Carlsberg India probes find 'potential improper payments', child labour

Reports by a different global consultancy, also seen by Reuters and previously unreported, disclosed other lapses at Carlsberg India Pvt Ltd in 2018, including child labour.

An investigation of allegedunlawful practices at Carlsberg India found "potential improperpayments" to government officials and other regulatory lapses,its former auditor said in a document seen by Reuters.

Reports by a different global consultancy, also seen by Reuters and previously unreported, disclosed other lapses at Carlsberg India Pvt Ltd in 2018, including child labour.

The findings cast a fresh shadow on operations andcompliance practices at the Indian joint venture of Danishbrewer Carlsberg A/S, which according to IWSR DrinksMarket Analysis has a 17% share of India’s $7 billion beermarket.

Carlsberg’s probes and a boardroom dispute come amid otherchallenges: an antitrust investigation last year concludedCarlsberg India colluded for years on prices with rivals, thougha final ruling is pending.

An India affiliate of the PricewaterhouseCoopers (PwC)network recently resigned as Carlsberg India’s financial auditorafter declining for two years in a row to give an opinion on thebrewer’s financials, amid boardroom tussles and internal probesinto local practices, Reuters reported in November.

Since at least 2019, Carlsberg had been probing allegationslevelled by some past and current employees around promotion ofalcohol in prohibited areas, kickbacks and bribery, according toregulatory filings and the document prepared by local PwCaffiliate Price Waterhouse Chartered Accountants LLP.

The investigation "concluded that there were internalcontrol weaknesses … potential improper payments made togovernment officials/other persons and possibility ofmisappropriation of company’s funds over past years by certaincustomers," says the PwC document, which details the basis ofthe firm’s resignation.

"However, the amount of misappropriation and other amountsrelating to inappropriate practices could not be ascertained."

Responding to questions from Reuters, Carlsberg said, "Wecannot rule out breaches of our policies and code of conduct."The company said it does everything possible to prevent suchincidents.

The investigations "specified that Carlsberg Group’spolicies were breached in the period until 2018" and the probesidentified the need for further strengthening of controls, thecompany said.

"Carlsberg India has taken several actions as a consequenceof the findings, including … dismissal of and formal warningsto employees," it said.

PwC declined to comment.

Carlsberg told Reuters in November the auditor had quitbecause of "highly disruptive side-effects" of a commercialconflict with its India joint venture partner, the Nepal-basedKhetan Group. Three nominee directors from Khetan refused toapprove the last two annual results.

In a filing for the 2018-19 financial year, PwC said it waswithholding an opinion due to "divergent views" among boardmembers, ongoing forensic reviews and the possible impact thesecould have on legal compliance.

Results for the year through March 2020 have not beenpublished, but the PwC document says the "complaining directors"had divergent views on the scope, manner and findings of theinvestigation into Carlsberg’s local practices.

C.P. Khetan, who manages the Carlsberg India partnership forthe Khetan Group, did not respond to a request for comment.


Separately, three documents by Ernst & Young (EY) in Indiashowed regulatory lapses in 2018, including child labour at awarehouse.

A May 2018 EY internal report on an audit of two Carlsbergwarehouses found underage labourers at a location in the easternIndian state of Jharkhand. Calling it a "high" risk finding, EYsaid 24 of 41 workers there were under 21 – the legal minimumage of employment for those engaged in alcohol sales in thestate – with some as young as 16 to 18.

The report also showed apparent violation of environmentrules, such as incorrect disposal of scrap material.

A draft of that report contained two images – a young boycarrying a box of Carlsberg’s Tuborg beer on his head, andanother of a boy smiling while sitting atop beer cartons withpackaging material in hand. It also contained photos of workerson the job in slippers rather than safety shoes.

On child labour, Carlsberg told Reuters, "The third-partyprovider was terminated immediately in 2018 following thefindings in the internal report."

EY declined to comment.

Another EY audit, which analysed Carlsberg’s logisticsoperations in 2018, found lapses on transportation, revealingthere were more than 22,000 instances of overloading trucks.

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