Diageo India’s CEO Was Hit With Anti-Corruption Probe in Critical Market

Reuters reported Thursday that Diageo India's CEO faced orders from New Delhi's anti-corruption police to appear in person and cooperate in an investigation involving the spirits giant's billing procedures with government entities and liquor shops from 2017 to 2020. Diageo is the majority owner of United Spirits Limited, and Reuters reported that law enforcement summoned United Spirits CEO Hina Nagarajan to arrive in person before authorities with documentation and sales records.

"We are in the process of sending in an authorized representative, as sought in the notice," a spokesperson for the company said, according to Reuters.

The outlet reported that the investigation concerns whether or not Diageo India offered liquor to agencies overseeing liquor stores and whether or not the government agencies paid suppliers offering discounts earlier than others. Bottle Raiders reached out to Diageo India, and a spokesperson referred to the article as "grossly misleading." The spokesperson claimed law enforcement requesting documentation from the spirits megabrand was a "routine information and fact-finding exercise." "We have recieved a notice that we believe may have been sent to other manufacturers as well," the spokesperson said. "Such notices from regulatory authorities requesting information are usually addressed to the company head - this is a routine process. This notice requires information to be submitted by a representative for the company, pertaining to its operations between the period of 2017 and 2020, not specifically from the Chief Executive Officer." Diageo India maintained it was cooperating with law enforcement, and that the brand always "maintained the highest standards of regulatory compliance and the headline and article suggesting any kind of culpability is irresponsible reporting." India appears to be cracking down on big alcohol; on Wednesday, Pernod Ricard lost its appeal to renew its liquor license in New Delhi. This marked the latest setback the supplier faced within the market after a string of legal woes including two antitrust probes. India is one of the most lucrative markets in the world and accounted for a whopping 10% of Pernod Ricard's total revenue, with 5% of that coming from New Delhi alone. The stakes are equally high for Diageo, which controls 17% of India's malt market, according to The Economic Times . The Australian Broadcast Corporation reported in 2023 that India consumed over half the world's whisky at 1.5 billion liters, making the market an unbelievably lucrative one. Brands like Johnnie Walker lead the charge, accounting for 30% of sales within India's marketplace, according to The Economic Times. Needless to say, if Diageo's fate is similar to Pernod Ricard's — it's going to hurt.

Sell-Offs and Stock Slumps: What's Going on With Diageo?

In early July , Diageo's stocks dropped to $128 a share, a four-year low. MarketWatch reported in early July that Goldman Sachs urged individuals with stock in Diageo to sell. The company additionally shared a decline in net sales to the tune of $158 million, and investment directors like Russ Mould claimed Diageo would be an ideal candidate for a takeover bid. Latin America and the Caribbean experienced particularly strong sales slumps, with a 23% dip. In December, Axios reported that the spirits giant expressed interest in selling its beer portfolio, but the brand claimed it would maintain ownership of Guinness at the time. Things shifted in June , when Bloomberg reported Diageo sold 58% of its Guinness Nigeria stake to the Tolaram Group. Diageo also sold Pampero, a Venezuelan rum brand, earlier this month . What's happening with Diageo appears to be a part of a pattern, as consumers are cutting their spending due to rampant inflation in conjunction with recent claims from the World Health Organization that no amount of alcohol is safe . Just Drinks turned to spirits industry leaders in January to gauge their outlook on what 2024 might look like for the booze biz. Mast-Jägermeister CEO Michael Volke shared his thoughts on his company's health with the outlet.

"In an ongoing period of significant global, economic, political and social disruption, there are many challenges to our business. We have already taken some pricing adjustments in recent years to partially mitigate cost inflation. However, price elasticities are already very stretched. As a result, we see little to no room for further price measures in 2024."

Needles to say, it's possible the setbacks Diageo is facing are affecting most spirits brands, and that 2024 is going to be a very bumpy ride. [newsletter-promo]