India: Diageo Strategy for Market Dominance Exposed
In India, Diageo is employing a strategy for market dominance as exposed by a Wall Street Journal article.
India currently has state implemented alcohol policies which either ban or tax alcohol heavily through local governments. This is bad news for Diageo and other Big Alcohol companies betting on India to boost their sales and make up for the decline of alcohol use in the west.
In India, alcohol advertising is banned and imports are taxed at 150%. Diageo India requires about 200,000 permits and approvals each year to do business across India. Diageo’s aim is to weaken alcohol policy in India so they can sell more and profit more.
Some of the main aspects of Diageo’s strategy to intervene in public health policy are as follows:
- Engaging in road safety programmes;
- Advocating for weakening of local alcohol policies under the guise of increasing Indian States’ ease of doing business rankings;
- Intervening and influencing tax policies.
With Diageo comes more death and disease
While alcohol control is strong in India and the cultural view of consuming alcohol is mainly negative, the consumption rate has been growing steeply. The average Indian consumed 38% more alcohol in 2017 than in 2010, according to a study in The Lancet, the world’s most prestigious medical journal. The rise is among the world’s steepest and has led to more deaths and diseases attributed to alcohol, up 12% and 9% respectively.
Alcohol’s harm to others is pervasive in India. For example, alcohol is also identified as major cause of road accidents and wasted household incomes. In terms of other social issues, alcohol is fuelling domestic violence.
A report by the Ministry of Social Justice and Empowerment (MoSJE), Government of India outlines the magnitude of alcohol problems in India. The list includes:
- Alcohol is the most common psychoactive substance used by Indians.
- Alcohol use has been reported in all the age groups, including among children aged 10-17 years.
- Every third alcohol user in India needs help for alcohol related problems.
- Only about 1 in 38 people with alcohol dependence, report getting any treatment or help with alcohol problems.
Diageo’s strategy in India: In depth
Diageo does not care about the obvious and significant harm their products are causing the people and communities of India. This is apparent from what Diageo’s India Head has to say.
Influencing regulation in India is like trying to break a rock, You’ve got to chip away, chip away and one day it’ll part,” said Diageo India head Anand Kripalu at an investor event in May, as per The Wall Street Journal.
That is exactly what Diageo has been up to in India.
In 2015, Diageo set up a 12-person team to improve the alcohol industry’s reputation and influence public health policy in India. It’s also working with the International Spirits and Wines Association of India (ISWAI), an alcohol industry lobby front group, to forestall public health regulation which can damage their product sales and profit.
Oppose real road safety measures
In 2017, India’s Supreme Court banned the sale of alcohol at shops, bars, restaurants and hotels within 500 meters (547 yards) of national and state highways in a bid to reduce road accidents. The move contributed to Diageo’s sales falling by more than half during that fiscal year.
To prevent further restrictions, Diageo is funding programs endorsed by the transport ministry that it says are designed to improve road safety and encourage “responsible” alcohol use. The Ministry has allowed Diageo to educate university students applying for driver’s licenses about the dangers of speeding, not wearing helmets and driving under the influence.
Undermining public health-minded alcohol taxation
Taxes are a key focus for Diageo. Alcohol is one of the few industries that states have been able to tax directly since 2017, prompting states to raise taxes on alcohol to generate revenue and discourage consumption.
In response, ISWAI, the trade body, is holding workshops to “co-create” “mutually beneficial” tax policy for imported brands with excise officials. Their argument is lower taxes boost demand and generate higher tax revenue.
That effort secured a 30% price cut for Johnnie Walker Black Label last year in Karnataka. Volumes jumped 64% in the five months after the move. This story is now being used to convince regulators elsewhere. Volumes of Pernod Ricard’s Chivas brand jumped 332% after taxes fell 28%.
A study, recently published in the International Journal of Drug Policy, showed that current levels of alcohol taxation in India are by far too low to help cover the costs of alcohol harm. The study found that after adjusting for tax receipts from the alcohol sale, the economic loss from adverse effects of alcohol consumption is about 1.45% of the gross domestic product (GDP). For comparison, the government’s annual expenditure on health is about 1.1% of the GDP.
“Mutually beneficial” by Diageo’s standards seems to mean higher profit for Diageo and higher alcohol harm for communities across India. As the World Health Organization has recommended, increasing taxes is one of the most cost effective policy measures to prevent and reduce alcohol harm.
Rising alcohol use, rising industry profits and rising health and development problems
A recent government audit found that India is behind on reaching the health-related Sustainable Development Goals and is likely to miss them by 2030. Insufficient health spending is one of the main reasons according to the government’s auditor. This shows how harmful Diageo’s lobbying campaign against alcohol policy in general and alcohol taxation in particular is.
In May 2019, a new landmark study published by The Lancet revealed that global alcohol use has increased over the past 3 decades. India is among those countries with the biggest increases in alcohol use. Alcohol use increased by 38% in India between 2007 and 2017 – among the biggest inclines in the world in this period.
The study warns that governments like in India will fail to achieve the global policy goals to reduce alcohol use and recommends immediate action.
… alcohol use will remain one of the leading risk factors for the burden of disease for the foreseeable future, and its impact will probably increase relative to other risk factors,” said study author Jakob Manthey of the Technical University of Dresden, Germany.
In this dire context of India missing the SDGs, completely missing the 10% reduction target for overall alcohol consumption, rising alcohol use and ever more aggressive Big Alcohol lobbying, prospects for health and development for all are very bleak. Therefore, cost-effective methods to prevent and reduce harm are and remain specially important for countries in India. Such methods are also necessary to save money which are now spent on alcohol’s health, economic and social costs. The money which is saved can in turn be used for promoting health and development for all.
Many public health researchers are wary of the Big Alcohol’s efforts to influence tax policy and other public-health interventions.
You become the policeman as well as the thief,” said Vivek Benegal, professor of psychiatry at the Bangalore-based National Institute of Mental Health and Neurosciences, as per The Wall Street Journal.
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For further reading:
Diageo Company Profile
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