EU-India Free Trade Agreement Reshapes Food Industry Landscape
The recently announced free trade agreement between India and the European Union is poised to fundamentally transform how Indian food companies source and utilize premium ingredients. With substantial tariff reductions, this landmark deal promises to make high-quality European inputs more accessible while simultaneously raising the competitive stakes in India's growing food market.
Unlocking Premium Ingredients for Indian Manufacturers
From specialty dairy products and cocoa derivatives to gourmet cheeses, olive oils, and artisanal condiments, the India-EU FTA announced this week is expected to significantly reduce import costs that have historically constrained domestic manufacturers. Industry executives highlight how this development will enable better ingredient access and facilitate global quality benchmarking across multiple categories.
"Specialized ingredients like olive oil, condiments including balsamic vinegar and mustard, along with dried fruits and tomatoes are certainly going to become more affordable," explained Chirag Kenia, founder and managing partner of gourmet food brand Urban Platter. "This tariff reduction will enable superior ingredient access and allow Indian companies to benchmark against international quality standards."
The agreement eliminates duties on numerous products that previously carried substantial import costs. Olive oil, margarine, and various vegetable oils now face zero tariffs compared to previous rates reaching up to 45%. Similarly, processed foods including breads, pastries, biscuits, pasta, chocolate, and pet food have seen duties reduced from 50% to zero.
Strategic Partnerships and Market Expansion
Beyond simple cost reductions, the FTA opens doors to exclusive international partnerships and curated collaborations that could bring global appeal to Indian consumers. According to Gaurav Manchanda, founder and director of The Organic World, a Bengaluru-based premium grocery retailer, these developments create opportunities for strategic alignments that respect both quality standards and local consumption patterns.
"Scale becomes meaningful only when it strengthens quality and builds long-term consumer trust," Manchanda noted. "Therefore, we will consider partnerships that align with our clean-label values and Indian consumption habits." He added that reduced tariffs would allow exploration of sharper entry price points and niche global categories while acknowledging that more international brands will now target India's retail market.
The statistical context underscores the agreement's significance. India imported edible fruits and nuts from the EU worth ₹1,582 crore in FY25, while cocoa and its derivatives accounted for ₹886 crore in imports. Dairy products contributed another ₹341 crore during the same period, illustrating the substantial existing trade that stands to expand under the new agreement.
Intensifying Competition in Premium Segments
While improved ingredient access presents opportunities, industry experts warn that lower barriers for imported products will likely intensify competition, forcing companies to sharpen their differentiation strategies, pricing discipline, and market positioning.
"Premium Indian food brands will face a dual challenge," observed Madhur Singhal, managing partner (consumer and internet) at management consultancy Praxis Global Alliance. "On one hand, easier access to high-quality European ingredients raises consumer expectations around quality and experience. Simultaneously, the same trade shifts make international brands more competitive on Indian shelves, particularly when premium consumption is already polarized and retail growth remains uneven."
The competitive landscape is evolving against the backdrop of India's rapidly expanding e-retail market, which has surged to approximately $60 billion in gross merchandise value. According to a March 2025 Bain & Company report, this growth has created the world's second-largest online shopper base, driven by premiumization trends and increasing participation from smaller cities and towns.
Strategic Responses to New Market Dynamics
Industry leaders acknowledge the competitive challenges while outlining strategic responses. "As price gaps narrow, storytelling becomes even more critical," emphasized The Organic World's Manchanda. "Differentiation will now be driven by sourcing transparency, formulation integrity, and cultural relevance rather than just price positioning."
Urban Platter's Kenia anticipates intensified competition in the mass-premium price band, particularly in categories like olive oil, olives, pasta, chocolate, and ambient bakery products where imports are moving closer to everyday purchase thresholds. However, his company plans to avoid price wars by focusing on quality, clean formulations, and relevance to Indian consumption patterns.
"We maintain our distance from price wars by concentrating on quality, clean formulations, and Indian consumption relevance," Kenia stated. "Our strength lies in consumer trust and repeat usage, not discount-led positioning."
According to Praxis's Singhal, brands will need to work harder to justify their premium positioning rather than simply establishing it. Marketing strategies and product differentiation will become increasingly crucial as the market becomes more crowded with both domestic and international options.
The India-EU FTA represents a significant milestone after nearly two decades of intermittent negotiations, paving the way for India to open its vast, protected market to free trade with its largest trading partner. As the agreement takes effect, it promises to reshape not only ingredient sourcing but also competitive dynamics across India's food industry, creating both opportunities and challenges for manufacturers, retailers, and consumers alike.
