UK-India FTA will lead to a high single-digit reduction in prices, volume growth: Diageo
United Spirits
Ltd, part of British multinational alcoholic beverage company Diageo, expects a reduction in "high single digit" in consumer prices of imported liquor in India along with additional volume growth after implementation of the India-UK free trade agreement, said its top management in an investors' call on Friday. Diageo India will pass on the benefit of the duty reduction from the free trade agreement between the India and UK governments to the consumers, said its Managing Director Praveen Someshwar and CFO Pradeep Jain.
"Reduction of duties from 150 per cent to 75 per cent will typically lead to about a high single-digit reduction in consumer prices," said Someshwar while responding to a question.
He further said: "My sense is that the government will also insist that we pass on the pricing benefit to the consumer, and we are absolutely of the same view that we would want to pass on this benefit completely to the consumer, and therefore keeping the consumer spend constant."
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Diageo, which owns brands as Johnnie Walker, Black & White, Smirnoff, Tanqueray etc., said it is "reasonable to assume" that in this part of the portfolio, a "high single digit additional volume growth" should happen.
Under the trade pact, announced earlier this month, India will reduce duties on UK whisky and gin from 150 per cent to 75 per cent, and further to 40 per cent by the tenth year.
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This FTA "also opens up the opportunity of exploring our global portfolio as we see a reduction in duties, there will be some opportunities, and that will be very exciting from a consumer front also," they added.
Diageo India expects these reductions mainly to happen on the Bottle-in-Origin (BIO) portfolio, which is distilled and packed in the UK and imported to India.
However, over the Bottled-in-India (BII) category, they said the reduction in the prices would be less, because it will have a lesser component of benefit.
"So the price reduction might be slightly less than high single digit, my sense is it will be a little bit in the range of 4 to 5 per cent," he said.
Most of the IMFL (Indian Made Foreign Liquor) products, which are produced and bottled in India, come under the BII category.
However, despite the benefits from the import of raw materials, Diageo India said it will take a call on that as and when that happens.
"So, probably the benefit will start coming only in financial year FY26 and FY'27. At that point in time... I don't want to comment right now," they said.
Earlier this week, global spirits major Diageo Plc, during its global earnings call, had said it is set to reduce the prices of its Scotch whisky brands in India following the India-UK FTA implementation.
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