Turkish Wine Industry

The wine industry is a special sphere that depends on many factors such as climate and can develop only in particular countries in the world. Turkey is one of the wine produces but has several specialties of industry development. Wine is produced in Turkey in several regions. The highest quality wines come from the Izmir region (vineyards, that belonged to the Greeks of Asia Minor in XX century), Cappadocia and Eastern Thrace and the region of Diyarbakir (Brown, 2010). Although the wine history of Turkey is one of the oldest in the world, the modern Turkish wine industry is very young. Turkey resumed wine production only in 1925, as a symbol of the country’s modernization. Despite the limitations imposed by Islam, a habit of drinking wine among the Turks in recent years is increasing, especially in the cities. The purpose of the research is to observe how the wine industry emerged and developed, what is its condition now, to analyze the market and management in the industry for further business recommendations.

World Wine Industry

The wine industry is a part of the industry of alcoholic beverages. The complexity of it lies in the specifications of production and target audience. Wine production in the year of 2013 significantly increased thanks to the performance of the New World and Spain surpassed France for the first time in the list of the world’s largest wine producers (Golicic & Flint, 2014). According to the Wine Institute, wine production volume increased in 2013 by 8.5% compared to the previous year resulting in up to 276.6 million hectolitres (The Wine Institute Statistics, n.d.).

According to the report of the International Organization of Viticulture and Wine (OIV), Italy continues to hold the first position among the largest wine-producing countries c and the second place for the first time belongs to Spain (Turkey, StatOIV extracts, n.d.). The set of three countries accounted for 47% of total world wine production (Turkey, StatOIV extracts, n.d.). At the same time, the New World continues to break records of winemakers. For example, in the US, wine production increased by 7% accounting for up to 22 million hectolitres, in Argentina it grew up to 15 million hectolitres and in Chile, it became almost 13 million hectolitres (Turkey, StatOIV extracts, n.d.). According to the industry analysts, in the alcohol market, the higher the social position of a person is, the more he or she prefers alcohol with lower alcohol content, it is a growing interest in fine wine (Turkey, StatOIV extracts, n.d.). Turkey was added to the list of most perspective countries in the industry, however, it needs changes to become competitive with world leaders in wine production.

The Overview of Turkish Wine Industry

History

The wine industry of Turkey has a very long history with its ups and downs. The cultivation of grapes on the territory of modern Turkey began in ancient times (according to some sources, it maybe 6,000 years old) (Brown, 2010). In Turkey, there are about 600 indigenous varieties of grape for wine. Archaeological excavations show that in 8-6 century BC, there was winemaking on the territory of modern Turkey (Brown, 2010). During the time of the Hittites, Phoenicians, Lydians, Phrygians, Romans, and Byzantines, grapes and wine were the main products supplied to various parts of Europe from Anatolia to the Aegean coast, and from Thrace, where viticulture and winemaking have received considerable attention (Brown, 2010).

In the days of the Ottoman Empire, winemaking, as well as the use of alcoholic beverages in general, was not welcomed because of the Islamization of the country (Huyghe, 2014). The development of viticulture was aimed at meeting the needs of the population in fresh grapes and grape juice. In the XX century, after Kemal Ataturk came to power, the attitude to winemaking changed for the better and more lenient (Huyghe, 2014). Thus, even historically Turkey was determined to establish and develop wine production. At the moment, it is important to preserve natural resources and keep up with the world’s wine market leaders’ pace.

Current State of the Industry in the Country

For now, the wine industry plays an important role in Turkey. The Islamist government abolished prohibitive duty on imported wine, reducing it from 400% to 50%, which allowed foreign wines to come freely to country where most people actually do not drink alcohol at all for the same religious reasons (still the Turks consume a liter of wine a year per capita) (Golicic & Flint, 2014). The purpose of this broad step was to win the attention of the European Union because Turkey is eager to become a full member in this organization. Such divergence of views with respect to wine in a Muslim country is possible only because Turkey is a secular republic where religion and state became separate due to the efforts of Kemal Ataturk, who laid the foundation of the modern Turkish lifestyle (Robinson & Kenyon, 2009). Therefore, thanks to Ataturk, Turkey, previously invisible on the world wine map, is now numbering about 100 wineries and currently produces about 275 million liters of wine per year (The Wine Institute Statistics, n.d.). This amount is almost equal to wine production in Canada and is superior to such wine production countries as Lebanon and Israel.

The modern country produces about 275 million liters of wine annually (The Wine Institute Statistics, n.d.). Alcoholic beverages are taxed at 63% of the wholesale price (The Wine Institute Statistics, n.d.). The issues of viticulture and winemaking belong to the Ministry of Agriculture, Forestry and Rural Affairs. In 2010, Turkey was the fourth country in the world in terms of cultivated grapes, but only 40% goes to the cooking berries grape juice and wine (The Wine Institute Statistics, n.d.). Turkish wines are exported to Germany, Belgium, Luxembourg, and other countries with large Turkish communities (The Wine Institute Statistics, n.d.). Also, small deliveries are carried out to Sweden, Switzerland, Great Britain, Denmark, Holland, Canada, the USA, and Japan (The Wine Institute Statistics, n.d.). In addition to wines from grape, produced in Turkey, there is a wine from other fruit including apples, blackberry, pomegranate, raspberry, peach, melon, cherry, mulberry, and others. Thus, it is obvious that the wine industry is promising for Turkey and exporting products abroad will help to gain new markets.

Analysis of the Industry

It is necessary to analyze the major producers of wine in the country on the basis of Porter’s National Diamond model, discuss market entry strategy and contemporary management issues. The main producers of wine in Turkey are Tekel which was formerly the largest manufacturer of alcoholic beverages in Turkey, Sarafin (produces wine, practicing one-year aging in oak barrels), Doluca (the largest producer, about 35% of wine produced in Turkey), Kavaklidere (the second in terms of volume wine producer in Turkey), Mey – the successor of “Tekel”, Sevilen, Bo??azkere, Umurbay, Melen, Gülor, Ganos Winery, Lobiteks, Pamukkale (The Wine Institute Statistics, n.d.).

The Turkish wine industry is growing. Moreover, the government is changing the regulations to help wine producers. The law on a monopoly on alcohol stimulated the government to eliminate the minimum annual volume of sale specified in the framework of pricing on the current year (Storchmann, 2011). The council no longer sets prices for alcohol to regulate the market of tobacco products and alcoholic beverages (Storchmann, 2011). Thus, the state will only regulate the methods and principles for permitting, compliance and supervision in the field of domestic and foreign trade and trafficking of alcohol and, particularly, wine.

Porter’s National Diamond Model

1. Factor Conditions. The Turkish wine industry has many advantageous conditions. The factor conditions include a favorable climate for wine grapes and other fruits, available and not expensive human resources in terms of labor cost, good infrastructure and logistics. Therefore, these aspects increase the competitiveness of the Turkey wine industry.
2. Related and supporting industries. The related industries are marketing, growing wine cultures (agriculture) and logistics. However, they are not interacting at maximum efficacy regarding the wine industry. Probably, the elements of those industries might have worked in clusters to optimize cooperation.
3. Home Demand Conditions. The wine industry is successful in Turkey because it is a secular Muslim country. Therefore, there is a demand for the product that had a tendency to grow (Fig. 2). That gives a large advantage compared to other Muslim countries. However, entering international markets would be more beneficial for the Turkish wine industry.
4. Strategy, Structure, and Rivalry. Turkey has many regions that produce wine and a number of companies. However, small enterprises have problems with modern equipment and are not competitive with large companies. The good point is the absence of monopolists in the market.

Market Entry Strategy

The problem of Turkey wine companies is the lack of strategic management. Modern production is performed by very few companies in Turkey. There are three giants – Doluca, Kavaklidere, and Sevilen that account for 90% of the local wines and almost all exports (Szolnok, 2011). The main countries-importers of Turkish wines are Germany, Belgium, Luxembourg, France, which are home to large Turkish and Japanese communities (Szolnok, 2011). Small wineries are poorly technically equipped and thus not competitive. However, a prospect of Turkey joining the EU started a surge of investment in viticulture and winemaking. For example, Doluca invested about $ 40 million over the past 10 years in the creation of a modern raw material and technological base (Szolnok, 2011). Moreover, small farmers have plans to enter the international market with their wine and for this purpose, they uproot unpromising vineyards and plant varieties of European vines. Somehow it happened that a group of farmers, previously engaged in tobacco and sugar beet production, has created cooperative mechanisms to be engaged in winemaking (Turkish wine producers: Sour grapes, 2016). They plan to restore the abandoned vineyards, for which the EU has allocated to them more than a million euros. Therefore, Turkey has perspectives on development due to foreign direct investments from other countries. That is particularly important on the onset of Turkey’s vector on European Integration. However, the country must be ready to establish the most favorable investment climate in governing, jurisdiction economy and other spheres.

Contemporary Management Issues

Current issues in wine industry management are on the way of stimulating demand both in Turkey and abroad and supplying the products abroad. Stimulating demand can be solved in several ways. The most important area of government support of this process would be to allow, for example, the promotion of wine through the mainstream media. The efforts of wine producers should be made in a variety of marketing strategies to better adapt to the global market. In fact, in these conditions, the winemaker chooses the wine, which he loves, and not the one that the consumer prefers. The second problem is in managing the costs and creating a specter for customers. For example, a company should be able to produce different types of wine: sweet, semi-sweet, red, pink, white, etc. Also, the target population must be taken into account to create more accessible brands and a luxury category too. Also, it would be favorable to develop e-commerce and online advertisement. Every enterprise in the wine industry must develop a clear vision of development and/or going to the international market. The most interesting idea is the combination of wine and tourism in Turkey.

While solving the managerial problems, it is necessary to take into account overall conditions in the country. The major issues may be solved with investors’ costs in forms of FDIs, but Turkey has high political risks and instability such as problems with Russia and with Kurdistan. Turkey needs all four types of FDIs as it needs to increase the efficacy of the wine industry, to develop and preserve resources, find and win new markets. Luckily, Turkey is active in regional processes of integration which opens new opportunities for the wine industry.

Wine Industry and Tourism

Spectacular Turkish ruins are a popular attraction in the country. Nevertheless, the exotic state also has a lot of potential with respect to wine tourism. Today in Turkey, there is a rebirth of the wine industry, so travelers from around the world do not want to miss the opportunity to get acquainted with the wine regions of the country. Thus, regions of Thrace and Izmir are very popular.

For a long time, Turkey has been a striking wine-growing region. Turks grow from 600 to 1,200 grape varieties on their fertile land (Brown, 2010). Rich vineyards for the production of Turkish wines grow on the shores of the Marmara Sea, Cappadocia in Central Anatolia, as well as in the eastern provinces of Diyarbakir and Elazig (Sakarya, 2011). Tourists are coming to taste wine and enjoy the vineyards in Tekirda??, which is 145 kilometres west of Istanbul and Cappadocia. The region was known for its wines for thousands of years (Sakarya, 2011). On the territory of Barbare vineyards, away from Tekirda?? Barbaros suburb in the south, one of the most important wineries is opened for visits all year round.

Cappadocia is a renowned place in Turkey, which organizes wine tours and tastings. Tourists are offered to spend a full day on the vine tours in Cappadocia, which include trying samples (Sakarya, 2011). During the grape tour participants also get acquainted with the ancient sights of the city. The rich history of Turkey and a variety of indigenous grape varieties makes Turkish wines especially noteworthy for the beverage lovers. In Turkey, the wine is made not only from the most popular international varieties of grapes, but also from the local Turkish berries such as Öküzgözü, Bo??azkere, Kalecik Karasi and Narince (Sakarya, 2011).

In the European part of Turkey, Thrace, travelers visit the new and established wineries and wineries located there (Gali Suvla, Gülor, and Doluca). Winery Gülor, founded in 1993, was the first Turkish manufacturer of mass production wine. This plant is also credited with the import and cultivation of international grape varieties in the country. Doluca Winery was established in 1926 (Sakarya, 2011). It is considered as one of the first wineries that set standards for Turkish wine. Doluca is the most common brand of wine, which often can be seen in Turkish stores. This is not surprising, given that Doluca produces 40 beverage varieties, with an annual capacity of 14 million bottles (Sakarya, 2011).

Due to its proximity to Istanbul, Thrace wineries wine tours in this area have become quite popular. After relaxing in the Turkish metropolis, one may allocate a day to get acquainted with the wine culture of the country. In Thrace, there is still a couple of famous vineyards called Arcadia. Wine Tour in Izmir is also memorable. The three young wineries are located here, about an hour’s drive from the city of Izmir (Sakarya, 2011). Thus, Urla is a picturesque seaside town with wineries around it. Lovers of wine tourism should definitely visit the region for new experiences (Sakarya, 2011). On the territory, there are two small boutique wineries. Urla winery includes vineyards on the territory of 40-acres. Part of the ancient vineyards includes a terrace, which is proof of the early production of wine (Sakarya, 2011). The good news is that if a tourist wants to treat himself to aromatic drinks in Urla, he or she can visit the boutique hotel. Urla is for many travelers the base point for exploring the wine-making in Turkey. The winery is located next to a nature reserve. The hotel includes a plant nursery and an arboretum. Winery Urla has more than 7,000 visitors a year (Sakarya, 2011).

Winery Urlice uses grapes that are grown on four acres of land. The owners bought the property in 2004, and the first crop was released in 2008 to participate in the Slow Food movement (Szolnoki, 2013). The third is a family winery called Mozaik that uses organic cultivation of grapes (Sakarya, 2011). The 14 hectares of vineyards were planted in 2008 with its first harvest in 2010 (Sakarya, 2011). The Mozaik Winery produces only red wines that are imported from Italy and France. There are many interesting wineries in the area of Izmir.

During the trip to Turkey, visitors should not miss t opportunity to explore the wine country’s east side. The region has a long history of wine, making it perfect for this tourism destination. In addition to the modern wineries, Turkey is famous for a lot of different ruins that testify exciting stories. Therefore, the overview of the most important regions for the wine industry shows how tourism can successfully intersect with industry. That may attract new customers, new FDIs and help to develop interesting concepts of cooperation among enterprises.

Conclusions

Turkey has many perspectives in developing the wine industry. There are favorable factors like climate (natural factors), human resources and managerial aspects. However, there is still no established successful business model of the wine industry in the country. There must be proper cost management, branding, effective logistics and competition within a country. Turkey should also work to attract foreign direct investments and the government should pay more attention to make wine business more attractive for domestic and foreign investors. The world market of alcoholic beverages is developing very fast and Turkey must undergo modernization to compete. The Turkish government is helping to conduct business in the area and makes the wine industry more Europe-oriented which requires a very high quality of products that correspond to the EU standards.