UK-India FTA To Provide Fair Level Playing Field: Chivas Brothers

Chivas Brothers, a leading manufacturer of Scotch whiskey, expects the proposed free trade agreement between the U.K. and India would provide a 'fair level playing field' on customs duties for liquor companies, its Chairman and Chief Executive Officer Jean – Etienne Gourgues said.

He also said that the proposed agreement may also help increase investments and promote domestic manufacturing of premium liquor in India.

The two countries have been negotiating a free trade agreement since January 2021 and senior officials of both sides concluded the 11th round of negotiations.

Currently, Scotch whiskey, imported from the U.K. - both in bottled and bulk - is taxed at around 150% in India, however, if the pact between the two governments is signed, then it would provide liberalisation in tariff and will be a 'win-win' for both India and the U.K., he added.

“Our expectation is a fair level playing field between India and the U.K. When we export scotch whisky to India, we pay a very high tax of over 150 per cent. When Indian whiskey brands are sold in the U.K., there are zero tariffs,” Gourgues told PTI.

Chivas Brothers, a business owned by the French spirits major Pernod Ricard owns several popular single malt and blended Scotch whisky brands, which include Chivas Regal, Ballantine's, Royal Salute and The Glenlivet.

Presently, India is among the top five large markets for Chivas Brothers after the U.S., France, China, and Global Travel Retail (Duty-Free Shops). Gourgues believes India, where it has been present for the last 30 years, has a 'possibility' of being among its top three in the coming years, aided by FTA.

According to Gourgues, India is one of the 'key strategic' markets for Chivas Brothers.

"There is already a very strong basis of business and of consumers. At the same time, we do see a lot of opportunities and growth potential for the Indian market, so it's definitely a very strategic market for us," he added.

Besides branded Scotch, Chivas Brothers also supply to India a large proportion of bulk Scotch for producing whisky in India, including Royal Stag and Imperial Blue, which are among the world's top 10 selling whisky brands by volume.

Gourgues said lowering of duty under FTA would not impact the domestic liquor industry as Scotch whiskey is just 3.1% of the total Indian sales.

"The Scotch market at the end of the FTA to go to 5 to 6% maximum. So even it is doubled, 94% of the market will be Indian whiskey," he said.

It is important to remember that 75.8% of the volume of Scotch shipped to India is bulk. Scotch represents a tiny proportion of what is sold in India – only 2% of the total market," he said.

According to Gourgues, lowering the duty on bulk scotch would also help in accelerating the growth of the India-Made Foreign Liquors industry.

"We do expect liberalisation on tariffs on two components - first on the imported bottled Scotch, which will give much more choice for the Indian consumers in the small top segment, but as well, liberalisation of the of the tariffs on the bulk, which will encourage the made in India brands and the IMFL in order to keep premiumisation with better Scotch or at a more affordable price," he added.

When asked as to whether Chivas Brothers will increase investment in India after FTA is implemented, he said: 'Most probably, we would like to invest in the better. We will reinforce our support to India to Indian consumers.” According to Gourgues, India is an “important” and “fast developing” market for Chivas Brothers with a clear trend for premiumisation having an “appetite and thrust” for high-end products to drink better, he added.

"This is a very strong call for us, but what we are witnessing is a great premiumization of the shopping experience," he said.

The company is working on new brands and brand extensions of its current lineup to tap the growth, though he did not share any details about that.

When asked about the growth prospects of the Indian market for Chivas Brother, he said the business has been performing 'strongly' with double-digit growth over the past years.

We are already far beyond what was our pre-Covid level of sales. So, that's very encouraging. And we are as well, very optimistic about the future because of the size of the Indian population, because of these demographic benefits that you commented on, and as well, because of this premiumization trend on an already huge basis of whiskey consumers.

"So, definitely, we do expect in the coming years to carry on having double-digit growth for our brands in India," he said.