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‘India Is A Potential Market For Alcohol’
Diageo, the world’s largest spirit and alcoholic beverages company, wants to transform the practices in Indian market
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Diageo, the world’s largest spirit and alcoholic beverages company, wants to transform the practices in Indian market. Charlotte Lambkin, global director, Corporate Relations, Diageo Plc, talks to C.H. Unnikrishnan
Diageo has invested $3 billion in India. Do you think the market opportunity justifies the scale of this investment?
For us, India presents one of the most exciting opportunities in the world. The World Bank retains its growth forecast for India at an impressive 7.5 per cent for 2016, and is predicting it to be the leading destination for foreign investment. For Diageo, India is a unique and established spirits market and one with huge potential too. It is also our second biggest market behind the US and its strong demographic trends coupled with changing social attitudes and lifestyle choices makes it a very compelling market and thus Diageo is committed to investing in the country.
Diageo India’s merger with USL has been in the news for good and bad reasons. How do you plan to repair and strengthen your reputation in India?
Our vision is to be the best performing, most trusted and respected consumer goods company in India and around the world. Building trust and respect are central to the way we operate. This takes time and commitment. Every business acquisition, whether in India or any other market in the world brings its fair share of challenges and opportunities and some are more complex than others. But what’s important for us at Diageo and United Spirits (USL) is that we continue to do what’s right for all stakeholders within a robust and governance framework with transparency and discipline.
We are a business that is committed to creating shared value — and our reputation is built on our purpose of celebrating life every day, everywhere. We are proud of our iconic brands that have a special place in celebrations in India as they do the world over, and we are committed to ensuring that they are consumed responsibly. USL now has a marketing code that mirrors best practice in responsible marketing and promotion.
We do recognise that the harmful use of alcohol can have negative effects on an individual and society. That’s why we partner with government at a national and state level to help reduce the abuse. For example our road safety initiatives span 19 states and 50 cities and have worked with over 3,800 police and transport officials and educated thousands of consumers including commercial vehicle drivers on the dangers of drinking and driving.
Also, we have the Young Women Social Entrepreneurship Development Programme (YWSEDP) to help women from marginalised backgrounds become self reliant and integrate into the mainstream of progress. Likewise, the Project S.H.E — a grassroots community programme in the villages near our plants that delivers safe drinking water, improved health and sanitation, particularly to women in the villages. It has already benefitted over 30,000 villagers of which 45 per cent are women. This is the sort of work and reputation that we are becoming known for. I visited Goondpur in Alwar district of Rajasthan and saw this come to life. Village by village sustainable partnerships with companies like ours, accessing available government grants and working with local NGOs can make a real difference to people’s lives.
USL is a very Indian company. What changes are you making to integrate USL with Diageo’s multi-national culture?
Unleashing the power of people truly brings the best results for our business. It is our employees that can make this difference and who we believe bring real power and innovation to help us grow. Here at USL we are building an extraordinary company with extraordinary people who are proud of what they do — who act like owners. We’re building a transparent culture with open communication forums such as regular townhalls for all employees so they can understand and ask questions about the business strategy and actions taken.
USL has also introduced an open-office culture much like Diageo’s which breaks down hierarchy, encourages openness and cross-functional working. USL employees are also now linked to Diageo’s global internal social networking platform Yammer so they can participate in online conversations with the 32,000 Diageo and USL employees across the world, sharing and receiving best practice in real time. Participating in workshops with Diageo colleagues globally also helps knowledge and culture transfers.
I am also proud to say that at USL, women now occupy key positions on its Executive Committee and we are hiring and nurturing more women leaders in senior management positions across all functions.
The alcohol industry in India does not have the cleanest of reputations. While Diageo is a company governed by the UK Bribery Act, how are you managing to operate in a market like India?
Compliance is a priority at Diageo and is vital in giving us our license to operate. We have common guidelines to ensure that our businesses across geographies operate to the highest standards of governance. USL has an updated and stronger Code of Business Conduct now in place; every single employee as well as our business partners is trained on the code and all are quite clear that failure to comply can result in termination of employment or contract. Our compliance standards are non-negotiable.
It also helps that about 80 per cent of the recorded IMFL and imported alcohol in India is now controlled by global companies that adhere to global compliance and ethics standards, so the industry itself is being transformed in the way we do business. What’s particularly helpful is the new government’s mandate to eradicate corruption which is so encouraging to foreign companies that want to invest in India. We are hugely supportive of this approach and do what we can to work to alongside government.
What are the biggest challenges that you see in the Indian market?
Alcobev continues to be one of the most regulated and complex industries in India, at both the federal and state level. Despite the government’s ‘Make in India’ agenda to improve India’s rankings in ease of doing business, the alcobev industry continues to be challenged by the excessive levels of regulation and restrictive policies. Also, some of the regulations are made in a fairly arbitrary manner and that makes the business environment unpredictable. We are clearly disappointed that alcohol has been left out of the Goods & Services Tax which is very surprising as this would have led to greater transparency as well as higher revenue collections for the states.
Prohibition has become the new electoral tool in India. What is your opinion and experience with prohibition in other global markets?
Prohibiting the sale and consumption of alcohol has been widely shown to be ineffective in reducing alcohol-related harm and is most often counterproductive. Prohibition deprives governments of legitimate tax revenue, shifts much of the alcohol business underground and encourages illicit trade. It also criminalises the majority of people who consume alcohol moderately and responsibly. However, it is clear that people have legitimate concerns around alcohol harm which must be addressed and we are committed to doing just that. We believe that a balanced mix of intervention programmes, policies and education are required to address harmful drinking.