India-EU FTA May Disrupt Sula’s Premium Wine Business

As the anticipated India-EU Free Trade Agreement (FTA) approaches implementation, Sula Vineyards, India's largest listed wine producer, may soon find itself in a far more competitive market.

The agreement is expected to significantly lower import duties on European wines. While the deal is designed to strengthen trade ties, it may alter pricing structures in India’s premium wine segment, where Sula earns the majority of its profits.

The company currently commands close to 40% of the ₹1,500 crore domestic wine market.

Currently, as of 23 February, the Sula stock price is down 1.41%, ranging between ₹176 and ₹180 on the National Stock Exchange (NSE).

How Could Tariff Cuts Change Pricing In India’s Wine Market?

Imported wines presently attract duties of nearly 150%, which keeps most European labels positioned in the premium and super-premium categories. Under the proposed FTA structure, tariffs are expected to fall to around 75% initially, followed by phased reductions to 20 to 30% over time.

Retail channel data indicates a possible shift. Among 45 imported European wines currently tracked:

• Only 7 are priced below ₹2,000

• 21 fall between ₹2,000 and ₹3,000

• 12 are priced between ₹3,000 and ₹10,000

• The highest-priced label, Dom Pérignon Champagne, sells at nearly ₹39,739

The mix includes:

• 20 French wines

• 20 Italian wines

• 2 German wines

• 2 Spanish wines

• 1 Portuguese label

Most remain out of reach for mass consumers.

If prices fall by around 30% after the FTA:

• 24 wines can cost less than ₹2,000.

• 11 wines can cost between ₹2,000 and ₹3,000.

• 8 wines may stay in the ₹3,000 – ₹10,000 range.

This would bring a large number of imported wines into direct competition with Sula’s core premium portfolio, which is typically priced between ₹750 and ₹2,100. Nearly 80% of the company’s revenue comes from this premium band.

Why Does The Timing Increase Pressure On Sula?

The potential shift comes at a challenging time for the company. Sula has reported revenue degrowth for three consecutive quarters amid softer discretionary spending and slower urban demand.

For the December 2025 quarter:

• Net sales were ₹180.41 crore, down 9.86% from ₹200.15 crore from Dec 2024.

• Net profit stood at ₹9.10 crore, down 67.57% from ₹28.06 crore.

• EBITDA declined 39.09% from ₹53.95 crore to ₹32.86 crore Y-o-Y.

• Earnings per share fell to ₹1.08 from ₹3.32.

The pressure has been partially pointed out by management to spending patterns and seasonality. Analysts point out that a closing price gap between domestic and imported wines may put pricing power in the premium market to the test even more.

Also Read - Donald Trump’s 15% Global Tariff

What Should Investors Watch If The FTA Takes Effect?

Sula has been gradually broadening its strategy. In recent years, it has partnered with imported labels such as Le Grand Noire and Torres, using its distribution network to bring global brands to Indian shelves.

At present, the distribution of imported wines contributes around 2 to 2.5 % of total revenue.

For investors, the main concern is how profits hold up if competition increases. Sula earns more from selling its own wines than from distributing imported labels. If imported wines start selling faster than domestic ones, the profit mix could change.

Pricing will be another key factor. If more European wines enter similar price ranges, Sula may need to respond. The company may have to balance between keeping volumes steady and protecting margins.

There is also a wider possibility. Lower duties could attract more consumers to wine overall. If the total market grows, Sula could still benefit because of its strong presence across stores.

In the coming months, investors are likely to watch how well the company adapts. Brand strength, shelf visibility, and the ability to respond quickly to competition may matter more than tariff protection.

Sources:

NDTV Profit

Moneycontrol