Diageo under investigation in Turkey

Turkish authorities have launched an investigation into Diageo’s operations in the country, specifically over allegations its raki business took advantage of market dominance.

Diageo CEO Ivan Menezes has also had his pay packed slashed by nearly half as a result of the company’s poor performance this year (Photo: Diageo)

Accusations made to Turkey’s Competition Authority were judged to be “serious and adequate” enough to begin an inquiry into Mey Icki, the Diageo-owned producer of local spirit raki, according to reports by financial news service Bloomberg.

The exact nature of the allegations is not yet clear, nor what the investigation will actually involve.

A Diageo spokesperson told the drinks business that the company “will carefully review the issues raised and respond to the Authority within the required time limit.”

In June last year, the same competition board fined the company 41.5m Liras (£9.6m) for breaching competition rules.

London-based Diageo acquired Mey Icki, Turkey’s largest raki producer, for £1.35bn in 2011. It was one of the company’s largest ever acquisitions and its first concerted effort to gain a foothold in a successful developing market, before focus shifted to India and China.

However, Turkey has proved difficult for Diageo, enacting alcohol advertising restrictions two years ago and its political leaders encouraging the majority muslim population to avoid drinking.

Diageo’s overall financial performance this year has been badly affected by its moves in developing markets, with flatlining sales and stagnant share prices leaving investors disappointed and analysts wary.

Organic sales growth was effectively unchanged, under-performing on analysts’ expectations of a modest 0.2% gain. Net sales fell flat in Europe, dropped by 1% in North America and Latin America and the Caribbean, and in Asia Pacific by 2%.

Africa bucked the trend, increasing its net sales by 6%, but from a low base, thus accounting for just £85 million in value sales.

Diageo’s CEO Ian Menezes had his pay packed slashed nearly in half this year, down from £7.3m to £3.9m, due to performance-related pay incentives yielding next-to-no return.