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Antitrust Probe Focuses on Exclusive Retail Deals
India's Competition Commission (CCI) has launched a formal probe into French spirits maker Pernod Ricard for alleged anti-competitive practices in the New Delhi liquor market. A public interest litigation complaint claims Pernod Ricard used exclusive dealing arrangements with retailers. The company reportedly provided about $24 million in corporate guarantees to bankers in 2021, helping city retailers secure loans. In exchange, these retailers allegedly agreed to stock Pernod Ricard brands, making them at least 35% of their inventory. The CCI suggests these actions could distort demand and steer consumers away from rivals, harming fair competition. This comes after earlier reviews of similar allegations that began in 2024. Pernod Ricard has not yet commented.
Navigating India's Complex Liquor Market
India is Pernod Ricard's largest market by sales volume, with the company reporting revenues of ₹274.45 billion (about $3 billion) for fiscal year 2024-25. The Indian alcohol market is growing rapidly, fueled by premiumization and a larger middle class. However, it is also one of the world's most regulated markets, with complex state tax systems, licensing rules, and compliance demands. Pernod Ricard aims to balance offering premium, craft beverages with careful cost management to remain profitable. The company faces strong competition from rivals like Diageo, which operates through its subsidiary United Spirits Ltd., as well as other global and local players.
Multiple Regulatory and Tax Issues Plague Pernod Ricard
The CCI antitrust probe is just one of several challenges Pernod Ricard faces in India. The company is also fighting a large $250 million federal tax demand, reportedly due to undervaluing imports. Additionally, it faces separate investigations for alleged violations of New Delhi's liquor policy, which has led to operational disruptions like a ban on liquor sales in Delhi since late 2022. In late 2024, reports also surfaced that Pernod Ricard began an internal probe into alleged discounting misconduct in Rajasthan, reportedly leading to employee dismissals. These combined issues in its biggest market create a complex web of risks for Pernod Ricard's operations and growth plans.
Analysts See Value Despite Regulatory Pressure
Despite growing regulatory pressure, some analysts remain positive about Pernod Ricard's Indian business. Jefferies, for example, kept a 'Buy' rating with a €185 price target, forecasting a 41% potential increase. The firm views a possible Initial Public Offering (IPO) for Pernod Ricard's Indian subsidiary positively, valuing it at an estimated €12 billion based on current Indian market multiples. Jefferies believes such an IPO could raise about €2.5 billion, boosting Pernod Ricard's finances and helping it meet debt reduction goals faster. This outlook emphasizes the Indian market's underlying value and growth potential, even as the company deals with many regulatory investigations. Pernod Ricard's ₹274.45 billion in sales for FY25 highlight its strong position, but the ongoing scrutiny raises questions about future expansion plans.