In a major blow to many companies, India has ordered its 4,000 military shops i.e. army canteens, to stop buying imported goods, a move that could send an unwelcome signal to liquor firms such as Diageo and Pernod Ricard.
With annual sales of over $2 billion, India’s defence canteens make up one of the largest retail chains in India. These canteens sell liquor, electronics and other goods at discounted prices to soldiers, ex-servicemen and their families.
The October 19 internal order from the defence ministry, said that in the future, “procurement of direct imported items shall not be undertaken.”
‘Direct imported’ items would include those that are shipped from other countries in finished form.
For instance, Scotch brands that are bottled in Scotland will be banned, but those that are bottled in India with imported ingredients will continue.
Though the order did not specify which products would be targeted, industry sources said they believed imported liquor could be on the list.
Imports make up around 6-7% of total sales value in the defence shops, according to an August research column of the government-funded Institute for Defence Studies and Analyses (IDSA). Chinese products such as diapers, vacuum cleaners, handbags and laptops, account for the bulk of it, it said.
Also, Reuters reported in June that Pernod and Diageo had briefly stopped receiving orders for their imported brands from such government stores.
“While imported liquor sales at defence stores generate only about $17 million in annual sales, the order would send a negative signal,” said an executive whose company sells products at defence stores. The move is a part of PM Modi’s Atmanirbhar Bharat Abhiyan that has been launched to promote domestic products.
