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Last Updated: May 20, 2007 - 10:48:48 AM
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Mallya's Whyte & Mackay swig makes Scotch industry uneasy
May 17, 2007 - 2:34:05 PM
'We now have a wonderful opportunity in front of us and you can be assured that we will capitalise on this. I don't think you should be surprised if we look at other acquisitions in the near future.

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[RxPG] London, May 17 - Flamboyant Indian businessman Vijay Mallya's mega acquisition of Whyte & Mackay is the nearest equivalent of setting a cat among pigeons in the spirits business, given his tumultuous relationship with the influential Scotch Whisky Association - in the past.

For years, SWA and Mallya have been at loggerheads over two things: Mallya being prevented from selling his Indian-made whiskies in the European market and Mallya, a politically influential MP in India, reportedly lobbying with the Indian government not to lower its high import duties regime.

The SWA has consistently campaigned for a lower import duties regime in India in order to access the vast Indian spirits market, and help expand exports. The SWA case is that the current import duties regime in India violates WTO regulations, deprives Indian government of revenue and encourages counterfeit products.

Mallya has been unhappy with the SWA's attempts to lobby the Indian government to lower its tariffs on imported spirits, and at the same time refusing to recognise India's molasses-based whiskies.

He said some time ago: 'India is not a British colony any more. This imposition of British imperialism is unacceptable. The SWA has to understand there are two sides to the coin. They have double standards. I will continue to oppose SWA coming to India until they allow us to sell in England and Scotland. Nobody can take us for granted.'

At the root of the dispute is the definition of 'whisky'. The SWA says that spirits produced by Mallya's companies do not meet the European Union definition of whisky - that it should be made from cereals and not molasses and as such cannot be marketed in Europe as 'whisky'.

The SWA had no objection if it were called 'spirits' instead of 'whisky'. In line with traditional practice, the EU requires 'whisky' to be produced from cereals and aged for a minimum of three years, at a strength not less than 40 percent vol. All whisky produced or sold in the EU must be produced in line with the definition.

Last year, the SWA opposed Mallya's company registering its flagship whisky brand McDowell in South Africa and elsewhere on the ground that the use of Scottish brand names on non-Scotch whiskies will mislead consumers about the origin of such products.

David Williamson of the SWA told IANS that there had been 'some issues' with Mallya in a number of areas in the past, but after the acquisition of Whyte & Mackay the SWA will look forward to working with its new owners to protect the interests of whisky.

He said that Mallya acquiring the spirits major and the ongoing efforts to ensure India lowers its import duties regime were two separate issues. Mallya, as the new owner of Whyte and Mackay, will no doubt be aware of the benefits of lower import duties in India, he added.

Williamson said: 'We look forward to working closely with Whyte & Mackay's new owners on matters of mutual interest to protect and promote Scotch Whisky in India and other international markets to the benefit of all Scotch Whisky distillers.'

As per SWA rules, Whyte & Mackay ceases to be its member after the takeover by Mallya. The company's news owner will need to apply for membership, but uneasiness due to fractious relations in the past is already evident. The SWA said that it was open to welcoming Mallya into the fold, but 'will not give him a free ride'.

Gavin Hewitt, chairman of SWA, said: 'We are earnestly looking forward to meeting up with Vijay Mallya and his team to discuss his entry into the association. But he will not be given a free ride and he will have to commit to a certain code, besides the articles of association.'

The commitments include sticking to SWA's marketing and branding code, entering into a memorandum with the UK government on fraud management, and sticking to the necessary disclosures when Scotch is blended with Indian spirit for rolling out admixes.

There are indications that Mallya will adopt a conciliatory approach. Whyte & Mackay's senior managers are likely to mediate and bring about a rapprochement between him and the SWA. He said after the acquisition on Wednesday: 'I have nothing against SWA. Once we sit down, we will try to sort out issues mutually.'

Asked if he would now dilute opposition to lowering of import tariffs at the media briefing, Mallya quipped: 'We have been importing Black Dog Scotch for many years. It remains the same.

'We now have a wonderful opportunity in front of us and you can be assured that we will capitalise on this. I don't think you should be surprised if we look at other acquisitions in the near future.

'We are finally in Scotland, where we always wanted to be. We are investing here for the long term'.

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