Diageo's Indian subsidiary, United Spirits, has provided financial documents to New Delhi's anti-corruption police as part of an ongoing investigation into liquor supply practices. The inquiry focuses on billing and discount procedures involving government agencies that manage alcohol retail outlets in the city.
The investigation covers the period from 2017 to 2020, examining the company's financial dealings with Delhi city agencies responsible for liquor shops. Hina Nagarajan, CEO of United Spirits and member of Diageo's global executive committee, was requested to appear before the police on July 26, 2024. However, company representatives submitted the required documentation in her stead.
The submitted materials included bank statements, records of financial transactions with Delhi city agencies, and relevant agreements. Diageo India has characterized the investigation as a "routine information and fact-finding exercise" and stated its cooperation with authorities. The company also suggested that similar notices may have been sent to other manufacturers in the industry.
"We believe this is a routine information and fact-finding exercise, and we are cooperating with the authorities."
This investigation sheds light on the complexities of India's liquor market, particularly in New Delhi. The capital city mandates that all liquor retail shops be operated exclusively by government agencies, creating a unique distribution system. The anti-corruption police are examining whether there were any irregularities in the process of supplying liquor to these government-run shops and if the discounts offered by companies complied with local liquor laws.
India's alcohol industry is known for its strict regulations, with each state implementing its own policies. This regulatory environment presents challenges for international companies operating in the market. Diageo, as the world's largest spirits producer, has navigated these complexities to become a major player in India's $35 billion liquor market.
The company's position in India is particularly significant given the current situation of its main competitor, France's Pernod Ricard. Since late 2022, Pernod Ricard has been unable to retail its products in New Delhi due to separate allegations of wrongdoing, further highlighting the regulatory challenges in the market.
Diageo's strong presence in India is underscored by its acquisition of a controlling stake in United Spirits in 2013. This move allowed the company to tap into one of the world's largest whisky markets by volume. Despite the regulatory hurdles, India's growing middle class has fueled increased demand for premium alcoholic beverages, contributing to the consistent growth of the country's alcohol market over the past decade.
As the investigation continues, it remains to be seen how it will impact Diageo's operations in India. The company's cooperation with authorities and its established market position may help it navigate this challenge. However, the case serves as a reminder of the ongoing complexities and scrutiny faced by international alcohol companies operating in India's diverse and heavily regulated market.