Diageo squares up to costly and disruptive ban

Leading drinks might Diageo has lost its licence to import alcohol in South Korea and has been fined £160,000 to boot by the Korean tax authorities.

The six month ban is a blow to Diageo which, with its Scotch whisky brands Johnnie Walker, Dimple and Windsor, is the market leader in South Korea, commanding a 34% share of the action in the world’s fourth largest Scotch whisky market in value terms. 

“While we acknowledge responsibility for past mistakes, we believe that the cancellation of Diageo Korea’s licence is a very severe penalty which will have a disruptive and costly impact on our business,” said Diageo.

It was back in March that the company admitted it was under investigation after the country’s tax authorities found that a number of the company’s salesmen had sold whisky to unlicensed wholesalers who then did not pay duty on the alcohol – although Diageo had paid import taxes. Diageo is taking immediate steps to minimise the effects of the loss, and to this end the spirits force has appointed an independent third party distributor and announced that it will continue to provide marketing services in support of its “many Korean consumers”.

Additionally, Diageo Korea has been granted a period of one month’s grace out of the six month period at the end of which it can apply for the renewal of its licence. “We deeply regret that a small number of our employees have engaged in improper transactions with unlicensed wholesalers in violation of our policies and the conditions of our licence,” said the company.

Patience Gould, 27/06/07