Turkish wine corked by AKP government

Turkish wine corked by AKP government
Suvla is a well-known boutique winery in the Gallipoli peninsula that produces about 850,000 bottles per year.
By Menekse Tokyay in Istanbul April 6, 2016

Traces of winemaking in Anatolia can be found dating back to 1700 BC, but this age-old industry is suffering today from a more modern problem in Turkey, which is the perpetual battle between the religious conservatives on one side and the staunch secularists on the other.

This Muslim but ostensibly secular country has never in fact been much of a wine-drinking nation; the country’s consumption of alcohol is the second lowest among the OECD countries, with an average of just 1.6 litres per person in 2012, compared with Estonia’s 12.2 litres.

This is reflected in the figures for the sector. Although the country is the world’s sixth largest producer of grapes, outpacing Argentina and Chile, only 3% of these grapes are used to produce wine. There are about 500,000 hectares dedicated to growing grapes of about 30 varieties for winemaking, for a country of 75mn with a land mass of almost 800,000 square kilometres.

In 2015, Turkey’s wine production reached a total 63.6m litres, after growing slowly over the five previous years, though wine production actually doubled between 2006 and 2010. This change reflects the conservative turn that the Islamic-rooted AKP government took following its 2011 election victory, after the initially inclusive and business-friendly years after coming to power in 2002.

At a time when the economy is under pressure from rising instability in the region and Russian sanctions that have decimated the tourist industry and choked off a valuable source of foreign currency, the government might be expected to encourage any industry that boosts consumption and exports and provides a valuable source of jobs. But the mounting taxes on alcohol and restrictive drinking laws pushed by the AKP's conservatives and their narrow interpretation of Sunni Islam are having a major detrimental effect on the sector, say industry players.

According to a law passed in 2013 by the AKP, any kind of alcohol promotion – including sponsorship agreements for festivals, advertising, promotions on websites and even wine-tasting events – are strictly prohibited. This law has undermined the country’s potential to attract global wine professionals and tourists to Turkey, and prevented the hosting of international wine festivals and fairs to showcase the strength of this sector. This is especially ironic given that over the past five years the Turkish government has more than doubled its revenue from taxing alcoholic beverages from TRY2.0bn to TRY5.8bn.

“Wine products do not have a high ratio of alcohol, although according to the law they are considered as if they are spirits. In this way, the legislation prevents the added value of this sector for the whole economy,” complains Selim Zafer Ellialti, founder of Suvla, a well-known boutique winery in the Gallipoli peninsula that produces about 850,000 bottles per year.

The AKP’s punitive attitude toward the sector and accompanying restrictive legislation has hit the younger winemaking outfits particularly hard, as they are no longer able to promote their new products to the public. “You are producing a new kind of wine, but you are not allowed to introduce it to the domestic clientele and create an awareness about your brand. So what is the point of investing in the sector?” asks Ellialti. “Normally, in civilized countries, the government cannot intervene in such freedoms. It can always control excessive alcohol consumption, but there is a limit to that.”

Ellialti also notes that foreign investors as well as domestic investors regard the current climate in Turkey as not conducive for investments in the wine sector. “We sometimes hold meetings with some foreign investors, but they are always hesitant due to the current restrictions and government stance,” he says.

Outward bound

So, instead, Turkey’s wine producers are turning outward. Suvla, active in the sector since 2003, now also has subsidiaries in the US, Germany and Canada, and intends to increase its exports over the next five-year period.  

With investments in new technology, some of Turkey’s wine labels are even gaining traction in international awards – tangible proof of the increase in quality. Initiatives like “Wines of Turkey” and “Turkish Wine Alliance”, composed by dozens of Turkish wine producers, aim to promote the export of Turkish wine companies and eke out a bigger share in foreign markets. Turkey currently exports about 2.8mn litres of wine mainly to Germany, Britain and Belgium, which is actually down from the 3.0mn litres that were exported in 2004.

The economist Emre Deliveli says that the government’s restrictions are more geared towards restricting domestic consumption rather than exports, but he doesn't see any serious foreign investment coming into the sector anytime soon due to how the most recent investors were “cheated” by the AKP.

He cites the example of global alcoholic drinks producer Diageo’s deal in 2011 to pay a hefty $2.1bn for Turkey’s largest alcohol producer Mey Icki. “I am sure they did not take into account all the changes in laws restricting advertising and marketing into their projections,” Deliveli tells bne IntelliNews.