Fake labels taking a toll on liquor firms
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Bangalore: United Spirits Ltd (USL), Pernod Ricard and Allied Blenders and Distillers Pvt. Ltd (ABD) and other top liquor companies are losing out on liquor sales in fast-growing eastern states such as West Bengal, Assam and Bihar because of a significant increase in sales of fake labels—poor quality blends that are packaged as popular alcohol brands.
Over the years, apart from the states in eastern India, bottles of counterfeit alcohol has been sold in some other states including Andhra Pradesh, Rajasthan and Haryana, where regulation is relatively weaker.
It has become increasingly lucrative to sell counterfeit labels because of a sharp rise in taxes in states such as Assam, West Bengal and Bihar over the past year. Sales of these products are now accounting for as much as 10-12% of overall revenue in the eastern markets from less than 5-6% earlier, executives at two liquor companies said.
“Regulation is lax in the east so it’s easier to sell spurious liquor there,” said Roy.
States in eastern India account for roughly 10-12% of liquor sales in the country and are among the faster-growing regions in India at a time when overall growth in India’s liquor industry has dropped to its lowest in a decade. Last week, India’s fourth largest distiller Tilaknagar Industries Ltd bought the branded alcohol business of Kolkata-based IFB Agro to increase its presence in states such as West Bengal and Assam.
Poor quality liquor is increasingly being packaged as premium brands, especially in Assam, Meghalaya and Tripura, to dupe customers, said an executive at one of the five largest distillers in India, who spoke on condition of anonymity.
“Rather than targeting only mass brands, the perpetrators are now going after the premium brands because the profit margins are huge. This problem has become much worse after the increase in duties because the margins have become even bigger,” the executive said.
Though spurious liquor hurts all the major liquor companies, there has been no joint effort to control or clamp down on sales of these products. Rather, some companies including ABD and USL have hired private investigators to help identify the firms that are selling fake liquor and either report these firms to the government or get them to stop selling fake liquor independently.
“We are aware of the attempts by unscrupulous elements to fake our market leading brands,” a USL spokesperson said by email. “We have been fighting this menace for a long time through internal resources and external assistance. We will continue to fight and ensure that our valued customers get our genuine brands with full quality assurance.”
ABD’s Roy said that the company complained to state regulators about sales of counterfeit liquor but government officials haven’t been able to control the problem yet.
“The regulators are aware of the problem and they are trying but not much has been done so far. It’s a bit difficult for them to because the guys doing it are very flexible. If you stop them once, they move to another location and start again,” Roy said.
Emails and phone calls to excise department officials in West Bengal and Assam went unanswered. Mint couldn’t reach officials in other states.
“The problem is bigger for the larger players because if the quality of their premium brands is found to be bad their image gets hit,” said Santosh Kanekar, former marketing head at Diageo Plc’s India unit. “The state officials are usually quick in responding to complaints of spurious liquor because it hurts their revenues... I think they will clamp down on it at some point. Among the companies, Diageo has had a very strong anti-counterfeiting team over the years so USL will have additional in dealing with the issue,” said Kanekar, who now advises funds on investing in India.