Indian whisky brands can rise to the challenges posed by the recent FTA with UK, says Paul John

While India Inc has largely termed the India-UK Free Trade Agreement (FTA) as a landmark treaty that has strengthened economic ties between the two countries, the Indian alcoholic beverage industry has raised concerns fearing that reduced import duties on foreign liquor could hurt domestic producers. According to the deal, tariffs on UK-made whisky and gin may be slashed from 150% to 75% initially, eventually dropping to 40% over a ten-year period. This phased reduction is expected to significantly benefit British brands. The government has also not included the MIP (minimum import price) in the agreement which would have prevented possible dumping (the practice of selling goods in a foreign market at a price lower than the price quoted in the exporter’s home market) and also the removal of non-tariff barriers to ensure better international market access for to Indian alcoholic beverages.

In this interview, Paul P John, chairman and managing director of John Distilleries Pvt Ltd and the man behind the Paul John Single Malt Whisky, talks about the impact that the FTA can have on the Indian alcohol industry.

The India-UK Free Trade Agreement has raised some concerns within the Indian alcohol industry, especially among the single malt manufacturers. The agreement will no doubt help UK’s whisky and other alcohol exporters. The European Union is also pushing for reduced tariffs on key exports such as whiskey, wine, and automobiles as part of its ongoing negotiations for a Free Trade Agreement (FTA) with India. What kind of impact will it have on Indian liquor manufacturers?

There could be some pressure on Indian alcohol companies due to the FTA. However, India is now building a tradition of producing high-quality spirits, and the growing global interest in Indian single malts is proof of the category’s increasing recognition. A reduction in tariffs for Indian liquors into Europe could indeed help Indian brands compete on a more level playing field. However, while tariffs might reduce, there are still several non-tariff barriers in Europe, such as stringent aging and maturity eligibility regulations, which can restrict the accessibility of Indian brands in these markets. The phenomenon of Tropical Ageing is gaining ground and we have a lot of educative work to do in this regard, hence a collective effort from the more genuine players is required.

For Indian brands to compete effectively, there is a need for a level playing field where local laws, such as the GI tag for Indian Single Malts, would help boost the credibility of our products. The EU should be encouraged to standardize such measures across both local and imported products to create fair competition. Moreover, our industry would benefit from further policy reforms that can ease market access and promote a broader recognition of Indian spirits in the global market.

However, there are concerns around dumping.

Globally, the status of Indian whiskies has gone up significantly over the last one decade. What do you think has contributed to it?

The rise in the global status of Indian whiskies can be attributed to several factors. First and foremost, the quality of Indian Single Malt whiskies has significantly improved over the years. As a category, Indian single malts have benefited from tropical maturation, which accelerates aging, resulting in a rich, complex flavour profile that resonates well with consumers worldwide. Brands like Paul John have gained international recognition, winning multiple awards at prestigious global competitions, which has helped build credibility and trust in the quality of Indian whiskies. Additionally, the increasing demand for unique and craft spirits has allowed Indian brands to stand out. As global consumers are becoming more adventurous in their whisky choices, Indian whiskies, with their rich heritage and distinct characteristics, have captured their attention.

This is the reason why we are not overtly worried about the FTA with the UK. We can rise to the challenge.

According to the Ministry of Commerce, India imported $354 million, while exported only $157 million worth of whiskies in FY24. What’s the status for FY25?

While the import-export gap is a concern, there is a growing demand for Indian whiskies in key international markets, and this gap is gradually narrowing. The significant strides made by brands like Paul John in international competitions and our expanding presence in global markets reflect the increasing appeal of Indian whisky abroad. In FY25, we know that our exports have continued to grow as we strengthen our distribution networks and invest in market education, ensuring that Indian whisky has a stronger presence globally.

How has been your relationship with Sazerac, the US-based firm, that has taken a significant stake in the company? How has the partnership helped you?

Our relationship with Sazerac has been extremely positive and strategic. They have brought a wealth of experience and expertise to the table, especially in global distribution and brand building. Their experience in the international spirits market has allowed us to expand our presence in key global markets like US, UK and Australia with direct distribution, enabling us to reach a broader audience and enhance brand visibility. Their deep understanding of global whiskey dynamics has helped refine our strategies, and we’ve benefited from their insights into product development and marketing.

Sazerac’s partnership has provided us with invaluable resources to scale up production, reach new markets, and consistently maintain the quality that defines Paul John Indian Single Malts. Together, we are focused on growing the Indian whisky category, further elevating our position in the premium spirits segment worldwide. In India, we are building the American Whiskey category which at present has few players.

Sazerac also plans to launch and develop the bourbon category whisky from Buffalo Trace Distillery, in top Indian metros. Do you think there’s a sufficient market for bourbon in India?

The rise of premium spirits in India, especially in urban markets, has opened up newopportunities for categories like Bourbon & Rye. While Scotch whisky has traditionally been dominant in the Indian market, the growing curiosity and evolving preferences of the Indian consumer present an opening for Bourbon. With its distinctive flavour profile and the increasing number of young, affluent consumers looking for new experiences, Bourbon can carve out a niche in India. However, it will take time for bourbon to gain the same level of recognition as Scotch, especially with the stronghold that Scotch has established.

What are the challenges faced by Indian whiskies in the domestic market? How can they be overcome?

The primary challenge in the domestic market is the uneven playing field created by differential taxation and state excise duties. Most states in India do not view “Made in India” products as luxury items, which results in higher taxes for Indian brands compared to imported whiskies. Additionally, there are bureaucratic hurdles that make it difficult for Indian brands to establish themselves in the same way international brands have done.

To overcome these challenges, there needs to be a concerted effort from the government to standardize excise policies, reduce entry barriers for domestic products, and ensure that Indian whiskies are recognized as premium products. Advocacy from industry bodies, like the one we have newly created, is crucial in influencing policy changes that will foster a more competitive environment for Indian spirits.

John Distilleries Limited (JDL) is considering a new 30-acre plant in Karnataka with an investment of about ₹600 crore, following the expansion of its Goa facility. You had earlier announced a capacity expansion at your Goa facility. The company has invested about ₹500 crore to fund the expansion that will see capacity tripling to nearly 3 million litres annually. Is that investment on track?

We are looking at an investment of Rs.500 crore in Karnataka, covering IMFL production, malt production and barrel storage. Yes, the Goa investment is on track.

Do you see further surge in demand for whiskies in India?

Absolutely. India’s whisky market is experiencing a surge in demand, especially in the premium and luxury segments. As more consumers explore high-quality whiskies, Indian single malts are carving out a unique space in the market. The rise of affluent consumers, the increased focus on quality and experiences, and the growing middle class are driving this demand.