The global spirits industry is not used to being shut out of parties. But thanks to high import tariffs—which in some states can reach a sobering 550%—it has been held back from the action in India. That may change if the latest stage of a campaign by the EU, the US and Australia demanding the World Trade Organization opens up the market is successful.
It’s easy to see why they are so keen on India. Incomes are rising and liquor is becoming more socially acceptable.
India’s alcohol market is worth $1.8 billion (Rs7,740 crore) and is among the fastest-growing in the world, with 10-11% volume growth in spirits. Per capita spirits consumption is one-tenth that of Russia, and one-fifth of places like the UK and the US.
What’s more, India’s branded spirits market is dominated by domestic players. United Spirits and Radico Khaitan together have two-thirds of sales. The unbranded spirit market —occasionally lethal, so-called “country liquor”—is twice as large. Unlike in beer, foreign groups have not been successful in establishing themselves.
India is the world’s largest whisky market, yet Scotch whisky accounts for less than 1%. The most successful is Seagram, a Canadian whisky with 6% market share.
But drinks companies shouldn’t get their hopes up too much.
First, India is unlikely to lower its tariffs willingly. And the WTO is not set to rule until later this year.
Second, even if India does lower import tariffs, there are plenty of bureaucratic obstacles to negotiate. The government hasn’t issued any new domestic or foreign distilling licences since the 1970s, and state retail permits are strictly limited. There’s also a media ban on advertising of alcohol, which makes it harder to establish brands.
Finally, India is only a developing market. Even if tariffs were 0%, aspirational premium Western brands like Johnny Walker and Scotch Whiskey would still be too expensive to flood the market.
In the short-term at least, the biggest winners will be exporters of cheap spirits from countries like Thailand, Malaysia and China.