Will the new EU free trade agreement open up India to fine wine?
Following the signing of the EU-India trade deal at the end of last month, which slashed tariffs on European wines, Arabella Mileham looks at the implications for fine wine.
As reported by the drinks business last month, tariffs on EU wine will be slashed from 150% to 20% for premium wines and 30% for mid-range wines as part of the deal, following nearly two decades of negotiations. This is likely to prove a massive milestone, as India’s federal import tariff on wine has been “the single biggest barrier to access” for EU wines, according to WineCap. Slashing the rate from 150% to just over 20% on premium bottles marks “the first meaningful shift toward improved price accessibility and broader participation” in India, it said.
Speaking to the drinks business last week, WineCap CEO Alexander Westgarth points out that it has long been “an open question about what would happen if India meaningfully opened its market” and while he argued that lowering tariffs won’t “transform things overnight”, this is the first meaningful step towards tariff liberalisation and as such, may be enough to “change the trajectory of demand” and improve the long-term access for European wine.
“I don’t think it will make a difference in 12 months, it’s a slow burn, but give it five to ten years and I think it will be,” he said. While the explosion of fine wine in China and Hong Kong happened quickly, there are other factors to consider ih India, including the “massive taxation” between India’s states and the fact that some are still dry states. However, the potential in metropolitan centres such as Mumbai, Delhi, and Bengaluru is substantial.
Exciting opportunity
Westgarth said it was an exciting opportunity, with “huge” potential. In light of global trade becoming more fragmented, it “could prove one of the most important long-term developments for fine wine”.
“In normal high-income economies, wine represents around 27% of alcohol consumption – in the European region is closer to 31%,” Westgarth points out. “In India, wine consumption is approximately 0.02 litres per adult per year, compared to Portugal at 60L, France and Italy at over 40 litres or Australia at over 20 litres per capita.”
India remains one of the least developed wine markets in the world relative to its population – with “tiny” consumption rates of wine (less than 1%) in a market dominated by spirits (53%) and beer(46%).
He argued that while it is a “very protected economy” with not much having been let in, there is already “huge wealth” in India – and investing in fine wine as an alternative asset class is expected to rise, with demand feeding into global markets via established trading centres before any domestic investment infrastructure develops.
“Class is huge thing [in India], but the upper echelons of class have been to Harvard and other universities and the best boarding school – they’ve been exposed to wine,” he said.
Growing middle class
But it’s not just the super-rich/super-elite – India’s middle class is expected to nearly double in the next 20 years going from around 31% of the population in 2023 to 60% of the population by 2047 and this will prove key,
Wine, WineCap argues is “increasingly positioned not as mass alcohol consumption, but as a lifestyle and premium category,” and the county’s wine market is projected to grow from under US$200m in 2022 to more than US$700m by 2030.
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“And it’s the middle class really that we are expecting to [grow],” Westgarth told db. “But a lot of education needs to happen.”
Increasing wine education
There are some signs that wine education is already on the rise – not only has India now got its first MW, wine educator Sonal Holland MW who is one of the most followed wine professionals on social media in India, with over a million Instagram followers, but the WSET reports general increased activity across the board, with the number of WSET course providers rising 30% in the last few years, to ten.
“Our experience shows that consumers in India are looking to make more informed choices about what they drink,” marketing director Carolyn d’Aguilar told db. “Drinking wine is aspirational in India as beer and spirits are the most popular beverages.”
Demand for WSET qualifications amongst consumers in India’s Tier 1 cities (Delhi, Mumbai, Bengaluru), where WSET course providers are well established, is growing, however d’Aguilar points out that the WSET was also reaching areas where its courses were not previously available.
“Better study options – including online exams and the use of Zoom/Teams for teaching – mean that students based in other parts of the country can now access our courses,” she said. Last year around 1,000 students took a wine qualification with WSET “but this year we are hoping to significantly this number”.
“Hospitality remains an important area of growth as more outlets realise that staff need knowledge and skills – from food and wine pairing to how to store and preserve wine – to be able to make a difference to the service they offer.”
But are the logistics ready?
There are some challenges however, notably the exchange rate, which make global courses such as the WSET’s quite expensive, while accessing international wines in India is also challenging “they are expensive, the selection available is limited and they are not always kept in the right condition.”
This points to another key area that needs to be addressed, given that education and tariffs alone are not enough to guarantee success for wine entrepreneurs keen to gain a foothold in the potential market. As Westgarth points out, import partnerships with companies who can secure the infrastructure, the logistics and security of shipments will be key.
“From having worked in other markets, that is something that that’s the first thing to look into there in terms of fulfilment – can you actually deliver [wine] safely and temperature-controlled [to meet] an increase in demand?” he asks.
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