RAKI, the aniseed-flavoured drink that Mey Içki specialises in, is a popular Turkish aperitif. Shareholders in Diageo will hope the deal whets Paul Walsh’s appetite for similar deals, which will allow the company to move into emerging markets for alcohol.
Turkey is a good place to start. Mey Içki has the market for Raki, Turkey’s most popular drink, sewn up. It has an 80 per cent share of Raki sales, equivalent to 20 per cent of the total alcoholic beverage market.
However, Walsh is not paying 9.9 times 2010 earnings for Raki alone. Instead he wants to use Mey Içki’s huge distribution network to capitalise on growing demand for premium western spirits. With a network of 650 sales staff that cover 80 per cent of outlets, Mey Içki can help boost Diageo’s relatively modest sales in the region (around £20m).
Still, Diageo will need to expand more quickly into emerging markets if it is to stave off stagnating sales in mature markets. North America and Europe still account for 80 per cent of operating profit. An aperitif is all well and good: now Walsh needs to tuck in.