As India prepares for the next round of Free Trade Agreement (FTA) talks with the UK and the EU in 2025, it’s important to examine how these agreements could impact the country’s alcoholic beverage (alcobev) industry. In past FTA discussions, a lot of focus was placed on imported finished products, with concerns about high import duties—100% on wines and 150% (100% plus a 50% Agriculture Infrastructure and Development Cess) on spirits. This made it difficult for domestic producers to compete.
In the upcoming FTA negotiations, there needs to be more focus on bulk alcohol, which accounts for over 90% of alcohol imports to India. Bulk alcohol is crucial for local brands that produce bottled-in-India (BII) and Indian-made foreign liquor (IMFL). As India’s alcohol industry shifts towards more premium products, the demand for bulk ingredients like scotch is expected to rise, benefiting smaller businesses and boosting exports.
Globally, in markets like the EU, US, and UK, alcohol consumption patterns are changing. People are drinking less traditional alcohol and opting for low or no-alcohol drinks, hard seltzers, ready-to-drink cocktails, and wines. This shift presents an opportunity in India, but the market for these products is still in its early stages and will require significant investment to develop.
India’s alcohol market is dominated by whisky, which makes up 66% of total spirits consumed. Rum and brandy follow, with white spirits like vodka, gin, and RTDs (ready-to-drink beverages) growing in popularity, albeit slowly. The success of Indian single malts and innovative gins has the potential to be a game-changer for both domestic and international markets.
While international companies may see opportunities in India, they will face tough competition from local players. Indian alcobev companies have strong portfolios across all price segments, with investments in white products, integrated supply chains, and advanced logistics. They also use demand forecasting and have formed collaborations and partnerships, making it harder for international brands to gain a foothold.
India’s complex and fragmented regulatory environment adds another challenge. Each state has its own excise policies, creating barriers to smooth operations across the country. This lack of uniformity will limit the benefits that FTAs could offer.
The retail market for alcohol in India remains largely physical, with about 75-80% of sales happening through retail channels. With limited advertising opportunities due to strict regulations, international brands will find it difficult to promote their products, further limiting the potential benefits of FTAs in the alcobev sector.
