Benefits of free trade with India potential boon for Scots’ spirits

Panellists Rosemary Gallagher, The Scotsman – panel discussion facilitator; Sherring Thekekkara, Global executive vice-president for market access at DP World; Laurence Whyatt, Managing director, Beverages Equity Research – EMEA at Barclays; Anuj Trivedi, Partner at Dentons Link Legal in India; Ian Duddy, International director at the Scotch Whisky Association; Dougal Burden, Associate, Dentons UK. | John Devlin/The Scotsman

The special event was a collaboration involving global law firm Dentons, UAE multinational logistics company DP World, and The Scotsman, entitled Premium Beverages: Unlocking Opportunities from the UK-India FTA.

Speakers from Dentons, DP World, Barclays, the Consulate General of India in Edinburgh, the UK India Business Council (UKIBC), and the Scotch Whisky Association gathered at Dentons’ Edinburgh office to share their insights on how organisations can best navigate one of the world’s most dynamic markets.

Guests also heard from panellists during the event’s From Agreement to Action –Entering and Expanding in India session and had a chance to ask questions.

Unlocking opportunities and addressing challenges

Opening the event, Adam Knowles, partner and UK head of food and drink for Dentons, said: “There has been enormous anticipation surrounding the UK-India Free Trade Agreement, and rightly so. For many businesses across Scotland’s premium beverage sector, this agreement represents a potentially transformational moment.

“The reduction in tariffs on Scotch whisky exports to India from the current 150 per cent, initially down to 75 per cent and then 40 per cent, has understandably generated significant excitement across the industry.

“And the opportunity is already built on strong foundations – India is currently the largest market for Scotch whisky by volume, with exports reaching around 220 million bottles last year, and it’s now the third-highest market by value, close to£300 million annually.

“These figures demonstrate something important. Scotch premium brands have already established a strong connection with Indian consumers despite those historic barriers to trade.”

Siddharth Malik, Consul General of India in Edinburgh, addressed the audience, explaining that since the trade deal will be implemented soon, people should start doing their homework on the market.

He commented: “The good news is that the biggest winner of the trade deal is Scotland, especially the food and drink sector”.“India is a growing economy, we are predicted to become the third-largest economy by the end of the decade.”

Siddharth concluded his speech by offering five tips for doing business in India:

◆ Do not see India as a large complex market. Instead, take a regional approach.

◆ You should have a trusted local partner.

◆ Be ready when it comes to market compliance and rule of origin conditions.

◆ His organisation is here to help by facilitating market access.

◆ You have to visit India – “seeing is believing”.

Next to the lectern was Emma Kent vice-president of freight forwarding in north Europe for DP World. She said: “Scotland’s premium beverage sector is world-renowned and that reputation means that doors open. But protecting and growing that business means keeping up with the fast pace of the moving global market. This is where the role of supply chain logistics comes into focus.”

Stephen Crisp, director of government relations and membership services at the UKIBC, speaking about what the FTA should deliver, said: “There should be significant progress in the ease of doing business, with faster customs clearance, simplified procedures and reduced paperwork. UK exports to India are projected to increase by 59.4 per cent by 2040.”He added that tariff reductions will “provide an opportunity for a product such as Scotch whisky to shift from a niche, luxury import to a dominant premium category.”

Laurence Whyatt, Barclays | John Devlin/The Scotsman

Looking at why India is such an attractive market, Laurence Whyatt, managing director, Beverages Equity Research – EMEA at Barclays, referred to young consumers and a growing middle-class population. “So, what can the India trade deal do for Scotch?”, he asked. “It is now the number-one market for Scotch whisky by volume, the tariff is coming down. So, we are likely to see a big reduction in the price of whisky in India.”

Laurence said he would not be surprised if a 10 per cent decrease in price could lead to between a 20 to 50 per cent volume uplift in Scotch, adding: “It could be an extremely attractive proposition for the Scotch players going into the Indian market,”

Dan Lund, partner and global head of trade at Dentons, told the gathering: “It’s very nice to be talking for once about tariffs being reduced rather than tariffs increasing.”He described FTAs as “creating increased focus and emphasis on two countries wanting to do more with each other. The trade agreement is the totem pole around which everything else is gathered”.

Dan Lund, Dentons | John Devlin/The Scotsman

While Dan observed the tariff reductions on Scotch exported to India mean the gains are “real and achievable”, there are also non-tariff challenges to consider, as in any market.

Anuj Trivedi, partner at Dentons Link Legal in India, told the event: “I come from India which has a profound relationship with whisky. Currently, the relationship is more with Indian liquor, although of course everyone fancies Scotch whisky. It symbolises authenticity, heritage and luxury, but for most of the target audience it is still beyond reach.”

Anuj discussed the Indian legal system and explained how the vast country is made up of a federation of 28 states and eight union territories.

He said that while India has agreed to the free trade agreement with the UK, the production, manufacture, possession, purchase and sale of alcohol rests with the Indian state.

Anuj urged the assembled: “Please do not focus on all28 states. Identify your markets, focus on those markets, understand those markets, and then enter those markets.”

The event | John Devlin/The Scotsman

Takeaways from the Entering and Expanding in India session

Setting the scene, Ian Duddy told the event: “The value of Scotch exports to India over the last ten years has increased by 237 per cent, so there is clear potential for continued growth.

“Our modelling demonstrates significant long-term export growth for Scotch whisky once the FTA with India enters into force.

“It has been challenging for our members in the EU and US –these are mature, established markets, but growth in some has been flat, with tariffs and the global cost of living, as well as increased competition from other categories presenting a significant challenge for producers. In that context, the Indian market is really important for us.”

Laurence Whyatt commented that the availability of alcohol is a factor to consider. “The populations are very different. We’re looking at something like 65-times the number of outlets in the UK per person than you see in India. It is relatively challenging to go and get a product, even if you want it. It’s also a ‘dark’ market – you can’t advertise very easily. There are regulatory hurdles, but it is a huge growth market.”

Anuj Trivedi, pictured, said: “Of course, the FTA will have an impact. The customs duties are going to come down. But the challenge remains on excise duties at state level.”

Anuj Trivedi, Dentons Link | John Devlin/The Scotsman

According to Dougal Burden, the key things to think about are customs and excise compliance. “You need to make sure you can benefit, when you are exporting, from duty suspension,” he explained. “The issue is that compliance is complex, it’s intensive, but it’s ultimately very important to make sure you comply.

“The FTA, by reducing the tariff barrier, makes it more economical to engage in exporting to this market.”

Sherring Thekekkara said: “Driven by rising consumer demand, ‘premiumisation’, and growing awareness of global brands, India is fast emerging as a dynamic growth market for premium beverages. However, success requires a deep understanding of the regulatory framework, figuring out the logistics and RTM complexities and willingness to invest behind the brand.

“While the broader trade agenda has been shaped by the [FTA], different states and territories within the country have significant influence on how the trade is conducted.“DP World facilitates market access through integrated end-to-end solutions, multimodal logistics capabilities, and resilient supply chains that help brands scale with greater speed, control and confidence.”