Compliance issues behind Beam Global probe

Industry sources say that unlike Diageo where there was mass siphoning of funds in the case of Beam Global the practice of giving discounts and freebies in government-controlled markets appear to have raised the hackles of the parent

 

The alleged probe into financial irregularities at the Indian unit of the fourth-largest spirits maker Beam Global appear to have been triggered by the practice of personnel here offering discounts and freebies in mostly government-controlled markets. Persons in the know say that this practice of offering free cases for every consignment sent is common in India though not so abroad. This appears to have raised the hackles of the parent, which ordered a probe into the matter.

 

Officials at Beam Global were not immediately available for comment. A mail sent to Beam's India & Sub-Continent managing director Harish Moolchandani elicited no response till the time of going to press. Calls and text messages sent to him also did not elicit any response.

But persons in the know say that the probe is being monitored directly by the Illinois-based company, with Arthur Aroney, managing director of emerging markets for the Asia-Pacific/South America region under whose jurisdiction the Indian unit falls, said to be camping in India among other executives.

Persons in the know say that the probe has been on for the last few weeks at the New-Delhi-headquartered company and Moolchandani alongwith national sales head Deepak Malhotra as well as regional sales and finance heads have been asked to provide reasons for their alleged trade practices to the visiting delegation from abroad.

Ernst & Young is believed to be assisting the visiting delegation on the probe.

The Indian unit, whose turnover is estimated to be around Rs 1,000 crore, has been one of the fastest-growing subsidiaries for Beam in the Asia-Pacific region, with rate of growth pegged at over 25% per annum, ahead of China. 

Moolchandani, widely considered in the liquor industry to be chief architect and driver for this growth at Beam, has been asked alongwith Malhotra and others to discontinue reporting to work.

However, It is unclear whether Moolchandani has been asked to step down from his position. A few years ago, UK-based spirits major Diageo's India MD Asif Adil was asked to leave following widespread irregularities at the company. But persons in the know say that Beam's situation appears to be different from Diageo where mass siphoning of funds was established. In Beam's case that is yet to be proved. 

Moolchandani, who has been with Beam for seven years as its India MD, was earlier attached to Allied Domecq, the company that was acquired by Beam in 2003. His association therefore with Teacher's, the flagship brand that was first promoted by Allied and then Beam, goes back almost 15 years. Industry sources that he has been instrumental in pushing Teacher's in India, whose sales in the country are estimated to be 500,000 cases per year. One case is equal to 12 bottles of 750 ml.

Beam has other brands in India too such as Jim Beam, a bourbon, Sauza, a tequila, and Laphroaig, a single-malt whisky. While these are popular abroad, in India, they have a niche presence.