Koç in bottoms-up rakı pricing gambit
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aysun 23 Yaşında İstanbul |
Özge 18 Yaşında İzmir |
Pelin 18 Yaşında İzmir |
Güner 18 Yaşında Almanya |
Upon its decision to leave rakı sector, Turkey’s biggest company Koç Group reduces the price of its 70cc Mercan brand from YTL 26 to YTL 17 in order to finish off its stocks. The rival companies, facing tough times, have concerns about the impact of Koç’s aggressive price policy on customers.
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The alcoholic beverages sector, which faces increasing distress every day, is now puzzled about the aggressive price policy of Turkey’s biggest company, Koç Group, following its decision to leave the rakı sector.
While rival firms sell 70cc of rakı for YTL 24-28, Koç offered its Mercan brand for YTL 16.90 at Tansaş stores to deplete its stocks. “Considering tax rates in rakı, we can say that we are selling the product at cost. The campaign is limited to the product amount in stock,” said an authority from Tariş-Tat Group, which produces Mercan.
Tariş-Tat Alcoholic Beverages, a joint venture of Tariş and Koç Group, entered the rakı market in 2004 with an investment of $18 million. The company introduced the Mercan Rakı and Fasıl Rakı brands to the Turkish market with its production at the Manisa-Alaşehir plants. However, due to the conflict between partners, the capital increase necessary for production and marketing activities could not take place. Therefore, rakı production in the factory came to a halt approximately a year ago, and the existing stocks could not be finished.
As only Tat Group participated in the recent capital increase, Tariş’s share in the company deteriorated to 10 percent. Koç Group, which took the control of the company management, announced its decision to leave the sector, and started the campaign to melt the stocks. Tat Group, launching the first campaign at Tansaş stores, reduced the price of 100cc of rakı from YTL 32 to YTL 24 and of 33cc from YTL 14 to YTL 8.5.
A little amount on stocks
“There is no production at the factory at present. However, we have some products at hand. It is not possible to announce the amount due to competition; however, we can say that the amount is little. Considering tax rates in rakı, we can say that we are selling the product at cost,” said an authority from Tat Group. Due to the Ramadan, which will start at the beginning of September, the campaign will be limited to approximately a month.
“We heard about the campaign just two days ago. We were surprised to see such low prices,” said Galip Yorgancıoğlu, chief executive officer, or CEO, of MEY Alcoholic Beverages. “There is enormous competition and unregistered activity in rakı and vodka. With these sale prices, the market will become more confused.”
Private consumption tax and value added tax total YTL 16.5 in rakı, Yorgancıoğlu noted, adding that selling at a loss is left to the firm’s discretion. “We know that they have not made production for a long while. However, we do not know how much product they currently have.”
Efe Rakı CEO Egemen Demirtaş said that it is natural for a company that will leave a sector to turn its stocks to cash; however, consumers will be puzzled about the price gap. “Our consolation is that the Efe brand is strong and the sale campaign will only last or a short time. Therefore, the stock depletion operation will not affect us negatively much. However, the real distress emerges due to the companies that carry on with low price campaigns constantly.”
The prices in the Mercan Rakı campaign are not rational, said Hayrettin Akartuna, a coordinator at Burgaz Alcoholic Beverages. Denying the criticisms about Burgaz selling low prices, Akartuna said, “We are selling Burgaz Rakı for YTL 19.90. However, Mey sells İzmir fresh grape wine for the same price. It is not possible for us to compete and survive by offering the same price as the market leader.”
The highest cost in rakı after taxes is marketing expenditures, said Akartuna, and added that the increasing costs in the recent period has led firms to the verge of price regulation. “Our sale prices are at a critical point. It seems inevitable to introduce a price modification soon. Other firms are expected to do so as well. New prices may appear just after Ramadan.”
Rakı consumption drops
-Turkey’s annual rakı consumption is 43 million liters
-the rakı market narrowed by 50 percent in 10 years
-Around 2-3 million liters of rakı are exported
-There are six rakı-producing firms and around 20 brands
-Mey is the market leader
-The tax in the sector is around 65 percent
Rakı producer firms and their brands
Mey Alcholic Beverages: Tekirdağ, Yeni Rakı, Kulüp Rakısı, İzmir, Altınbaş, Yekta, Mest
Burgaz Rakı: Burgaz, Ata, Rakı Turka
Efe Rakı: Efe, Karaefe, Sarızeybek
Sarper Rakı: Beylerbeyi, Beyoğlu
Anadolu Rakı: Anadolu
Rakı prices (70cc)
Yeni Rakı 27 YTL
Anadolu Rakı 19.90 YTL
Efe Rakı 24 YTL
Burgaz 19.90 YTL
Beylerbeyi 28 YTL
Mercan 16.90 YTL (campaign)
Changing mind
Koç Group had invested $18 million in the Alaşehir plant with an annual production capacity of 5 million liters of rakı. The total investment reached $50 million with sales, marketing network and other operations. Koç planned to become the sector’s second biggest brand with the capacity to increase after reaching a market share of 10 percent. The group aimed at launching production of other alcoholic beverages, such as wine and vodka. However, the firm decided to leave the rakı business, Ömer Bozer, head of Koç Holding’s retail and food group, announced last week.
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