India's food safety regulator warned liquor giant Diageo (DGE.L) that it misleadingly claimed one of its top-selling whiskies was "matured in American oak casks", when most of the product had not been matured, a confidential government notice shows.
The previously unreported July 20 notice from the Food Safety and Standards Authority of India, reviewed by Reuters, reveals another complaint by the regulator, in addition to an assertion of improper flavouring that prompted the authorities to ban some spirits this month.
The FSSAI announced on Sunday it had prohibited sales of Diageo's Royal Challenge Whisky made in the state of Madhya Pradesh and some whisky and rum brands made in some Indian states by Diageo and India's Inbrew for using artificial flavouring, such as whisky and rum flavours, rather than proper ageing and ingredients.
The industry says it complies with the law.
REGULATORY CRACKDOWN
The FSSAI did not respond to Reuters queries on the assertions about maturing. Diageo India, the commonly used name for the local unit United Spirits (UNSP.NS), told Reuters on Saturday it remains committed to the highest quality standards and was "actively engaging with FSSAI to address their queries on labelling".
The crackdown on India's $40 billion alcohol industry, which has triggered some legal challenges, comes as the regulator increases its scrutiny of liquor companies, energy drink makers like PepsiCo and food producers over what it contends are incorrect labelling and weak compliance.
The FSSAI told Diageo in its July 20 notice that the whisky's label says it is "matured in American oak casks", but "your product has a grain neutral spirit as second ingredient after demineralized water, and major portion is non-matured spirit."
"The complete alcohol is not matured in wood cask as claimed on the label, and therefore misleading the consumer," it said. "Any claim regarding age of the spirit used in the product must refer to the youngest spirit used in the mix, not the oldest."
United Spirits told stock exchanges this week it anticipated no financial implications from the ban but it was closely monitoring the matter.
The whisky ban covers Diageo's Antiquity Blue Whisky and Royal Challenge made in Madhya Pradesh, as well as Inbrew's Bagpiper Deluxe Whisky and Old Cask Deluxe XXX Rum, produced in the same state.
Domestically made Royal Challenge is one of Diageo's top-selling products in India. Over 4.5 million nine-litre cases of Royal Challenge are sold every year in India, Diageo says, calling it a product of the "mid prestige price segment".
Alcohol pricing differs in each Indian state, but in Uttar Pradesh, a 375-millilitre (13-ounce) bottle of the Royal Challenge whisky costs 360 Indian rupees ($3.80).
The whisky's front label says: "A rich blend of Indian grain spirit & imported scotches, matured in American oak casks". Its back label says it contains "demineralised water, grain neutral spirit, Scotch. Contains permitted natural colour ... and added nature identical (whisky) flavouring substances".
The FSSAI notice said Diageo's mention of "Scotch" is also vague and "does not inform its true characteristics", and the company must mention what "Scotch" is used.
