HOW SCOTCH WHISKY IS PRICED IN INDIA

 THE IMFL VS SCOTCH WHISKY BATTLE TAKES SHAPE

A difference of $1 a bottle in the import price of whisky could lead to a significant surge in the shipment of popular brands such as Johnnie Walker Black Label and Chivas Regal into India.

Fearing an influx of foreign liquor, domestic players makers have sought a higher minimum import price of $5, instead of $4 in the ongoing India-UK FTA talks.

The report suggests that the deal will prescribe a minimum import price (MIP) and all bottled Scotch above the threshold will see import duty reduced to 100% from 150%, while those coming in casks could see it halved to 75%. The report says that while the details are still being negotiated, there have been discussions around reducing customs duty on bottled Scotch to 50% over 10 years.

Domestic players are of the opinion that India should agree to an MIP of $5 a bottle, instead of $4 for every 750 ml bottle. Popular brands like Johnnie Walker Black Label and Chivas Regal’s basic price is just over $4 a bottle. It is believed that would result in a flood of imports from the UK and wipe out several home-grown players and Indian-made foreign liquor (IMFL) brands.

Earlier this year, India's alcohol industry flagged a 40% increase in whisky imports in the first eight months this financial year against the full fiscal 2021-22, amid the ongoing India-UK negotiations on a free trade agreement (FTA).

Domestic players will find it tough to compete and foreign players, who have set up bottling units here, will not add fresh capacity and may go to the extent of reducing capacity, which will hit employment.

Even without a reduction in import duty, there has been a surge in bottled Scotch in recent years. Bottled whisky imports in FY23 more than doubled to $316 million from $152 million while the value of bulk whisky shipments is estimated to have increased by over 40% to around $149 million.

Domestic players, however, have expressed concerns to the government, pointing out that the surge in bottled Scotch imports in recent years was detrimental to the cause of local distillers and blenders.

It has been observed that all Scotch imports originate from the UK, although some shipments are listed as coming from Singapore and the UAE, as they serve as global trans-shipment hubs. Surprisingly, the cost of Scotch whisky has increased dramatically in Singapore.

Imported products currently constitute a small portion, around 3.3 per cent, of the overall Indian whisky market. However, in the middle and premium segments, defined as whiskies priced over Rs 750 per bottle, the share of Scotch is nearly 32 per cent and steadily increasing.

Currently, Scotch whisky, imported from the UK - both in bottled and bulk - is taxed at 150 per cent in India. According to Chivas Brothers’ Chairman and CEO, the pact between the two governments, if signed, would provide liberalisation in tariffs and will be a 'win-win' for both India and the UK.

One factor has not been considered, viz., the overstock status of these extra-popular brands during the pandemic. The cost of storage space also contributed to the deep cut in prices and the massive volumes sold as economies of scale more than made up the holes in the pockets of sellers.

HOW SCOTCH WHISKY IS PRICED IN INDIA

Single Malt Scotch whisky may be exported only as bottles, whereas Blended Scotch may be exported as desired by the transacting duo. Blended Scotch comes to India in huge metallic containers and is shipped directly to the bottler from the Port of landing. A check of the labels on the bottles will show you the details of bottling. The Indo-UK talks centre around the US$, an unusual move post Brexit disregarding both the GBP £ and the Euro €. Inter-exchange prices only served to drive costs up and only the GB £ should be considered in the future.

PRICING IN GURGAON HARYANA AS ₹ PER BOTTLE UP TO 31 MAR 23
		JW RED LABEL	JW BLACK LABEL
1	CIF Value US$1 @ ₹ 75	US$ 1.85 = 139	US$ 4 = 300
2	Profit & Margin	139	300
3	Total Landed (1+2)	278	600
4	Customs @ 150% (on 1)	208	450
5	Excise @ 50% (on 3)	139	300
6	Total = 3+4+5	625	1350
7	VAT @ 15% (on 6)	94	203
8	TOTAL 6+7	719	1553
9	Retail Margin (Variable)	50	150
10	VAT On Retail Margin @ 25%	13	38
11	Break Even Retail Price	782	1741
12	Actual Retail Price	Variable, ~800	Variable,~1,800

 This is how Black Label was sold at Rs 1800 in Gurgaon till this financial year. The Retail Margin varied according to demand and prices of other Scotch whiskies were decided according to availability and popularity. 

PRICING IN GURGAON HARYANA AS ₹ PER BOTTLE AFTER 31 MAR 2023
		JW RED LABEL	JW BLACK LABEL
1	CIF Value £1 @ ₹ 82.50	$ 1.85 = 153	$4 = 330
2	Profit & Margin	153	330
3	Total Landed (1+2)	306	660
4	Customs @ 150% (on 1)	227	495
5	Excise @ 50% (on 3)	153	330
6	Total	686	1485
7	VAT @ 15% (on 6)	103	223
8	TOTAL	789	1708
9	Retail Margin	80	100
10	VAT On Retail Margin @ 25%	20	25
11	Break Even Retail Price	889	1833
12	Actual Retail Price	Variable, ~1,000	Variable,~2,100

There has indeed been an increase in prices across Haryana, but it is relatively small compared to global duty-free prices. The cost elsewhere is staggering, as reported by ToI below:

                     

THE CURRENT PRICING IN INDIA AS ₹ PER BOTTLE
		JW RED LABEL	JW BLACK LABEL
1	CIF Value	175	330
2	Profit & Margin	373	803
3	Total Landed (1+2)	548	1,133
4	Customs @ 150% (on 1)	262	495
5	Excise @ 85% (on 3)	467	920
6	VAT @ 25%	320	637
7	Total	1,597	3,185
8	Retail Margin	82	100
9	VAT On Retail Margin @ 25%	21	25
10	RETAIL PRICE	1,700	3,310

Breakage is taken as 03%, i.e., three bottles in 100.

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BARREL SERIES FROM TAIN

 GLENMORANGIE MOVES INTO BARREL RESERVE WHISKIES

The attention paid to its pioneering work in wood management has resulted in Glenmorangie’s distillation regime being slightly overlooked. Not that anyone is complaining as this distillery sells the most Scotch single malt whiskies in Scotland. With LVMH taking over, price points are being raised to create exclusivity, which might go against the Tain hub. But there's enough variety to go around..

Situated next to the Dornoch Firth in a series of handsome red sandstone buildings, the Glenmorangie distillery started life as the local brewery for the town of Tain. In 1843, William Matheson converted it to a distillery and it remained in the family until 1887, when it was sold to the Glenmorangie Distillery Co, co-owned by the Maitland brothers and Duncan Cameron.

After WWI, the business was sold to a partnership between two blending and broking firms, Macdonald & Muir and Durham & Co, soon passing entirely to the former, which used the whisky for blends such as Highland Queen. Although it was bottled in small quantities from the 1920s, a change of strategy in 1959 saw Glenmorangie revived as a single malt that soon became Scotland’s biggest seller.

This was not the first time that this had happened, however. Records show that at the end of the 19th century, Glenmorangie was being sold at The Savoy and other top-end London hotels, as well as being exported. Early success in the infant single malt category resulted in two more stills being added to the original pair in 1976, a number which was doubled again in 1990. In 2009, four more were added, along with a larger mash tun and extra washbacks.

In December 2004, French luxury goods firm Louis Vuitton Moët Hennessy (LVMH) bought the firm (along with Ardbeg) for £300m. More recently, extra warehousing has been built, the result of a decision to mature and vat all the production on-site.

In January 2018, it was announced that a new stillhouse would be built, housing two more of Glenmorangie’s distinctive, long-necked stills, plus a new mash tun and washbacks. The new facility will enable more experimental runs, with indications that innovations such as the use of stainless steel condensers will be explored.

The process at Glenmorangie starts with mashing unpeated barley with water from the distillery’s Tarlogie Springs – making this one of a small number of hard water sites in Scotland. Although there is no smoke, once a year some chocolate malt is added to the mash for use in the firm’s Signet brand – another of the distillery’s many innovations.

Fermentation is long, while distillation takes place in the tallest stills in Scotland, all of which retain the same long-necked design of the pair which were brought from John Taylor’s gin distillery in 1887. This extra height allows a long interaction to take place between alcohol vapour and copper and, while the new make is decidedly high-toned (the cut points here are quite high), there is still a little note of cereal, adding a dry counterpoint.

The vast majority of Glenmorangie’s make is aged in ex-American oak casks, many of which have been made to the distillery’s exacting specifications: slow-growth American white oak from north-facing slopes in Missouri, which is then air-dried. The firm’s Astar bottling uses 100% of these ‘bespoke’ casks.

The casks are only used twice, with the second-fill casks all ageing in damp ‘dunnage’ warehouses to increase oxidative-driven flavours. As the whisky matures, it picks up more lush fruits, some honey and mint, as well as notes of vanilla, crème brûlee and, in the oldest expressions, chocolate.

Some of the mature spirit is then transferred to ex-fortified wine (Port, Sherry) and still wine (Sauternes, Burgundy, Super-Tuscan etc) casks for a period of finishing. Glenmorangie was one of the pioneers of this technique. Now it is experimenting-successfully, I must add-with Barrel Finishing, using casks that last held Cognac, Palo Cortado, Amontillado and Malaga within.

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