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DIAGEO PLC

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Diageo : No more scotch? India moves to ban imported goods at military shops

10/23/2020 | 01:31pm EDT
FILE PHOTO: Bottles of Chivas Regal blended Scotch whisky, produced by Pernod Ricard SA, are displayed on the campus of the HEC School of Management in Jouy-en-Josas, near Paris

NEW DELHI (Reuters) - India has ordered its 4,000 military shops to stop buying imported goods, according to a document reviewed by Reuters, a move that could send an unwelcome signal to foreign liquor firms such as Diageo and Pernod Ricard.

India's defence canteens sell liquor, electronics and other goods at discounted prices to soldiers, ex-servicemen and their families. With annual sales of over $2 billion, they make up one of the largest retail chains in India.

The Oct. 19 internal order from the defence ministry, reviewed by Reuters, said that in future, "procurement of direct imported items shall not be undertaken".

The order said the issue had been discussed with the army, air force and navy in May and July, and was aimed at supporting Prime Minister Narendra Modi's campaign to promote domestic goods. A defence ministry spokesman declined to comment.

The order did not specify which products would be targeted. However, industry sources said they believed imported liquor could be on the list.

Imports make up around 6-7% of total sales value in the defence shops, according to an August research column of the government-funded Institute for Defence Studies and Analyses (IDSA). Chinese products such as diapers, vacuum cleaners, handbags and laptops, account for the bulk if it, it said.

Reuters reported in June that Pernod and Diageo had briefly stopped receiving orders for their imported brands from such government stores. Diageo did not respond to a request for comment, while a Pernod spokesman declined comment.

While imported liquor sales at defence stores generate only about $17 million in annual sales, the order would send a negative signal, said an executive whose company sells products at defence stores.

"The (foreign liquor) sales are small - but why would a government which is wanting to attract foreign investments do this? It's a confusing, conflicting signal," said the executive.

India has in recent months taken steps to curb Chinese businesses and investments following a border clash in June that killed 20 Indian soldiers.

(Reporting by Aditya Kalra in New Delhi; Editing by Peter Graff)

By Aditya Kalra


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
DIAGEO PLC 1.16% 3472.5 Delayed Quote.19.34%
PERNOD RICARD 0.54% 178.3 Real-time Quote.13.11%
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Net income 2021 2 711 M 3 826 M 3 826 M
Net Debt 2021 13 257 M 18 710 M 18 710 M
P/E ratio 2021 29,6x
Yield 2021 2,05%
Capitalization 80 228 M 113 B 113 B
EV / Sales 2021 7,49x
EV / Sales 2022 7,15x
Nbr of Employees 27 788
Free-Float 91,0%
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Average target price 3 500,63 GBX
Last Close Price 3 434,50 GBX
Spread / Highest target 22,3%
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Ivan M. Menezes Chief Executive Officer & Executive Director
Kathryn A. Mikells Chief Financial Officer & Executive Director
Javier Ferrán Larraz Chairman
Alan James Harris Stewart Independent Non-Executive Director
Nicola S. Mendelsohn Independent Non-Executive Director
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