Pepsi franchise under threat locally from smuggling

Mar 23, 2016 News

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– DDL complains to Govt.
The new administration is facing pressure to address smuggling, with one beverage company warning

recently that a major franchise is under threat.
Demerara Distillers Limited (DDL), which has the local rights to produce Pepsi, has reportedly written Government, complaining that the cheaper, smuggled products on which it has the local rights, is severely eating into profits.
The issue is not a new one, with DDL’s main competitor, Banks DIH, repeatedly raising the smuggling issue for a number of years now.
Pepsico is the global maker of popular products like Pepsi, Quaker Oats, Tropicana, Gatorade  and Mountain Dew.
While DDL’s boss, Komal Samaroo, was not immediately available for a comment yesterday, a number of officials of the company confirmed that the smuggling issue is one that is deeply troubling. It could cause DDL to lose the franchise unless action is taken by the authorities – in this case the Guyana Revenue Authority (GRA), which is tasked to collect import taxes on behalf of the country.
“Pepsico provides us with the concentrates to produce Pepsi and other products. We have staffers who are employed, and for whom taxes are paid. Yet over time smuggled drinks, by the containers, are making it to the streets,” a senior official said yesterday.
DDL is one of the country’s largest employers, with offices across the country and its base of operations at Diamond, East Bank Demerara. The company is known worldwide for its line of award-winning El Dorado rums.
It is the same thing for Banks DIH. That company has the rights for Cola Cola, which has a wide array of products like Sprite, Coca Cola, Fanta.

In consecutive annual general meetings dating back to the late 2000s, Banks’ Chairman, Clifford Reis, has been begging for new laws to curb the smuggling of beer and other beverages.
The company, like DDL, has hundreds of workers under its employ with distribution outlets across the country.
Smuggling is affecting not only the country’s revenues, but profits of the company and workers’ security.
“What we have is Pepsi coming in tins and others, and selling even cheaper than what we can sell for,” one DDL official said.
Banks DIH’s Chairman, Clifford Reis, in expressing worry to shareholders, said that the country loses millions of dollars in taxes and experiences the loss of jobs when foreign beers, liquor and other products come into Guyana illegally.
He noted that items which attract high taxes are attractive to smugglers, as the savings from the non-payment of taxes are big. He warned that local manufacturers are placed at a disadvantage.
The smuggled items are reportedly making their way to the shelves of prominent supermarkets and represent major business for a number of importers who use fishing boats and other means to bring the drinks into the country.
The bad news does not stop there. Smuggling is also reportedly rampant for top alcoholic beverages like Smirnoff Vodka, Absolut Vodka, Hennessy cognacs, and a number of popular foreign beers, like Heineken.
A number of night spots, according to officials, appear to be the biggest buyers of the smuggled alcohol.
“You are talking big money here. The taxes paid here are supposed to be in the tens of millions annually for the Guyana Revenue Authority. Every bottle that comes here from out of the country from extra-regional sources, has to be taxed. Yes, indeed, DDL and Banks have legitimate concerns,” a senior Government official said.
Last year January, at Banks DIH’s annual general meeting in Region Two, officials complained that Polar Beer from Venezuela was being smuggled through the Pomeroon River to the coasts.
Banks DIH mooted the idea of special labelling that will allow buyers to immediately know the smuggled products.
The written complaint by DDL was reportedly sent to the Ministry of Finance recently, with the Guyana Revenue Authority (GRA) likely to step in and address the matter. GRA is facing a stern test. Minister of Finance, Winston Jordan and GRA’s Chairman, Rawle Lucas, were unavailable for comment yesterday.
Under new management and a Board of Directors, the tax agency has expressed worry about loss of revenue because of non-compliance and smuggling.
As a matter of fact, Chairman Lucas had said, it is believed that Guyana is only collecting about 60 percent of the taxes it is owed.
Last year, the David Granger-led administration dismantled the Berbice Anti-Smuggling Squad (BASS), a unit that was supposed to curb the problem in the Corentyne area. It was found that BASS’s overhead costs were more than it collected from seizures. The unit was accused of bribery and turning a blind eye to smuggling in the area.

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