Diageo to Cut Liquor Prices in India Following UK-India Free Trade Agreement

Strategic Insights -

India's biggest whiskey consumers will soon benefit from lower liquor prices as Diageo, the world's largest liquor company, plans to fully pass on the benefits of lower Customs duties following the recent India-UK free trade agreement. Diageo expects the FTA to be implemented in fiscal 2027, benefiting the world's biggest whiskey-consuming market. The company's CFO, Nik Jhangiani, stated that they intend to pass the benefits through to consumer pricing fully, aiming to drive growth in the exciting category.

Key Takeaways:

  • Diageo plans to cut liquor prices in India by a high single-digit percentage range following the India-UK free trade agreement.
  • The FTA will lower Customs duties on UK-made whisky and gin from 150% to 75% initially, eventually dropping to 40% over a 10-year period.
  • Diageo's CFO, Nik Jhangiani, expects the benefits from the FTA to translate into lower prices, with a potential high single-digit decrease in consumer price.
  • Customs duties make up about 20% of the shelf price for scotch, with state taxes, production, and marketing costs contributing the rest.
  • Industry body IWSR suggests that on-shelf prices could drop by up to 30%, with a realistic saving of around 10% for BIO scotch.
  • The savings will not be apparent across states, and may not be passed on to the consumer, at least not in the short-term.
  • Diageo follows the July-June financial year, and India is its largest market by volume and second by value.
  • Scotch whisky has a 4% share of India's total whiskey market, with high taxes making them pricier.
  • Sales of scotch single malts slowed in 2024 as Indian consumers shifted to local malts.

Statistics:

  • Diageo's India revenue: grows at a high single-digit rate (Source: Diageo's annual report)
  • Customs duties make up about 20% of the shelf price for scotch (Source: Industry expert)
  • Tariffs on UK-made whisky and gin will be halved to 75% initially, eventually dropping to 40% over a 10-year period (Source: India-UK free trade agreement)
  • Scotch whisky has a 4% share of India's total whiskey market (Source: IWSR)
  • Sales of scotch single malts slowed in 2024 (Source: IWSR)

Sources:

  • "Diageo Plc to Cut Liquor Prices in India Following UK-India Free Trade Agreement" - The Times of India
  • Diageo's annual report
  • India-UK free trade agreement
  • IWSR (International Wine and Spirit Record)