Despite being the world’s largest whiskey market, India has historically been just the 23rd largest export destination for American whiskey. That could be about to change, as India agrees to lower its bourbon import tariffs from 150% to 100% – a move that comes at a crucial time for US distillers.

The timing is particularly significant. American whiskey is showing clear signs of market pressure, with volumes dropping 2% in the first eight months of 2024, according to IWSR data. This follows years of consistent growth, where the category enjoyed a 5% compound annual growth rate between 2019 and 2022.

The Bourbon Breakthrough

The tariff reduction represents a significant shift in India’s approach to American whiskey imports. Chris Swonger, president and CEO of the Distilled Spirits Council of the United States, called it “a significant accomplishment” that opens opportunities in the world’s largest whiskey market.

Last year, American whiskey exports to India reached $8.8 million, despite the 150% tariff barrier. This figure fell behind exports to significantly smaller markets including Singapore, New Zealand, and the United Arab Emirates. With tariffs now reduced to 100%, DISCUS sees substantial growth potential for US distillers looking to expand their global footprint.

Scotch’s Ongoing Battle

While bourbon producers celebrate their breakthrough, Scotch whisky continues to face the full 150% tariff barrier in India. The Scotch Whisky Association has been pushing for reduction through UK-India trade talks, with little progress to date.

Mark Kent, Chief Executive of the Scotch Whisky Association, believes reducing the tariff could grow exports to India by £1 billion over five years. “Tackling the tariff and State level regulatory issues would open the market up to smaller producers who are effectively locked out by the substantial barriers to trade,” Kent said.

Market Implications

For American whiskey producers, India’s tariff reduction comes at a crucial moment. With domestic volumes dropping 2% in early 2024 and standard segments seeing declines of up to 8%, access to the world’s largest whiskey market offers a timely lifeline.

Kentucky distillers, who produced a record 2.7 million barrels in 2022, now have a clearer path to reach millions of new consumers. While challenges remain – including fierce competition and complex state-level regulations – the reduced tariffs could help offset domestic pressures and provide a much-needed growth avenue for US producers.

The move also signals a potential shift in global trade dynamics. As India demonstrates willingness to reduce barriers on strategic products, it could pave the way for further liberalisation in the spirits sector – potentially benefiting other whiskey categories in the future.

Read the full article at India Slashes Bourbon Tariffs as American Whiskey Faces Domestic Pressure