Spirit of optimism around Irish whiskey mission

If you happen to find yourself feeling a bit homesick in the Indian capital, Delhi, this weekend, you might feel better after making a trip to the bar of the Sheraton Hotel.

There, in the "Dublin" bar, your discomfort will be soothed and your mind distracted as you indulge in one of home's great pleasures: a glass of whiskey.

Of course, you will not strictly be the target market for the Bord Bia promotion that will be taking over the bar that evening. In fact, unless you can pretend you form part of India's growing middle class, you may not be overly welcome at all.

It is this portion of Indian society - estimated to number between 250 million and 300 million people - that is making Irish drinks companies very excited just now. As the world's biggest consumer of whiskey (or whisky if you prefer), India has the potential to transform the scale of the spirit's manufacture in countries such as Ireland and Scotland.

It is for this reason that a number of our largest drinks companies - Diageo, Irish Distillers and C&C - have joined this week's Enterprise Ireland-led trade mission to the country.

At the moment, Indians are thought to consume some 54 million cases of the golden liquid each year, a figure that is sure to grow as wealth spreads throughout the still-fragmented society.

Needless to say, a little of this action would go a long way for brands such as Jameson, Bushmills and Tullamore Dew, if only the Indian government would allow them to sell their wares.

Owen Brooks, director of international markets with Bord Bia, left for India ahead of the trade mission to do a bit of advance organisation for the food and drink trade fair in Delhi. It will be the first such Indian event to see Irish participation and it requires a subtle approach.

The need for particular care stems from the Indian system of levying heavy tariffs on foreign spirits. This means that most whiskey consumed in India is manufactured locally or, at a push, imported in bulk from Scotland and then bottled on the ground.

And if import duties weren't enough, whiskies must also face duties when they want to move from one internal Indian state to another.

The reason for the Sheraton promotion is that hotels can already sell foreign whiskeys with relative ease because of a complicated quirk in the law based on their foreign exchange earnings.

Brooks recognises that the path to stardom for Irish whiskeys in India will not be easy but he says Bord Bia has made a judgment that tariffs will come down in coming years, just as they did in Japan some years ago.

There have been encouraging signals in this regard, although the power of the domestic Indian whiskey lobby remains strong and one step forward is frequently accompanied by the proverbial two steps back.

For example, the most restrictive of the import licensing rules for foreign alcohol were repealed in 2001 but then India introduced a new, additional duty on imported spirits. This means that the federal duty burden for international brands ranged between 460 per cent and 710 per cent, according to figures compiled by Diageo.

Some improvements then came over the past few years but the 2005 Indian budget failed to build on these. As a result, the cumulative duty rate on Irish whiskey still stands at between 212.5 per cent and 525 per cent. And this is before the State restrictions even enter the picture.

The lack of movement last year prompted wine and spirit producers across Europe to unify and lodge a complaint with the European Commission. The producers believe India is violating a few important rules set down by the World Trade Organisation.

They hope a new bilateral agreement will be in place by 2006, with any quid pro quo likely to see Indian exporters getting more comfortable access to their international markets.

For the Irish producers, a new deal could deliver untold riches, with even the smallest pinprick of India's market capable of producing millions of euros in revenue.

For Diageo, the main focus will be its newly-purchased Bushmills along with Baileys, while Irish Distillers will focus on Jameson. C&C will be hoping to gain some penetration for its Tullamore Dew brand, and for its Carolan's cream liqueur.

Brian Walsh, managing director of C&C's international division, says the point of his company's visit to India is to seek a position in the whisky market before it matures.

Unlike Diageo or Pernod Ricard (owner of Irish Distillers), C&C does not have existing structures in India. Irish Distillers will be represented by a full-time India-based employee.

"We're probing to see if we can establish relations with some of the people there," says Walsh. "We'll be looking initially at finding a distributor."

And if the mission goes well, C&C could be selling small quantities of its spirits into India "very quickly".

From the Indian perspective, one advantage in making it easier to import Scotch and Irish whiskey would come in the de-emphasis on what are euphemistically labelled "alternative channels" of distribution. Scotch, in particular, carries a valuable cachet among wealthy Indians, who are allowed to drink as much whiskey as they like provided they can afford it.

This means that, like the Irish manufacturers, even the smallest malt producers in Scotland are already eyeing the market.

Meetings held this week between the Taoiseach, Bertie Ahern, and the Minister for Enterprise, Trade and Employment, Micheál Martin and their Indian counterparts thus carry significant importance for the Irish whiskey market.