India’s Union Minister of Commerce and Industry, Piyush Goyal, and New Zealand’s Minister for Trade and Investment, Todd McClay, signed the FTA on April 27 in New Delhi.
One of the highlights is an unprecedented 100% duty-free access for Indian exports entering the New Zealand market, which is expected to boost small and medium enterprises and benefit India’s labour-intensive sectors, such as textiles, apparel, leather, footwear, gems and jewellery, engineering goods, and processed foods.
On the nutrition front, New Zealand companies, in particular those exporting manuka honey and bulk infant formula, can expect to benefit from reduced tariffs.
At the moment, there is a 66% tariff on New Zealand’s manuka honey exported into India. The FTA will slash tariff rates by 75% five years from now. The reduction will take place gradually, with tariffs expected to go down to 56.1% in the first year, and further reduced to 46.2%, 36.3%, 26.4% and 16.5% in subsequent years.
This makes New Zealand the first country to secure preferential access for honey in any Indian FTAs.
India said that it currently imports 14.2 metric tons of manuka honey worth US$300k from New Zealand and imports 356.8 metric tons of manuka honey worth US$1.9m from other parts of the world.
“The FTA is a great opportunity. I applaud the two governments for coming together to find a path forward,” Karl Gradon, CEO of New Zealand-based manuka honey maker Comvita, told NutraIngredients.
India-New Zealand’s bilateral merchandise trade in FY 2024-25 was US$1.3 billion, which was up 49% year-on-year.
New Zealand said that India, being the fastest-growing G20 economy and is expected to become the world’s third-largest economy with a GDP of US$7 trillion by 2030, and offers huge growth potential. The country is also expected to have a middle class of more than 700 million by then.
FTA could make India a very significant market
Gradon believes that India would become a “very significant” market for the company with the 75% tariff reduction for manuka honey.
“India has not been a strategically targeted country, because a 66% tariff really is prohibitive. With the falling tariff rates, we believe that India will become a very significant market and we are looking to ensure that we have a very significant intent to grow,” he said.
India’s growing middle class and the understanding of honey as a therapeutic food in traditional practice are some of the reasons why it sees an opportunity for growth in the country.
Coupled with Comvita’s discovery and subsequent clinical findings on Lepteridine, a natural compound unique to mānuka honey, Gradon believes that this could help differentiate the company’s manuka honey from other types of manuka honey.
The compound has been shown to reduce symptoms of functional dyspepsia in a clinical trial.
“We need to find an audience within the Indian population that will understand the benefits of Lepteridine to create a point of difference within the manuka sector from the other competitors out there,” he said. “We are the only ones with that research. We are the only ones with plantations of manuka trees that are producing significant levels of this compound.”
Expansion will be disciplined, surgical, not overnight
While optimistic about manuka honey’s growth potential in India, Gradon emphasized that expansion will be “disciplined” and “surgical”.
This means that the company will enter India after identifying the target demographic and cities that will benefit most from the brand’s value proposition.
“I see India as not one country, but multiple countries within a single entity. We will be surgical in targeting cities and demographics that we believe are appropriate for our brand,” he said.
At first glance, he said that cities like Mumbai and Bangalore would seem like the obvious first choice, due to their demographics, spending power, and their propensity to embrace natural wellness.
However, the company will still be conducting an exercise to identify the distribution partners and areas to target.
Another key consideration is ensuring that its products are in the right formats and price points for the Indian market.
“We will be listening to the consumers and doing consumer research before we act,” he said. “The tariffs are going from 66% down to 16.5%. It’s a significant drop, but that’s over five years, so we need to make sure that we do this in a way that builds the brand and builds profitability,” said Gradon.
At this point, Comvita is already conducting outreach to potential consumers from India via travel retail and especially through its storefronts in Singapore, since there is a sizeable Indian population and tourists that visit the island-state.
From its manuka honey sachets to manuka honey lozenges, immunity gummies for kids and eye health jellies, Comvita’s products can be purchased via Singapore Airlines’ travel retail online store Krisshop.
“We are listed on Singapore Airlines because those movements of business people and tourists build awareness of our brand. It is also a great education opportunity for our promoters in-store to educate people on the benefits of Manuka honey too,” he said. “We are continuing to invest in Singapore ahead of our entry into India. Singapore plays a very important role in our discovery pre-entry into India.
Comvita has been growing its brick-and-mortar presence in Singapore. In 2023, it acquired specialist honey retailer HoneyWorld Singapore and its consumer brands.
Less interest from the bulk infant formula sector
Not all companies share the same ambition for the Indian market and dairy giant Fonterra is one of them.
Under the FTA, India’s tariffs on bulk infant formula, other dairy-based preparations and peptones – a dairy-based product – will be phased out over seven years under the new FTA. Currently, bulk infant formula exports from New Zealand to India are subject to 33% tariff.
However, India, being a major dairy producer itself, already makes it a less attractive market, with or without the tariff reduction.
“As you note, India agreed to eliminate the tariff on HS Code 1901.90, which covers bulk infant formula. New Zealand’s exports under this tariff line account for less than 1.5% of all New Zealand’s global dairy exports,” a Fonterra spokesman told NI.
He added that New Zealand does not currently send any exports under this tariff line to the Indian market.
“Fonterra has no current plans to expand our market presence in India as a result of this FTA, given the limited outcomes for dairy secured in the Agreement.”
Some of the major dairy and milk producer from India includes Amul (GCMMF), which has been building its line of functional protein products due to its access to whey protein.
NZ’s therapeutic claims limitation hinders export opportunities
On the other hand, the Natural Health Products New Zealand (NHPNZ) association said that it was assessing the benefits the FTA may offer for supplement exports, but also noted that the ongoing regulatory hurdles within New Zealand’s natural health products sector might hinder export opportunities.
The sector has long lamented limitations around making therapeutic claims for natural health products.
The inability to make health claims on the product label is undermining New Zealand’s health supplements in international markets, the industry argued.
“It is important to clarify that the New Zealand government has not yet taken the necessary steps to meaningfully enable export exemptions for dietary supplements,” said Samantha Gray, director of regulatory and government affairs at NHPNZ. “As a result, our sector remains in a holding pattern and is unable to fully seize the opportunities that the FTA could present — in terms of exporting dietary supplements to India and other markets.”
New challenges regarding the regulatory interpretation of permitted substances in dietary supplements could also potentially dampen the benefits that the FTA can bring, she said.
She pointed out that the New Zealand authorities appear to now hold the view that some natural ingredients that have a long and safe history of use are not permitted for use in supplements.
“This position is not consistent with the history or operation of the regulations, but unfortunately, it is the advice being given to Ministers and communicated publicly,” she said. “Not only does it threaten to restrict supplement exports, but it also has the potential to disrupt imports of raw materials that are essential for manufacturing.”
Examples of these raw materials include herbs, which India is a major producer of.
“As you’ll be aware, India is a crucial supplier of high-quality ingredients such as herbs, vitamins, and probiotics—many of which are now at risk due to regulatory uncertainty. This scenario could ultimately undermine the intent of the new FTA and impact our broader trade agreements,” she said. “We are working with urgency to ensure Ministers are fully aware that New Zealand law does not limit dietary supplement ingredients solely to those normally found in food, so our sector can continue to operate and grow without unnecessary hindrance.”