India: AB InBev already incurring losses due to ban on its beer sales in New Delhi

Anheuser-Busch InBev will face a “substantial adverse impact” on its business in New Delhi and is already incurring losses due a ban on its beer sales in the city amid allegations of tax evasion, it said in a court filing seen by Reuters.

The ban could be a major setback for AB InBev, which is also battling a separate antitrust probe in India linked to alleged beer price fixing by SABMiller, which it acquired in 2016 for around $100 billion, and other firms, industry executives say.

Local authorities in July barred AB InBev, the world’s largest brewer, from selling all its beer brands in New Delhi for three years on allegations of evading local taxes. AB InBev has denied the allegations.

An Indian court on September 3 rejected a request from the brewer to put the ban on hold, saying it must first complete the appeals process before the state authorities.

Describing the ban as “irrational and perverse”, the company said it would “face substantial adverse impact on its business operations and livelihood in Delhi and is in fact incurring losses due to black listing”.

It did not disclose any specific loss figure.

“Apart from loss of goodwill and reputation, the domestic beer business of the petitioner has come to a complete standstill in New Delhi,” AB InBev added in the court filing dated Sept. 2, which has previously not been reported.

A counsel for the Delhi government in the case, Ramesh Singh, did not comment on the contents of AB InBev’s court filing, but said “going by records, it seems like a classic case of excise duty evasion”.

The Delhi government’s ban order came after a three-year investigation which found that beer maker SABMiller used duplicate barcodes on its bottles supplied to city retailers in 2016, allowing it to pay lower levies.

Citing its excise payments of $26 million to the city authorities during 2016-2019, AB InBev argued the ban will hit the state exchequer and lead to “potential increase in illicit alcohol/moonshine trade” as its beer brands were popular.

AB InBev’s beer portfolio includes famous brands such as Budweiser, Hoegaarden, Corona and Stella Artois.

It is the second-biggest player in India’s $7 billion beer market, accounting for a 17.5% market share, according to research firm IWSR Drinks Market Analysis.

AB InBev has previously said it was hopeful of receiving a fair hearing from the Delhi authorities as it believed appropriate excise duty payments were made and the allegations dated back to 2016, before its takeover of SABMiller.

Calling the Delhi government’s order an “excessive exercise of jurisdiction”, AB InBev in its court filing said it was not receiving a fair and effective opportunity in its appeals.

06 September, 2019