Indian drinks firms do not mind tariff cuts on imported wines

Indian drinks firms do not mind tariff cuts on imported wines
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First Published: Wed, Mar 07 2007. 05 55 PM IST
Updated: Wed, Mar 07 2007. 05 55 PM IST
MUMBAI: Indian drinks firms do not oppose lower tariffs and taxes on imported wines and spirits, but want some concessions so they can compete with bigger rivals in the country’s fast-growing $1.8 billion alcoholic drinks market.
India’s basic import duties on wine and spirits are 100% and 150%, within WTO rules, but some federal and state-level taxes can push tariffs above 500%, prompting the European Union to press for cuts.High tariffs mean most Indians can only afford cheaper local drinks, splashing out on foreign wines and whisky only on special occasions or when travelling abroad.
Faced with sluggish home markets, foreign firms are eyeing India, where rising incomes and more liberal attitudes to drink, especially in urban areas, are fuelling a consumption boom. “We can go ahead with tariff cuts, but we are against allowing imports of cheap wines,” said Arun Shah, a director of wine maker Chateau Indage Ltd.
“We believe the industry needs some protection because it is so young,” he said, adding wine makers do not want India to allow imports of wine that cost below $10-$12 a case.Others say the EU must cut farm subsidies and grant concessions in return for tariff reductions.
“It’s a bit naive of them to ask us to cut taxes on their products when they are giving subsidies to their farmers, which makes inputs like grapes and barley cheaper for them,” said Ravi Nedungadi, chief financial officer of top drinks maker UB group.
UB also wants the EU to relax the description of whisky. Indian whisky, made from molasses, cannot be labelled as “whisky” in Europe.“We’re not going to pass off our product as Scotch, but these days, when fuel is even being made from grass, why can’t whisky also be made from molasses or potatoes?” Nedungadi said.
UB’s United Spirits Ltd. has more than half India’s spirits market, while United Breweries Ltd., with partner Scottish & Newcastle Plc., has nearly half the local beer market— where manufacturing capacity, distribution, retail and advertising are strictly controlled by the government.
Foreign drinks makers Diageo Plc., Pernod Ricard, LVMH’s Moet Hennessey, SABMiller and Anheuser-Busch Cos. Inc. have been drawn to India.Imported beer brands have less than 0.5 % of a market that is forecast to grow nearly 20% a year.
UB estimates the Indian market at around 133 million cases of branded spirits — but local unbranded liquor makes up for well over half the spirits market— and nearly 90 million cases of beer. Wine sales are put at around 5-6 million bottles.Annual beer consumption among India’s 1.1 billion population is just 0.7 litre per head versus 84 litres in the United States.
Diageo, while offering its premium brands like Johnnie Walker whisky and Smirnoff vodka, has tied up with India’s Radico Khaitan Ltd. to make lower-priced brands as well. UB, in a bid to protect its share, has said it is considering acquiring Scottish spirits maker Whyte & Mackay. Last year, UB bought French wine maker Bouvet Ladubay.
Wine makes up only a fraction of India’s drinks market, but is growing nearly three times as fast as traditional favourites whisky or rum, and restaurant and bar owners favour cutting tariffs so they can stock more brands.
“It’s tragic: a $10 bottle of wine can end up at Rs3,000-4,000 ($67-$90) on the menu after taxes and mark-ups,” said Rahul Akrekar, who runs the Indigo restaurant in Mumbai.“You’re always going to have plonk, but if the domestic guys make decent wine, what are they worried about?”
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First Published: Wed, Mar 07 2007. 05 55 PM IST
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