Action urged on duty fraud

15 June, 2007

Grey market stock 'helps excise cheats to thrive'

Wholesalers will continue to be forced to buy grey market stock unless supplie

rs do more to stamp out fraud, according to a senior industry figure.

Landmark's beer and cider boss Jim Brown said wholesalers are "all largely complicit" in supporting duty fraud by sourcing stock through suspect channels. "The real villains are directly involved in importing stock without paying duty, or clawing back duty without exporting," he said. Brown said some wholesalers sell on stock to other wholesalers even if they have doubts about the legitimacy of those businesses.

Other wholesalers "face a real dilemma whether to buy stock it can be assumed has evaded duty", he said.

Speaking at the Drinksummit conference organised by the Federation of Wholesale Distributors, Brown said criminal gangs are increasingly turning to alcohol duty fraud as tobacco fraud has reached "saturation point", and some business owners feel they have no choice but to buy suspect stock.

"To compete, you have to get involved somewhere down the line from individuals allegedly supporting organised crime and money laundering, or not compete at all," he said.

Brown called on suppliers to tighten up their policies to stamp out grey market fraud. He praised Coors for its new policy of only delivering stock to primary business addresses.

"Quite remarkably and almost overnight it worked. The dodgy sheds first went on to customer allocations and then simply ran out of Carling. Our members are reporting staggering increases in sales at sensible, profitable prices. Sales have not migrated to other grey market brands and we have resumed a strong and strategic relationship with Coors."

Brown added: "Coors reached a point with the management of the Carling brand that left them with few options. They have made the right decision."

He called for better government intervention to stop grey market goods being "smuggled in by chancers and criminal gangs in underhand transactions in car parks and working men's clubs".

"There are ongoing duty increases, and no steps are being taken to harmonise duty rates across Europe. Enforcement penalties just don't seem to be having any effect," he said.

Brown said that duty "villains" have moved on to Stella Artois but said "initial discussions with InBev leave me confident they will tackle the problem quickly and effectively".

He said Miller Brands and Anheuser-Busch had followed Coors' lead, that Diageo "will announce a solution any day now" and that he was encouraged by S&N's "positive stance".

Brown warned that complacent and unsupportive suppliers would lose the support of the wholesale sector.

Suppliers told OLN that they face real challenges from the growing problem of duty fraud. Budweiser Budvar chief executive Tony Jennings said: "For us it's very much bound up with the issue of parallel imports and grey stock.

"With some of the prices I'm sure there is a VAT or excise fraud involved. If you use English label stock we can control it, but if there is going to be a lot of foreign stock coming in there is not much we can do about it.

"We can only equalise the price gap between countries based on beer price, not on excise. While the UK has a very high differential we are an easy target."

Gallo's UK sales director Mark Tinsley said the introduction of spirits stamps last year has forced fraudsters "to look at alternatives and they are moving into wine". Tim North, director of Les Grands Chais, which supplies JP Chenet and Calvet, said: "We sell a lot of Chenet into northern Europe. It's not always possible to do thorough checks but we have to be as scrupulous as we can."

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