tayyip Erdogan’s ruling party submitted a draft bill to parliament on May 10 that would restrict where alcoholic drinks are sold and consumed while making it illegal to market or promote them in any way. The bill was tendered after Erdogan said at an alcohol policy symposium in Istanbul on April 26 that ayran, a salted yogurt drink, was Turkey’s national beverage, rather than alcohol.

“While we have regard and respect for both the views of the Turkish government and the country’s legislative and regulatory processes, we would be highly disappointed if the most restrictive scenario came to pass,” Pearman said.

Diageo paid $2.1 billion in 2011 for Mey Icki, a producer of the traditional Turkish spirit called raki. It said at the time that it didn’t expect “extreme treatment” of alcoholic drinks by Turkey in the long-run and later said it expected sales of the aniseed drink to fall that year as the government raised taxes and introduced more restrictions.

Islamic Roots

Turkey, which has been led by a government with Islamic roots since 2002, is not the only market where alcohol producers face legislative challenges. Under the leadership of Vladimir Putin and Dmitry Medvedev, Russia has also cracked down on drinking, raising taxes and limiting where alcohol can be sold. Russia banned selling beer at kiosks on Jan. 1, 17 years after imposing the same restriction for vodka. It also imposed restrictions on direct advertising of the brew in 2011.

In the U.K., the Parliamentary Health Committee said in July last year that the government should consider tighter restrictions against alcohol and study France’s “Loi Evin,” which since 1991 has only allowed alcohol advertising in places where adults are at least 90 percent of the audience.

Diageo’s purchase of Mey Icki was its biggest in a decade and doubled the company’s liquor sales in emerging markets, Andrew Morgan, the distiller’s president for Europe, said at the time of the sale. It bought the company, which it said controlled about 80 percent of the market for raki, from private-equity firms TPG Capital and Actera.

‘Different Cultures’

Diageo reported $17 billion in revenue last year, of which $5.6 billion was from North America and $4.7 billion from Europe, according to data compiled by Bloomberg.

The distiller is “cognisant of the different cultures in the countries in which we operate” and seeks “to work in partnership with governments and societies to find the common ground,” Pearman said yesterday. “We would sincerely value the opportunity to adopt this approach in Turkey, and to work with all relevant ministries to effect a more balanced outcome.”

Diageo fell 0.4 percent to 2,052 pence at 10:10 a.m. in London trading. The shares have risen 15 percent this year.

To contact the reporters on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net; Clementine Fletcher in London at cfletcher5@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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