New Delhi: Diageo India will change the labels of several whisky and rum brands flagged by India’s food safety regulator but retain their composition, even as the company gets 90 days to clear existing stocks in Maharashtra, company executives told Mint on Tuesday on condition of anonymity.
At around 8:20 pm on Wednesday, United Spirits informed the stock exchanges that the Food Safety and Standards Authority of India (FSSAI) had cancelled its 29 June order restricting the sale of one of the company’s products made at its Baramati plant, McDowell's Celebration rum. The company had challenged the order in the Bombay High Court, saying the product’s labels complied with applicable rules. The company said there is no material financial or operational impact from the latest development.
The cancellation came as Diageo and other liquor makers seek to comply with FSSAI directives to either remove disputed flavouring agents or relabel their drinks, according to three people aware of the matter. The 90-day relaxation is intended to give companies time to transition, and is not a rollback of the regulator’s position, they said.
The move means brands such as Royal Challenge, Antiquity Blue and McDowell’s No. 1 Celebration Matured XXX Rum could see changes in front-of-pack declarations such as “whisky-flavoured spirit” or “rum-flavoured spirit”, according to company executives. Diageo will make the changes while separately challenging the regulator’s position in the Bombay High Court.
“Our products have consistently met all applicable safety and quality standards. We have engaged with the FSSAI on their position of the existing guidelines and have since taken appropriate measures to align our products fully with the revised requirements. Diageo India remains committed to the highest standards of compliance and consumer safety,” United Spirits told Mint in WhatsApp text messages, after Reuters first reported the development on Monday.
Subsequent queries emailed to Diageo on Tuesday remained unanswered till press time. Queries emailed to FSSAI on Tuesday evening were not immediately answered.
A scale problem
The issue dates back to July, when FSSAI notices were sent to companies across the alcobev industry, including Diageo and Mohan Meakin Ltd, alleging violations over added flavours and age claims on popular products such as whisky, rum, gin, etc.
Industry experts say FSSAI’s reading of the rules could upend a long-standing manufacturing model for Indian whisky and rum, with implications for product costs, taste, pricing and availability.
Poonam Chandel, an industry expert and former managing director at companies like NeuWorld Spirits & Cobra Beer, and Vinod Giri, former head of the Confederation of Indian Alcoholic Beverage Companies (CIABC), both argue that India simply doesn't have the matured spirit stock to make such a change quickly, and that the disruption could touch everything from pricing to what falls under the “premium” label.
The industry’s central argument is that there may not be enough matured spirits available to quickly overhaul India's mass-market whisky and rum brands.
“India's whisky, brandy and rum market is approximately 432 million cases annually, representing approximately 1.73 billion litres of actual alcohol content…If FSSAI's interpretation requires these categories to be fundamentally reformulated around category-specific character spirits, India simply does not have this scale of matured whisky spirit, grape-derived brandy spirit or character rum distillate available today. This cannot be achieved overnight. It requires raw materials, capacity, capital and, critically for whisky, years of maturation," said Chandel.
She said the move was surprising given the sector's longstanding compliance with FSSAI requirements. Changing established recipes could alter familiar taste profiles, hurt consumer acceptance and affect state excise revenues, she said.
She questioned whether state governments would allow brands to raise prices if longer maturation made products more costly to produce.
“It is a very confused state. Millions of litres of mature spirit cannot be produced immediately. The scale of Indian whisky, from a maturation point of view, does not exist anywhere else in the world, so there is no way — at an industry level — that you can reformulate and then produce that much mature spirit in the short term,” said Sidharth Banerji, managing director of Kyndal Spirits.
Cost of changing
The economics could be just as difficult. Chandel said brands may have to be labelled as rum-flavoured or whisky-flavoured spirits, or start using mature malt spirit (MMS) and vatted malt spirit in products such as Royal Challenge and Antiquity.
Extra-neutral alcohol (ENA), the base spirit used in most Indian-made liquor, costs about ₹65 a litre, compared with ₹200-250 for even one-year-matured MMS, she said. A case requires about four litres of spirit, meaning the costlier input could potentially turn Royal Challenge and Antiquity into loss-making brands at current prices, according to her.
Chandel also pointed to a technical distinction: India makes ENA from broken rice, and it isn't matured. Only mature barley-derived spirits go into MMS. "What will the middle-class Indian now drink? This may lead to de-premiumization in the IMFL category. Will this imply that 'premium' is only single malt, gin and vodka?" she added.
Giri said the debate is about both how the spirit is made and how it's presented to consumers. "What FSSAI is saying is that if you take ENA, which is around 96% pure ethyl alcohol and add whisky flavour, caramel and other ingredients, you should not call it whisky but rather a whisky-flavoured spirit. The same applies to rum and brandy.”
FSSAI's position rests on how whisky and rum are traditionally defined—whisky from fermented cereal grains, rum from molasses or sugarcane juice, each distilled in a special way, Giri said. The issue, he said, isn't product quality but whether what's sold as whisky or rum genuinely fits that definition. Regardless of the merits, the directive, as it stands, would force companies to either change their products or relabel them midway through the year, both disruptive, which is why the industry should be given time to transition. He added that costs wouldn't rise much, but the disruption to manufacturing and the expense of relabelling would still be significant.
Giri said the tougher question is brandy. FSSAI had once required brandy to contain at least 2% grape-distilled spirit, a rule withdrawn roughly six years ago after the industry showed India doesn't grow enough grapes to meet it, a problem that could resurface now. Rum should be easier to comply with, given an ample supply of molasses, while whisky may need larger changes in sourcing, he said, adding that the industry can adapt though the shift won't be entirely smooth.
The regulatory issue
In July, the regulator sent notices to alcobev manufacturers alleging that they were using flavours to replicate the natural taste and aroma of rum, brandy, gin, whisky, wine and beer, and were making unauthorized age claims, including declaring an age that did not match the youngest spirit in a blend. Companies were asked to explain why action should not be taken against them under the Food Safety and Standards Act, 2006.
Diageo had earlier contested a Maharashtra order restricting sales of McDowell's No. 1 Celebration Matured XXX Rum, arguing that the food safety officer who issued it lacked statutory authority and had bypassed the required adjudicatory process.
In a 1 August filing, the company also challenged the timing of the FSSAI's parallel consultation on flavour-labelling rules, calling it "premature, disproportionate and commercially prejudicial" to keep the prohibition in place while the regulator was still reviewing those very rules.
At the heart of the dispute is the label "artificial flavour (rum)". FSSAI's position is that any rum flavour must reflect natural ingredients, fermentation and maturation, not additives. The Bombay High Court heard the matter on 10 August and has sought the Centre's response by 19 August.
Manufacturers argue that FSSAI-approved, nature-identical flavours have long been used in Indian Manufactured Foreign Liquor because prolonged barrel ageing isn't commercially viable at India's scale. They also point out that these flavours comply with FSSAI's own 2018 regulations, Bureau of Indian Standards rules and state excise laws, with batches routinely tested in government laboratories.