Indian Winemakers to Remain Largely Unaffected by India-EU Free Trade Deal
Bengaluru: Indian winemakers are poised to remain largely insulated from the effects of the India-European Union free trade agreement, despite significant tariff reductions on premium European wines. The structure of the duty cuts is designed to bypass the price segments where domestic producers predominantly operate, ensuring minimal competitive pressure on local vineyards and brands.
Tariff Structure Shields Domestic Industry
Currently, imported wines face a steep 150% import duty in India. Under the newly negotiated pact, this duty will be reduced to 75% initially, with eventual cuts to as low as 20% for premium wines and 30% for mid-range varieties, according to an official release from the European Commission. However, cheaper wines priced below €2.5 will not receive any duty concessions, a critical detail that protects the bulk of India's domestic wine production.
Industry executives emphasize that this tariff framework, combined with the relatively small size of India's wine market, will limit any adverse impact on local producers. "If that is correct, then the domestic wine industry will not be affected at all because more than 80% of the domestic wines will be below that cut-off," noted an industry executive, highlighting the strategic alignment of the duty reductions.
Minimal Impact Expected on Indian Alcobev Companies
Karan Kamdar, research analyst at brokerage firm Choice Institutional Equities, elaborated on the broader implications. "The impact of the FTA is likely minimal on Indian alcobev companies. Wines may be the most impacted by EU imports, but wine accounts for only 2% of India's alcohol consumption by value. It is a premium category and there is not enough education yet for mass consumers to move to wine consumption. As a result, imported wines are a faster growing category than local ones," he explained.
India's wine market constitutes a tiny fraction of overall alcohol consumption, with wine accounting for less than 1% of total alcohol volumes. Complex state taxes, registration fees, and distribution hurdles continue to constrain foreign labels, meaning that any duty relief is expected to benefit only a narrow band of premium imports rather than reshape the broader market dynamics.
"Anybody buying an imported wine costing ₹1,500, a ₹100 drop is not going to make much of a difference," the executive added, underscoring the limited effect of price reductions on consumer behavior in this segment.
Spirits Sector to Bear the Brunt of Changes
In contrast, the trade agreement is anticipated to have a more visible impact on the spirits sector, where volumes are larger and consumer familiarity is higher. Vinod Giri, director general of the Brewers Association of India (BAI), pointed out, "Where you may see some differences is in the spirits portfolios, where the duties are supposed to come down to 40%," referring to European spirits under the pact.
He further noted that mass-market international brands stand to gain more from these duty cuts, as products like vodkas already enjoy wider acceptance among Indian consumers. This shift could intensify competition in the spirits market, potentially benefiting consumers with more choices and possibly lower prices for imported options.
Market Reactions and Strategic Adaptations
Despite the optimistic outlook for winemakers, shares of listed Indian wine producers fell on Monday amid near-term investor caution. Sula Vineyards closed 3.1% lower at ₹188 on the NSE, while Fratelli Vineyards slipped 4.6% to ₹87.4 on the BSE. Rajeev Samant, chief executive officer of Sula Vineyards, shared insights into the company's strategic adjustments in response to evolving market conditions.
"While red wine has traditionally led the market, rising temperatures and changing preferences are pushing the company to expand its portfolio of cooler varietals such as rosé, tap new cities through urban wine festivals and scale back imports amid rising competition," Samant told Mint. This adaptive approach reflects the industry's resilience and forward-thinking strategies in a dynamic trade environment.
Broader Alcohol Sector Braces for Competition
The broader alcohol sector is also preparing for heightened competition, particularly in the beer segment, following tariff reductions on imported European beer from 110% to 50%. Vedant Kedia, whole-time director at Mount Everest Breweries Ltd, which owns brands such as STOK and Mount 6000, commented on the implications.
"This will narrow the price gap between international labels and domestic premium brands, intensifying competition on value," Kedia said. He highlighted that while brewing inputs like hops and grains are relatively stable, packaging—specifically aluminium cans and glass bottles—remains a significant and volatile expense sensitive to trade shifts.
However, lower duties are expected to support growth in the mass-premium segment. "Our premium brand, STOK, has grown by 75% in the last year, proving that Indian consumers are already eager to trade up for better quality," Kedia added, noting plans to capture a larger share of this segment through accessible price points.
The evolving trade environment could also enable firms to diversify their portfolios more aggressively. "These shifts have made it practical for us to explore high-quality ingredients, new brewing styles and unique collaborations that were once considered too niche," Kedia concluded, indicating potential innovation and expansion in the sector.
As the India-EU free trade agreement unfolds, the alcohol industry in India is navigating a complex landscape of opportunities and challenges, with winemakers emerging relatively unscathed while spirits and beer segments prepare for transformative changes.
