Carlsberg pulls out of Turkish market
Posted by meb at May 10th, 2008
Worn out by the high taxes imposed by the government on the beer sector, Danish brewer Carlsberg Breweries decided to leave the Turkish market in which it operates under the name Tuborg Carlsberg.
Carlsberg lauched negotiations with CBC Group, its partner in Romania and Israel, and signed a letter of intent to sell its 95.65 percent stake at Türk Tuborg that has been posting losses for the past seven years. Besides the 35 percent private consumption tax and the 18 percent value added tax in the country, the competition that emerged with the emergence of two new market actors played a role for the Danish brewer’s sale decision.
“The negotiations concerning our sale transaction are ongoing. However, there is not a definite agreement at present,” said Güven Erdal, Tuborg Carlsberg’s Ankara representative. “Our stance concerning the private consumption tax was expressed many times. It is obvious that the tax creates a heavy burden for producers.”
Handover:
Türk Tuborg, which currently ranks second in Turkey’s $1.6 billion beer market following Efes Pilsen, started its operations with Yaşar Group in 1967. During the 2001 economic crisis in Turkey, Yaşar sold 47.7 percent shares of the firm to Carlsberg. Having paid $57.3 million for the shares that had a market value of $120 million, Carlsberg, in time, increased its stake to 95.65 percent, and invested approximately $220 million into its factory located in western city of İzmir.
However, since the takeover, the accumulated losses of the firm totaled YTL 367.1 million. During the same period, Carlsberg Tuborg’s market value climbed only 8 percent to $130 million, while the Istanbul Stock Exchange’s (IMKB) benchmark IMKB-100 Index rose 406 percent.
High private consumption tax
The private consumption tax rate of the beer sector, which includes 45 domestic and foreign brands, reached 250 percent between January 2003 and February 2005, causing Tuborg Carlsberg’s losses to increase. Moreover, two new domestic actors, Pera and Perge, entered the sector, becoming popular particularly for tourism and entertainment facilities with their lower prices, and affecting Tuborg’s competitiveness. Efes, the controlling player of the market, overcame the problem via increasing exports. Anadolu Efes Biracılık, under which Efes operates, raised its profits 39 percent from YTL 269 million to YTL 374.4 million in 2007.
After taking over the Tuborg shares, Carlsberg had to spend three times more on advertisement than its beer sales, the firm formerly announced, adding that a period of four to five years is required for maturation of the brand. The firm announced later its decision to suspend its investments in Turkey and decreased its number of employees from 279 to 198.
Carlsberg had previously signaled it may leave the market, calling on the government to implement a fair structure in tax system. One third of Tuborg Türkiye’s turnover goes directly to taxes, Tuborg Turkey Chief Executive Officer (CEO) Damla Birol had said earlier.
Europe’s highest tax in Turkey:
Among European Union member states, Turkey is one of the top five countries in terms of high private consumption tax, said Nejat Eren, chairman of the Beer and Malt Producers’ Association.
“We rank fifth after the United Kingdom, Ireland, Finland and Sweden. However, considering the purchasing power of Turkish citizens, we rank first among EU countries.”
Eren also warned of Turkey’s mistake concerning proportional taxation. “For instance, there is a proportional difference of 2.9 percent between the taxes imposed on whiskey and beer in the EU countries. However, this rate declines to 1.5 percent in Turkey,” he said.
source: Turkish Daily News
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