US/INDIA: Beam Inc misconduct allegations stifling growth - analyst

Beam Inc's misconduct review in India has damaged sales more than expected and looks set to hamper growth for most of the year, an analyst has claimed.

The US spirits maker has been forced to "ramp down" sales to India in the wake of allegations of financial impropriety, analyst CLSA said today (4 February). The ongoing investigation will be a “headwind” at least until the third quarter of the calendar year, CLSA said.

In October, The Times of India reported allegations of possible violations of the US Foreign Corrupt Practices Act involving Beam's operations in the country. 

Beam executives on Friday deflected questions over the review, saying that the investigation is “making progress” but that it is still too early to speculate on how much it will cost the company.

Beam brand Teacher's is the top-selling Scotch in India, according to CLSA.

Meanwhile, the analyst said that Diageo's acquisition of Beam remains a “reasonable possibility” despite the UK company claiming it intends to focus on high-end tequila in the wake of a breakdown in talks with Jose Cuervo. Some commentators viewed Beam's Sauza tequila brand as a possible replacement for Cuervo and predicted a Diageo swoop for its owner.

CLSA said Suntory is another potential buyer after it announced an IPO to raise M&A capital this year.

In full-year results announced last week, Beam posted a healthy rise in Bourbon sales, with last year's Pinnacle vodka acquisition also performing strongly.