From tax notices to allegations of illegally boosting market share, French liquor giant Pernod Ricard faces business and regulatory challenges in India, which it says is "among the top three must-win markets."
The maker of Chivas Regal and Absolut vodka is the second-largest spirits company globally and in India. It accounts for 17% of the alcohol market by volume in India, where its competitors include Diageo, IWSR Drinks Market Analysis says.
Leadership Challenge
Pernod Ricard's managing director for India Paul-Robert Bouhier resigned from his position, a decision that sources said was announced internally on April 26.
Bouhier only took over the India job in January. He joined Pernod Ricard in 1995.
Dehli City Investigation
Pernod has since last year been under scrutiny from India's Enforcement Directorate as part of an investigation into how retailers, manufacturers and politicians allegedly colluded to illegally profit from the 2021 auction of liquor retail licences in New Delhi.
The capital city's liquor policy prohibited manufacturers from participating in retail sales, directly or indirectly. Pernod was "in contravention" as it effectively used bank guarantees to invest in retailers, the agency says.
The agency also accuses Pernod of illegally making profits of $23 million (€20.9 million) by giving false price information to Delhi authorities.
Pernod has strongly denied the allegations.
Shut Out Of Delhi Market
New Delhi city authorities in April rejected Pernod's application to renew its liquor sale licence, citing ongoing investigations into the company. Pernod told a Delhi court it has been "suffering massive losses" as its brands have not been available in the city for six months.
Pernod has challenged the rejection and says it is "keen to restart supplies as soon as possible".
Federal Tax Demand
Pernod faces a nearly $250 million (€227 million) federal demand for allegedly undervaluing imports for over a decade to avoid full payment of duties.
India's customs authority in a court filing last year called the company a "habitual litigant" and accused it of a conspiracy "to defraud the Government of India of its legitimate revenue".
Pernod, which challenged the demand, says it has "always endeavoured to act with full transparency" and complies with all local laws.
Impact On Investments
Pernod says that since 1994, its tax disputes have made it tough to do business in the country.
In a letter written to Prime Minister Narendra Modi in 2021, the company said that "ever-lasting litigation has been a big strain on our ease of doing business and has inhibited fresh investment by our group headquartered in Paris (France) for expansion of business in India".
In July 2022, Pernod wrote a letter to the federal tax authority saying it was "facing significant business continuity challenges" and that operational challenges were choking its supply chain.
High Import Taxes
India's alcohol market is heavily regulated and Pernod - like much of the industry - has been concerned about the 150% tax on imported liquor.
In April last year, the company urged the government to drop the tax it said poses a "large challenge" for Pernod Ricard and puts many of its drinks out of reach of consumers.
Pernod's revenue from operations in India stood at $2.4 billion (€2.18 billion) in 2020-21, but taxes and duties - which include federal, import and state levies - accounted for 79% of that. Its India net profit for the year stood at $130 million (€118 million).
News by Reuters, edited by ESM – your source for the latest drinks news. Click subscribe to sign up to ESM: European Supermarket Magazine.
