New Delhi: While India and the European Union have reportedly reached an agreement to reduce import duties on wine and beer, industry experts suggest the impact on these specific segments might be negligible. However, consumers of vodka and Irish whiskey could see benefits, provided state governments refrain from increasing taxes and companies transparently pass on the savings instead of absorbing the margins, according to reports by Sidhartha.
Limited Market Impact for Wine and Beer
Industry sources indicate that there is considerable hype surrounding wine, despite it constituting less than 0.5% of India's total alcohol market. With the duty reduction threshold set at ₹2.5 per bottle, the majority of domestic Indian producers remain protected from significant foreign competition.
European Wine Challenges in India
Within the non-sparkling wine category, French, Italian, and Spanish varieties represent relatively small market segments. Australian wines, particularly those from brands like Jacob's Creek, currently dominate the Indian imported wine market. For European winemakers to capitalize on the duty cuts, establishing a robust local distribution network will be crucial. This infrastructure could also benefit vodka producers, as companies like Pernod Ricard and Bacardi hold strong European vodka brands in their portfolios.
Long-Term Outlook and Beer Considerations
Market analysts predict that any noticeable impact from the Free Trade Agreement (FTA) is unlikely to materialize before 2027. Even then, for wines, the price cutoff is expected to shield over 80% of the domestic industry from disruption. Wines priced above this threshold cater to a niche, premium segment.
Regarding beer, its nature as a high-volume, lower-value product with a limited shelf life means it does not transport efficiently over long distances. Consequently, the FTA may not significantly affect the commercial beer market in India. However, it could enable European brewers with existing production facilities in India to import, experiment, and test products from their global portfolios before making substantial investments in local production capacity.
Vinod Giri, Director General of the Brewers Association of India, emphasized, "Let's not expect any impact in the market at least until 2027. Thereafter for wines, the cut off price will keep over 80% of domestic industry unaffected. Wines priced above that are niche... Being a high volume, lower value product with a limited shelf life, beer doesn't travel well. So, FTA may not commercially affect beer much. It may allow European brewers with production facilities here to import, experiment and test products from global portfolios before committing capacity for local production."
