Compliance behind Beam Global probe

The probe into alleged financial irregularities at the Indian unit of Beam Global, the world’s fourth-largest spirits maker, appears to have been triggered by the practice of offering discounts and freebies, primarily in government-controlled markets. People in the know say offering free cases for every consignment is common in India, not abroad. This appears to have raised the hackles of the parent company, which ordered a probe into the matter.

Officials at Beam Global were not immediately available for comment. An email to Harish Moolchandani, Beam’s managing director for the Indian subcontinent, elicited no response till the time of going to press. Calls and text messages sent to him also remained unanswered.

Sources say the probe is being monitored directly by the Illinois-based company, with Arthur Aroney, managing director, emerging markets (Asia-Pacific/South America), along with other executives, said to have come to India.

The probe has been underway for the last few weeks at the company and Moolchandani, along with national sales head Deepak Malhotra and regional sales and finance heads, has been asked to explain the alleged irregularities to the Aroney-led delegation. It is believed Ernst & Young is assisting the delegation in the probe.

The Indian unit, whose turnover is estimated at Rs 1,000 crore, has been one of the fastest-growing Beam subsidiaries in the Asia-Pacific region, ahead of China. The Indian unit’s growth is estimated at 25 per cent a year.

Moolchandani, considered by many in the liquor industry as the chief architect of the growth, along with Malhotra and a few others, has been asked to discontinue reporting to work. However, it is unclear whether Moolchandani has been asked to step down from his post.

A few years earlier, UK-based spirits major Diageo’s India managing director, Asif Adil, was asked to resign, following widespread irregularities at the company. However, people in the know say Beam’s situation appears to be different from Diageo’s, which saw mass siphoning of funds.

Moolchandani, who has been with Beam for seven years as India managing director, earlier worked at Allied Domecq, which was acquired by Beam in 2003. His association with Teacher’s, the flagship brand promoted by Allied and, later, by Beam, is 15-year-old. Industry sources say in India, he was instrumental in pushing the Teacher’s brand, sales of which are estimated at 5,00,000 cases a year (one case=12 bottles of 750 ml each).

Beam has other brands in India, too. These include Jim Beam (a bourbon), Sauza (a tequila) and Laphroaig (a single-malt whisky). While these are popular abroad, in India, these are niche brands.