States may tweak ex-distellery prices and excise duty rates to maintain excise collections
New Delhi:
The India-UK Free Trade Agreement (FTA) will lead to a reduction in prices of scotch whiskey, but not to such an extent that it would reshape the market. The price cuts are highly dependent on the pricing mechanism of every state.
Here's your 10-point cheat sheet on whiskey prices
- States may tweak ex-distellery prices and excise duty rates to maintain excise collections as they form a major part of states' revenue.
- Multinational companies may reduce billing prices by mid-high single digits for 6-12 months, then bring them back up.
- In the premium segment in which the prices start from Rs 3,500 per bottle, brands like Johnie Walker, Black Label, and Chivas REgal 12 Years may cost less by Rs 200-300 per bottle.
- In the standard segment, which is between Rs 1,700 and Rs 2,000 per bottle, brands like Red Label and Ballantine's may cost less by Rs 100-150.
- The tariff cuts will not be able to change market dynamics since the price difference with the next lower segment, i.e. bottled-in-India is not much.
- The brands in the bottled-in-India segment, which costs around Rs 1,500 per bottle, include Teachers, Black Dog, and Black and White. This is a category of whiskey that was created in India owing to high custom duties.
- The brands bottled locally use scotch imported in bulk in concentrated form and diluted and packaged in India using local material. Since tariffs have been slashed, production and bottling of these brands could move to the UK. In the UK, whiskey has better scale efficiency, automation in production, thereby offsetting production costs.
- "Most Indian whisky producers import Scotch whiskey to use for blending with domestic whiskies. Reduction in customs duty will help bottomlines of these Indian producers," said Vinod Giri, liquor trade expert and director general of Brewers Association of India. "Since these whiskies are mostly sub Rs 1,000 per bottle, their competitive price position will not be affected by any reduction in consumer prices of imported scotch," he said.
- Since the UK itself is not a major whiskey market, the gains to Indian manufacturers, whatever be the terms, is going to be very limited. Hence, stripped of all noise, all the UK-India FTA will do for the whiskey industry is to help the bottomlines of companies.
- Consumers should not expect to see much change. FTA will not dramatically reshape the Indian whiskey market, but will open new big business vistas for Indian producers, Mr Giri said.
