A slow reset, not a shock: What the EU-India FTA means for liquor companies

Domestic liquor makers are not panicking, but complacency is no longer an option. The EU-India FTA does not overturn India’s alcohol market overnight; it subtly but decisively resets its direction. Protectionism thins, preparedness gains currency, and comfort zones contract as comparison and competition move centre stage.

For domestic producers, especially in spirits, wines and beer, the issue is not survival, but relevance. Those investing in quality, brand equity, and supply-chain rigour may find competition acts as a catalyst rather than a threat.

Those dependent almost entirely on tariff insulation, however, may discover that these walls are becoming more permeable than permanent.

The EU-India Free Trade Agreement is best read as a strategic recalibration rather than a disruptive shock.

Its architecture with phased tariff reductions, minimum import price thresholds, and category-specific safeguard signals intent without upheaval. This is liberalisation with constraints, designed to nudge rather than jolt the market.

For a sector long shielded by high import duties and fragmented state controls, the FTA gently pushes Indian alcohol producers toward adaptation over insulation. The central question, therefore, is not whether domestic brands will endure, but how decisively they will evolve.

GUARDED OPTIMISM

The Confederation of Indian Alcoholic Beverage Companies (CIABC) has broadly welcomed the agreement, recognising the government’s effort to balance trade ambition with domestic realities. Yet its reservations are telling. Concerns around dumping, under-invoicing, and misuse of rules of origin point to a deeper unease: liberalisation without enforcement risks eroding competitiveness by stealth.

CIABC’s focus on strict rules of origin, particularly for GI-linked categories such as Cognac underscores fear of regulatory arbitrage rather than fair competition. The risk is not European producers playing by the rules, but third-country products exploiting loopholes and distorting the market.

Importers, however, strike a different note. For players like Aristol co-founder Sumit Sehgal, the FTA represents a cultural inflection rather than a price war. Lower duties, from this lens, are about market maturity—enabling better wines, sustainable margins, and long-term investment in consumer education. Imports are framed less as disruptors and more as ecosystem builders.

Both perspectives hold merit. Together, they reveal the agreement’s real fault line. The challenge lies not in tariffs alone, but in the broader regulatory ecosystem that surrounds them.

SHORT-TERM CALM, MEDIUM-TERM PRESSURE

In the immediate future, disruption is likely to be limited. As Brewers Association of India (BAI) Director General Vinod Giri notes, tangible market effects may not materialise until after 2027.

Beer, in particular, remains structurally insulated: bulky, low-value, and best produced close to consumption. Most global brewers already operate locally, rendering imports commercially marginal beyond niche trials.

Wine offers a more layered outlook, though alarmism remains unwarranted. The €2.5 minimum import price effectively protects more than 80% of the domestic wine industry.

European wines that benefit meaningfully from tariff reductions occupy the premium tier—a segment domestic producers have only recently begun to engage seriously.

The sharper pressure point will emerge in premium spirits. Categories such as Irish whiskey and vodka, already dominated by European brands, are positioned to gain disproportionately.

Any price softening is unlikely to challenge mass Indian spirits, but it could intensify competition in the emerging premium and luxury segments where Indian brands are still finding their footing.

THE MARKET REALITY

India’s alcoholic beverage market is vast valued at over Rs 3.2 lakh crore, but its core remains firmly domestic. Indian-made foreign liquor and locally brewed beer dominate both volume and value, while imports occupy a narrow, premium-led niche.

Spirits account for the lion’s share of value, beer drives volume, and wine—despite outsized attention—remains peripheral, contributing well under 1% of total alcohol consumption. Imported spirits represent roughly 2 % of spirits value, with imported wines accounting for an even smaller slice.

This is where the FTA’s influence becomes evolutionary rather than explosive. Imports will not flood the market, but they will increasingly shape aspiration.

The contest is not mass consumption, but perception, positioning, and premium shelf space. The India–Australia trade agreement offers a useful parallel: despite tariff reductions on Australian wine, imports have remained constrained by price thresholds and limited demand. The EU-India FTA is likely to follow a similar arc.

THE REAL TEST: NON-TARIFF BARRIERS AND REGULATORY FRICTION

If tariffs dominate headlines, non-tariff barriers will ultimately decide outcomes. India’s alcohol market remains fragmented by state excise regimes, label approvals, pricing controls, and policy unpredictability. Without parallel reform, tariff cuts alone will not create a truly competitive environment.

Paradoxically, this complexity may continue to shield domestic players even as duties decline. Yet it also limits their ability to scale, premiumise, and compete globally.

Reciprocity—particularly improved access for Indian spirits in EU markets—will remain largely theoretical unless these structural constraints are addressed.

At first glance, fears of a surge in cheap European alcohol appear intuitive. In practice, impact will be tempered by time. Duty reductions are staggered over years, with wine on the longest glide path.

The €2.5 minimum import price further restricts low-cost inflows, ensuring domestic mass-market products are not abruptly undercut.

This sequencing is deliberate. It transforms the FTA from a blunt liberalisation tool into a calibrated transition, granting domestic producers time to respond, not react.

In that sense, the agreement is less a threat than a mirror. It reflects where Indian alcohol stands today—and quietly asks where it intends to go next.