Strategic Toast for Diageo and Pernod Ricard in IndiaIon Jauregui – Analyst ActivTrades
The recent trade agreement between the United Kingdom and India has delivered a game-changing moment for major alcoholic beverage companies, particularly those with significant exposure to Scotch whisky. The reduction of import tariffs from 150% to 75% opens the door to substantial expansion in one of the world’s most promising markets: India.
Solid Economic Fundamentals
For Diageo (LSE: DGE) , the global leader in premium alcoholic beverages and parent company of iconic brands like Johnnie Walker, Tanqueray, and Guinness, the news could not have come at a better time. India already represents its largest market by volume, with sales reaching $1.3 billion in 2024—6% of total revenue. The ability to offer premium products at more competitive prices could further solidify its position in the Asian market and significantly boost margins. Diageo generates more than £17 billion in annual revenue, with operating margins close to 30%. Its business model is built around premiumization and brand strength, allowing it to maintain consistent profitability and a stable dividend policy. However, the company has recently faced challenges such as slowing consumption in the U.S. and volatility in emerging markets.
Pernod Ricard (EPA: RI) , Diageo’s direct competitor, also stands to benefit from the agreement. The French company, owner of brands such as Chivas Regal, Jameson, and Absolut, holds approximately 30% of the Scotch whisky market share in India. According to Goldman Sachs estimates, the tariff cut could translate into a multi-percentage-point increase in earnings per share, at a time when the sector is grappling with falling demand and inventory surpluses.
From a financial perspective, both companies show solid fundamentals, though with specific challenges. Pernod Ricard closed its last fiscal year with sales exceeding €12 billion and operating margins above 25%. Its strategy has focused on reinforcing the positioning of high-end brands through sustained investment in marketing and local distribution, especially in Asia. Still, excess stock and changing consumption patterns in Europe have limited its recent performance.
Technical Analysis
Diageo has undergone corrections from its 2022 highs of £3,763 to lows of £1,807 in April this year. The stock has since rebounded to £2,179. The daily chart shows the point of control around £2,307—slightly above the current price. Moving average crossovers suggest a potential corrective upward trend that has not yet materialized. The RSI stands at 63.89%, indicating overbought conditions, suggesting that an upward trend may emerge in the coming weeks.
Pernod Ricard, by contrast, has been in a downward trend since 2023, seemingly finding support at €83.04, also in April this year—coinciding with 2016 price levels. The current point of control is around €106. Moving averages appear to indicate a shift in direction to the upside. If conditions improve, we could see a potential move toward €120.
Opportunity and Competition
The trade agreement offers both companies a clear tactical advantage, though not without challenges. Despite the national tariff reduction, state-level taxes within India remain a significant operational barrier. Moreover, winning over the Indian consumer will depend not only on price, but also on the ability to connect with cultural preferences and deliver differentiated brand propositions.
In an environment where major economies are seeking to diversify and strengthen trade ties, this agreement could mark the beginning of a new era for the premium alcoholic beverages sector. For Diageo and Pernod Ricard, it’s a moment to raise a glass—but with a firm focus on strategy.
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