Diageo India expects price drop for some spirits after free trade pact with UK

Mint

23-05-2025

New Delhi: Diageo India, a subsidiary of British liquor giant Diageo Plc, anticipates that the recently-announced India-UK free trade agreement (FTA) will help lower prices for imported spirits, with some categories seeing a high single-digit reduction, potentially lifting demand for its alcoholic beverages.
"The India-UK free trade agreement, which has halved the duty on scotch from 150% to 75%, is landmark. It shall enhance accessibility of scotch in the world's largest whiskey market. As a category captain, for USL, it presents a valuable opportunity to drive deeper penetration and introduce new premium offerings that cater to India's evolving repertoire of consumers," Praveen Someshwar, chief executive officer and managing director, said during the company's earnings call on Friday.
USL, or United Spirits Ltd, is an Indian beverages company and a subsidiary of Diageo.
Earlier this month, India and the UK finalized the FTA, agreeing to reduce the 150% import duty on scotch whisky and gin to 75% initially, with a further decrease to 40% over the subsequent decade.
Diageo India manufactures, sells, and distributes brands such as Johnnie Walker, Ketel One, Tanqueray, Captain Morgan and McDowell's No1, with a portion of its portfolio made locally and another part imported.
The company's chief financial officer, Pradeep Jain, said that the duty reduction from 150% to 75% may result in approximately a high-single digit decrease in consumer prices.
This will also help lift volumes for the company, he added.
"Not just we, my sense is that the government will also insist that we pass on the pricing benefit to the consumer. 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, it is reasonable to assume that in this part of the portfolio, a high single digit additional volume growth should occur—that's on the bottled in origin (BIO) portfolio," he said.
For spirits bottled in India, or BII, the price reduction could be in the range of 4-5%.
To be sure, BII refers to spirits that are shipped to India in bulk and bottled within the country, including both international brands and locally blended spirits. These products dominate the ₹ 1,000–2,000 price segment. This includes brands such as 100 Pipers and Teacher's scotch.
BIO refers to spirits that are entirely produced and bottled outside of India before being imported for sale—for instance products made and packaged in the UK like scotch whisky.
'There will be a benefit that accrues into the raw material prices also, but again, we will take a call on that as and when that happens. There is still some amount of work to happen before this actually becomes legislation. So, probably the benefit will start coming only in the financial year 2026-2027,' Jain said.
Commenting on potential increase in competition due to duty reduction, Someshwar said, "Any play by a competitor will expand the pie—to me, that is an exciting space to be in."
Diageo is a large player in the Indian liquor market, competing with companies like Pernod Ricard and Allied Blenders and Distillers Ltd.
For the full year ended March 2025, the company reported gross revenues of ₹ 26,780 crore, a 5.4% year-on-year increase. In the March quarter, the company saw a 10.5% rise in reported net sales to ₹ 2,946 crore, attributed to portfolio resilience and the resumption of business in Andhra Pradesh. Profit after tax for the quarter was ₹ 451 crore, up 17.4%, and gross profit increased by 13.4%, leading to a gross margin of 44.5%.