Despite a steep reduction in import duties on UK-originated spirits under the newly signed India-UK Free Trade Agreement (FTA), the final impact on the prices of premium brands such as Johnnie Walker and Glenfiddich in India is expected to be limited. This is because alcohol taxes fall under state jurisdiction, and excise collections remain a major revenue source for state governments.
"Consumer prices for imported Scotch (whiskey) are not likely to change much. Most of the taxes on alcohol sit in states, and even if all customs duty reduction is passed on, the impact on consumer prices of imported Scotch whiskies will be in the range of Rs 100-300 per bottle," liquor industry expert and director general of the Brewers Association of India Vinod Giri said.
He added that since price segments in whisky are currently too wide, this much reduction is not going to win any new consumers, and hence companies are likely to instead pocket the savings.
As per the FTA signed in London between India and the United Kingdom, India is reducing duty on UK whisky and gin from 150% to 75% and further to 40% in the tenth year of the deal. The revised tariff structure will apply to both bottled-in-origin (BIO) and bulk imports, which are used for making Bottled in India (BIO) products as well as blending with Indian made foreign liquor (IMFL). International liquor brands welcomed the FTA as they believe it will lead to premiumisation in the world’s largest whiskey market.
“For the alcobev sector, the immediate tariff reduction on Scotch whisky and gin imports from 150% to 75%, and subsequent reduction to 40% over the decade, will open up and expand market opportunities for the industry. The deal will significantly benefit Indian consumers, as premium international spirits will become more accessible, thereby accelerating the ongoing trend of premiumisation,” said Sanjit Padhi, CEO of International Spirits and Wines Association of India (ISWAI).
According to ISWAI, India is one of the world's largest alcobev markets and sells over 400 million cases of Indian alcoholic spirits annually. Yet imported spirits – Bottled in Origin and Bulk Bottled in India, - account for a mere 2.6% of the total market. The imported category is dominated by whisky with Scotch being around 81% of the overall imports of 10.9 million cases of alcoholic spirits.
Chivas Brothers Chairman and CEO Jean-Etienne Gourgues termed the India-UK FTA as a sign of hope in challenging times for the spirits industry. "India is the world's biggest whisky market by volume, and greater access will be an eventual game changer for the export of our Scotch whisky brands, such as Chivas Regal and Ballantine's," Gourgues noted.
Confederation of Indian Alcoholic Beverage Companies (CIABC), an industry body of IMFL manufacturers, expressed concern about over possible 'dumping of Scotch whiskey brands', which have been bottled in India before the FTA.
"We hope that the government will ensure that Scotch whisky and other spirits (BIO - bottled in origin) are not dumped at low import prices or routed through any other country at cheaper rates, which would hurt the YOY growth of premium and luxury Indian brands," CIABC Director General Anant S Iyer said.