. The world's biggest liquor company expects the FTA to be fully implemented only from fiscal 2027, benefiting drinkers in the world's biggest whiskey consuming market."This (FTA) will take some time to embed into legislation. I think the belief right now is it will come in fiscal year 2027, but we will keep watching that, so that will start flowing through," Nik Jhangiani, chief financial officer at Diageo told analysts on Tuesday. "We intend to pass that through to consumer pricing fully. That is the whole idea of being able to really drive more growth in what is (already) an exciting category."
Diageo follows the July-June financial year.
For the UK-based firm, India is its largest market by volume and second by value. As per the FTA, tariffs on UK-made whisky and gin will be halved to 75% initially, eventually dropping to 40% over a 10-year period. Scotch whisky, the biggest global spirits segment by volume, has a 4% share of India's total whiskey market as high taxes make them pricier.
In 2024, sales of scotch single malts slowed as Indian consumers gradually shifted to local malts.
The maker of Johnnie Walker, Tanqueray and Smirnoff said benefits from the FTA will translate into lower prices, depending on categories within scotch in terms of bottle and origin (BIO) versus bottled in India (BII). "If you look at that reduction of about 150% down to the 75% initially, that will enable probably a high single-digit decrease in consumer price, and we believe that should drive a similar high single-digit percentage increase in volumes. Clearly, the intent is to pass through fully," he said.
Customs duties make up about 20% of the shelf price for scotch, with state taxes, production, and marketing costs contributing the rest. "The FTA will lead to better pricing on bulk whisky for India, opening up the market for new UK whisky brands and exposing Indian consumers to relatively smaller scotch whisky brands and casks. We believe the consumer price of scotch could come down by at least 20-22% but that will largely depend on local taxes and how companies work backwards on their calculations," said an industry expert.
According to industry body IWSR, some industry commentators are suggesting an up to 30% drop in on-shelf prices though the realistic saving is likely to be around 10% for BIO scotch. Also, the savings will not be apparent across states, and may not be passed on to the consumer, at least not in the short-term, it said.
Several liquor companies are already invoicing at lower-than-ideal prices to compensate for the high duties, and paradoxically, states will be resistant to any price reductions due to revenue losses.
"FTA, as far as is presently known, does not remove any of the extensive red tape that characterises doing business in the Indian alcohol market. For instance, brands and labels will still need to register annually state by state, with licence fees paid. There are opportunities, but they will not necessarily be easier to access," said Jason Holway, senior research consultant at IWSR.
IWSR said it is unknown, as yet, whether two of the Indian industry's concerns have been addressed: minimum import pricing per case to prevent dumping and 'predatory pricing' and the removal of non-tariff barriers to help boost Indian export opportunities. "Initial analysis suggests an outbreak of predatory pricing or dumping, which would demand a response from the Indian Customs authorities, is unlikely, particularly when most players, domestic and imported alike, are premiumising portfolios so as to maximise margins. That said, a price war can't be ruled out just yet," it said.
