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Turkey Food and Drink Report Q3 2008
Business Monitor International, July 2008, Pages: 53
The Turkey Food and Drink Report provides independent forecasts and competitive intelligence on Turkey's food and drink industry.
The Turkish fast moving consumer goods industry has been experiencing booming growth in recent years on the back of rising disposable incomes. With Turkey's per capita GDP now pushing close to 'high income' territory, as defined by the World Bank, many firms are beginning to realise the potential of this burgeoning consumer market. The pro-business AK Party has been proactively working to move the country toward EU membership. In that vein, it has instigated a number of key institutional reforms which have helped to harmonise the country's business regulatory framework to international standards, while also significantly opening the country to foreign investors.
However, this is not to say that all changes have been positive, and the AK Party has been highly criticised for its alcoholic drinks policies. In fact, in May 2008, following years of frustration with the country's high taxes, Danish brewer Carlsberg decided to pull out of the Turkish market. Carlsberg is now in negotiations to sell its 95.65% stake in its local operations, Türk Tuborg, to its Israeli partner, CBC Group, after having posted seven years of losses in the country. Although stronger levels of competition were also a factor in Carlsberg's decision to withdraw, it was clearly the country's difficult business environment that played the biggest role in Carlsberg's decision. Carlsberg cited the 35% private consumption tax and the 18% value-added tax as major factors in its withdrawal decision, noting that it had made its stance on private consumption tax known to the government many times, stressing what a heavy burden this is for producers.
The country’s pork producers are another group that have been very vocal in their complaints against the government’s policies towards the industry. Currently the Turkish pork sector is facing a major crisis as production levels have plummeted in recent years. Following a 2004 crackdown, there are only two pig farms left in the country where there were once 25, with the few remaining shops selling pork products now struggling to survive. While production has fallen, the demand for pork products has actually been rising steadily in this predominantly Muslim country, along with growth in tourism and the number of foreigners living in major cities such as Istanbul. Some of the few remaining shops defend the government, saying that it has granted licenses to those shops with good business and hygiene practices. However, even these shops say that they are now facing possible closure, with supplies of pork quickly running out. As most slaughterhouses are having their licenses revoked, the rising demand from hotels, restaurants and shops is not being met, which is leading to a growing illegal trade.
Although the current government has been widely lauded for the improvements it has helped bring about in the country’s macroeconomic stability, and the record levels of FDI this has helped attract, there are still many in the food and drink sector who would like to see a serious revision of certain key policies.
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