India-EU FTA may upend premium spirits pricing, intensify competition
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The proposed India-EU free trade agreement (FTA), which sharply cuts import duties on spirits to about 40% from 150%, could significantly alter the competitive landscape of India’s alco-beverage market, particularly in premium and luxury segments, according to a report by Elara Securities.
Unlike the India-UK FTA, which largely supported margins for Indian players through lower bulk Scotch costs, the India-EU pact is expected to be product-led, narrowing the price gap between imported European brands and domestic premium offerings.
“This is not just a margin story like the India-UK FTA. The India-EU FTA directly increases product-level competition, especially in the premium spirits segment,” said Karan Taurani, executive vice president at Elara Securities.
Imported spirits to close price gap with domestic brands
Based on primary checks, spirits with a CIF (cost, insurance and freight) price of around €3 would qualify under the revised duty structure. This potentially brings globally popular brands such as Glenfiddich and Absolut into sharper price competition with Indian labels.
Elara’s analysis suggests that Glenfiddich Single Malt could become nearly 5% cheaper than Rampur Single Malt, while Absolut Vodka’s premium over Magic Moments Dazzle Vanilla could narrow to about 13%, from 26% earlier.
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“What this really means is that the pure price arbitrage advantage enjoyed by domestic premium brands starts to weaken,” Taurani said. “Consumers may now see imported labels at prices much closer to Indian premium offerings.”
The report notes that while imported Scotch had earlier remained firmly in the luxury bracket due to steep duties, the revised structure could materially raise competitive intensity in the high-end spirits category.
Beer impact muted despite duty cuts
While import duties on beer have been slashed to 50% from 110% under the proposed agreement, Elara expects limited competitive impact in this segment.
Beer in India continues to be heavily taxed based on alcohol-by-volume (ABV), resulting in single-digit EBITDAM even for category leaders. In addition, most global beer majors, including AB InBev, Carlsberg and Heineken, have already localised manufacturing over the past seven to eight years, giving them a significant cost advantage over imported brands.
“There could be small trial volumes of international beers like Peroni entering the market, but this is unlikely to materially disrupt competition,” Taurani said.
Domestic brands: quality to matter more than price
For domestic spirits makers, especially those operating in premium and luxury categories, the report flags a shift in competitive parameters. Brands that relied largely on price gaps versus imports may face pressure, while quality and product differentiation will become more critical.
India’s single malt market remains nascent at under one million cases, but increasing availability of UK and EU products could accelerate consumer adoption even as competition intensifies.
“The entry of more international products may actually help grow the category faster, though it raises the bar for home-grown brands,” Taurani noted.
Elara highlights Radico Khaitan as a key name to watch, particularly its premium portfolio such as The Spirits of Kashmyr and Magic Moments Dazzle Vanilla. Vodka accounts for nearly 60% of Radico’s volumes, while its luxury and semi-luxury segments are growing at 30–40% year-on-year, with a sales salience of about 8–9%. Any moderation in this growth trajectory could affect overall performance.
That said, margin tailwinds from the India-UK FTA could provide some cushion. Lower bulk Scotch duties are expected to aid gross margins by about 60 basis points for Radico Khaitan and United Spirits, and roughly 50 basis points for Tilaknagar Industries.
“We remain positive on United Spirits and Radico Khaitan, though volume growth for premium portfolios will be closely monitored,” Taurani said.
Elara cautioned that other domestic players with premium-heavy portfolios, including Tilaknagar Industries, Allied Blenders and Distillers, and Pernod Ricard India, could also see heightened competitive pressure as the India-EU FTA takes shape.