NEW DELHI, August 11 (Reuters) – The Indian alcohol industry is facing a significant regulatory crackdown, with global spirits giant Diageo particularly impacted. The company is currently challenging a prohibition issued by India’s food safety regulator regarding one of its popular rum brands, arguing the action was taken without due process.
This move is part of the most substantial food safety crackdown in India in years, which has sent shockwaves through the $40 billion industry. The Food Safety and Standards Authority of India (FSSAI) has banned several whisky and rum brands, including some from Diageo and India’s Inbrew, in certain states, citing mislabelling and the improper addition of artificial flavors.
Diageo’s India unit, United Spirits, has filed a non-public court document detailing its arguments against the restrictions placed on “McDowell’s No. 1 Celebration Matured XXX Rum,” a top-selling product. The company asserts that the food safety officer who issued the prohibition on this Maharashtra-made rum lacked the legal authority to do so and bypassed established adjudicatory procedures by relying solely on a food analyst’s report to enforce the stop-sale order.
Adding to Diageo’s concerns, the FSSAI initiated consultations with the industry on flavor labelling regulations just days after issuing the prohibition order. In its August 1 court filing, seen by Reuters on Tuesday, Diageo stated that the “continued operation of the prohibition order, while the issues remained under active consideration by the FSSAI itself, was premature, disproportionate and commercially prejudicial.”
Neither the FSSAI nor Diageo immediately responded to Reuters’ inquiries. However, a government source disputed Diageo’s stance, indicating that the FSSAI was engaging with the industry on these matters at the request of alcohol companies.
Online court records show that the challenge was briefly heard in Mumbai’s High Court on Monday. The judge, however, denied immediate relief and instructed the federal government to provide a response by August 19.
The FSSAI’s prohibition order, included in court papers, specifically targeted the “artificial flavour (rum)” listed on the McDowell’s bottle. The regulator argued that the “flavor of rum should be characteristic based on the natural ingredients, fermentation processes, and maturation techniques.”
This regulatory scrutiny is not isolated. Separately, last week, Indian inspectors seized approximately 18,000 boxes of Diageo liquor bottles. Reuters reported on Monday that these seizures were due to the alleged lack of markings indicating the use of safe recycled plastic in their manufacturing, further widening the scope of the investigation into the company.
Diageo, which has previously identified India as its “consumer market of the decade,” maintains that it operates in compliance with all relevant laws.
