Diageo’s Indian unit, United Spirits (UNSP.NS), has recently submitted key financial documents to New Delhi's anti-corruption police as part of an ongoing investigation into the company’s billing and discount practices related to liquor sales to government agencies. This investigation has brought the practices of major liquor suppliers under intense scrutiny, particularly in how they conducted business with state-run alcohol shops in the Indian capital.
The investigation, which focuses on the period between 2017 and 2020, aims to uncover whether the discounts offered by Diageo India and other liquor manufacturers to government-run shops were in compliance with local liquor laws. The New Delhi police have questioned whether these discounts were part of a broader strategy to secure early payments from the city agencies. The probe has raised concerns about the transparency of such dealings and whether any misconduct occurred during the transactions.
Hina Nagarajan, the CEO of United Spirits and a member of Diageo's global executive committee, was summoned to appear before the police on July 26. However, instead of appearing in person, Diageo India, through its representatives, provided the requested documents, which included bank statements, records of financial transactions with Delhi government agencies, and agreements related to the liquor supply. A source familiar with the matter, who preferred to remain anonymous, confirmed the submission of these documents but noted that Nagarajan did not appear in person.
Diageo India has characterized the investigation as a "routine information and fact-finding exercise," emphasizing its cooperation with the authorities. The company also suggested that other liquor manufacturers might have received similar notices from the police, indicating that this probe could extend to other players in the industry. Despite repeated attempts, Diageo India and the Delhi anti-corruption police have not responded to requests for comments from Reuters.
This investigation comes at a critical time for Diageo India, as the Indian capital is a significant market for premium liquor brands. The market dynamics have further intensified due to the challenges faced by Diageo's main competitor, France's Pernod Ricard. Pernod Ricard has been unable to retail its products in New Delhi since late 2022 due to its involvement in a separate investigation concerning allegations of wrongdoing.
For Diageo, which is the world's largest spirits maker and commands a 19% market share by volume in India's $35 billion liquor market, this investigation poses a significant challenge. The company, known for its flagship brands like Johnnie Walker scotch whisky and Smirnoff vodka, must navigate this scrutiny carefully to maintain its market position and consumer trust in one of its most important markets.
As the investigation unfolds, the outcome could have broader implications for the liquor industry in India, particularly in how companies manage their relationships with government agencies. With the probe still ongoing, the industry is watching closely to see whether any regulatory changes or legal actions will follow, potentially reshaping the way liquor sales are conducted in the region.
(Source:www.economictimes.com)
The investigation, which focuses on the period between 2017 and 2020, aims to uncover whether the discounts offered by Diageo India and other liquor manufacturers to government-run shops were in compliance with local liquor laws. The New Delhi police have questioned whether these discounts were part of a broader strategy to secure early payments from the city agencies. The probe has raised concerns about the transparency of such dealings and whether any misconduct occurred during the transactions.
Hina Nagarajan, the CEO of United Spirits and a member of Diageo's global executive committee, was summoned to appear before the police on July 26. However, instead of appearing in person, Diageo India, through its representatives, provided the requested documents, which included bank statements, records of financial transactions with Delhi government agencies, and agreements related to the liquor supply. A source familiar with the matter, who preferred to remain anonymous, confirmed the submission of these documents but noted that Nagarajan did not appear in person.
Diageo India has characterized the investigation as a "routine information and fact-finding exercise," emphasizing its cooperation with the authorities. The company also suggested that other liquor manufacturers might have received similar notices from the police, indicating that this probe could extend to other players in the industry. Despite repeated attempts, Diageo India and the Delhi anti-corruption police have not responded to requests for comments from Reuters.
This investigation comes at a critical time for Diageo India, as the Indian capital is a significant market for premium liquor brands. The market dynamics have further intensified due to the challenges faced by Diageo's main competitor, France's Pernod Ricard. Pernod Ricard has been unable to retail its products in New Delhi since late 2022 due to its involvement in a separate investigation concerning allegations of wrongdoing.
For Diageo, which is the world's largest spirits maker and commands a 19% market share by volume in India's $35 billion liquor market, this investigation poses a significant challenge. The company, known for its flagship brands like Johnnie Walker scotch whisky and Smirnoff vodka, must navigate this scrutiny carefully to maintain its market position and consumer trust in one of its most important markets.
As the investigation unfolds, the outcome could have broader implications for the liquor industry in India, particularly in how companies manage their relationships with government agencies. With the probe still ongoing, the industry is watching closely to see whether any regulatory changes or legal actions will follow, potentially reshaping the way liquor sales are conducted in the region.
(Source:www.economictimes.com)
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