Istanbul's Tobacco Story, how BAT failed - What is your 100 %?
During my 2024 trip to Istanbul, a city with a deep connection to smoking, I started thinking about the tobacco business. This curiosity led me to explore the story of British American Tobacco (BAT) and its struggles in Turkey, contrasting sharply with the success of Philip Morris. Here's a deeper look into where BAT went wrong and what we can learn from their experience.
The history of the tobacco industry in Turkey is a fascinating saga that stretches back over centuries, intertwining with the country's cultural, economic, and political narratives. Turkey's relationship with tobacco has deep roots, reflecting both its traditional uses in social settings and its significant role in the national economy.
Early Beginnings and Ottoman Era
Tobacco was introduced to Turkey and the broader Ottoman Empire in the 1600s. Initially met with resistance due to religious and health concerns, it eventually became an integral part of Ottoman society. By the 19th century, tobacco had become a major agricultural product for the Ottoman Empire, with significant portions cultivated for both domestic use and export.
The Establishment of TEKEL
The pivotal moment in modernizing Turkey's tobacco industry came with the establishment of TEKEL (Türkiye Tekel Kurumu) in 1925, following the foundation of the Turkish Republic. TEKEL was created as a state monopoly to control the production, marketing, and sales of tobacco and alcoholic beverages. This move was part of broader efforts by the newly formed republic to centralize economic activities and generate revenue for national development projects.
Growth and Globalization
Throughout the 20th century, TEKEL played a crucial role in Turkey's economic development, with tobacco being one of the country's most valuable exports. The fertile lands of the Aegean and Black Sea regions produced high-quality tobacco that was sought after in international markets. However, the global landscape of the tobacco industry began to change in the latter half of the century, marked by the entry of multinational tobacco companies and the liberalization of markets.
BAT's Big Plan
BAT wanted to be a big player in Turkey's tobacco market. They tried to do this by buying into TEKEL, Turkey's government-run tobacco company. BAT thought this was a good idea because Turkey was opening up its market to more foreign business. But, things didn't go as planned.
Putting All Eggs in One Basket: BAT's whole strategy was about getting a piece of TEKEL. They thought controlling TEKEL would automatically make them a leader in Turkey. But Turkey's government and economy were going through a lot of ups and downs. Changes in government and economic troubles made it hard for BAT to buy TEKEL.
Not Seeing the Bigger Picture: BAT didn't fully understand how tough the rules in Turkey could be for foreign companies, especially in the tobacco industry. They also didn't predict how the economy's problems, like money losing value, could make their plan even harder. Because of these issues, BAT couldn't get the success they hoped for right away.
Philip Morris Takes a Different Road
While BAT was focused on TEKEL, Philip Morris took another path. They didn't just try to buy into the government tobacco company. Instead, they made deals with Turkish companies and started making cigarettes in Turkey. This way, they could work around the tough rules and economic problems that were tripping up BAT.
56 % Marketshare in Türkish hands
Reflecting further on the tobacco industry's landscape in Turkey, a significant piece of data caught my attention, highlighting the fierce competition and market dynamics as of 2022. According to Statista, a leading provider of market and consumer data, an intriguing trend emerged: 56% of the tobacco market share in Turkey was held by brands not affiliated with British American Tobacco (BAT) or Philip Morris. This statistic is a testament to the evolving nature of the tobacco market in Turkey, showcasing a diverse range of players and a shift in consumer preferences.
BAT's troubles in Turkey show how important it is for companies to have more than one plan. Relying too much on one idea, like buying TEKEL, can backfire if things change, like the economy or government rules.
Public Health and the Tobacco War
The fight between BAT and Philip Morris in Turkey wasn't just about business. It also had a big impact on public health. Both companies wanted to sell more cigarettes, but more smoking can lead to more health problems for people. This situation shows how big businesses, like tobacco companies, can affect everyone's health.
Takeaway
Don’t Put All Eggs in One Basket
Learning from BAT's journey in Turkey offers valuable insights for businesses aiming to expand internationally:
Diversify Strategies: Don’t rely on a single approach. Having multiple plans allows for flexibility and adaptation to unexpected challenges.
Understand the Local Context: Deep knowledge of the local market, regulations, and economic conditions is crucial. This understanding can guide more informed and effective strategies.
Consider Health and Ethical Impacts: Evaluate how your business operations impact local communities, especially in industries like tobacco, where health concerns are significant. Aim for practices that contribute positively to societal well-being.
