Cover Story

Wine, glorious wine!

The bubbling popularity of wine in India would make Bacchus proud. No more perceived as an elitist drink, wine has crossed over to entice the masses. And therein is the truth. By Sayoni Bhaduri

Photo courtesy: Grover Vineyards, Nandi Hills, Bangalore

For a country that has never had a culture for spirits, the acceptance of wine and taste for it has come as a pleasant surprise - not only for grape farmers but also indigenous wine makers and distributors. Statistics show that wine consumption in just eight months between April and November of 2007 was 11.24 lakh litres, by which estimates we might even reach the landmark figure of selling a million cases by 2008-end.

While being toted as a 'health drink' that keeps the heart happy, wine has managed to climb the charts thanks to the increased awareness, brought about not only by Indians travelling abroad constantly but also by their growing affluence. Rajeev Samant, CEO of Sula Vineyards, says, "The profile of the Indian consumer has changed a lot over the last couple of years. They have moved from hard liquor to soft liquor, particularly wine, due to increase in affluence and health reasons."

Wine makers themselves are thinking out of the box and initiating awareness campaigns in their own way. Not only domestic, but even foreign brands are trying to fight their way through our warped taxation system, and distributors are conducting marketing strategies like wine tasting and food-and-wine pairing sessions.

Similarly, restaurants are now storing more varieties of wine for their guests. Nixon D'Mello, national sales manager for wine distributor Brindco, brings another aspect to the fore - retail availability of wine. "Public perception is changing dramatically as wine becomes available at the local supermarket or department store. The supply of wine in the last few years has been exceptional and people now have access to good quality wine at great prices. But the trend is yet to pick up in other states," he says. However, Ranjit Dhuru, chairman and managing director of wine producer Chateau D'Ori, says that awareness about wine in places like Nasik, Nagpur, Kolhapur, Sangli and Satara in Maharashtra is quite high. The situation was very different five years ago.

The urge to simulate Western lifestyle, where alcohol and wine is almost an everyday affair, has also led a certain class of Indians to take to the classier wine.

Wine especially for women - Dia

Dia by Sula Vineyards is an Asti Spumante-style low alcohol wine. Dia is a joint venture between Sula and Italian company Bosca from the Piedmonte area, famous for Asti Spumante as well as Barolo. Dia is light and frizzante (slightly bubbly) infused with natural herbs. It is a mix of sparkling and sweet, with eight per cent alcohol.

White, not red

Nixon D'Mello

Ranjit Dhuru

Still, there is a long way to go. For one, it still needs to dodge internal taxation policies. There are other immediate issues. According to the constitution, alcoholic beverages or spirits is part of the state subject and all states have varying duties and fees including excise duty, license fee, sales tax, brand or label registration, import and export fee, vend fee, gallonage fee and turnover tax. Except for the state of Maharashtra, all states consider wine as part of alcoholic beverages and therefore attract spirits licensing and taxation.

Even distribution patterns vary from state to state. Quite a few states do not allow sale of imported wine. That said, importing wines is not so difficult. Customs bonded warehouses do not need licenses and anyone can import wine. From here, it is decided whether the wine is duty-free or duty-paid after paying the relevant customs duty.

Abhay Kewadkar

Rajeev Samant

Interestingly, state governments have realised the potentials of the wine industry and are adopting a protectionist policy. Maharashtra has 200 per cent excise duties on imported wines. In Tamil Nadu, sale of wines produced in other states is prohibited in state-owned liquor outlets. Similarly, sales tax on wines goes up to 70 per cent in Andhra Pradesh. These directly affect the product's price points and its availability, especially in the interiors. Interestingly, even though the CAGR of wine is approximately between 25 and 30 per cent, the maximum development of the market is in and around the metropolitan cities, particularly Delhi, Mumbai, Bangalore and Hyderabad.

Very closely linked to the policies of the government are the provisions for marketing wines. Like other alcoholic beverages, there can be no advertising or direct promotion of wines leaving producers and distributors to opt for indirect methods such as promotional events, tasting and food pairing. Says Abhay Kewadkar, business head and chief wine maker for United Spirits, "The audience that consumes wine in the country is extremely small and knowledge about wine is little.” Wine is not allowed to be advertised and attracts very high excise duties across the states. Apart from this, issues of proper storage and transportation need to be addressed, predominantly at local and state-owned wine and liquor shops where information about the right way to store and transport is miniscule.

Wining strategies

Today, India gets the best of wines from France, Australia, Italy, New Zealand, Chile, Spain and Germany - courtesy Moet Hennessy, Vuove Cliqout and Diageo. Brindco, Finewinesnmore, United Spirits and Sula have also been bringing in foreign premium wines. E&J Gallo has entered in a joint venture with Radico Khaitan to distribute the Gallo brand of wines.

Still, even if good wines are available in India, they are way above middle class budgets. Also, there is much to be expected from the foreign market. Subhash Arora, president of Indian Wine Academy, remarks, "Current growth is not enough. Out of the 9,00,000 cases of wine sold, only 2,00,000 cases were imported wines. Four years ago, it was 35 per cent of the total sale."

Nevertheless, imports range from premium to economic and make for a healthy competition. An incentive to improve the quality of domestic wines, says Sumedh Singh Mandla, partner of Finewinesnmore. "We should look at the long-term approach and improve the quality and packaging of domestic wines to compete in the international market. We need to have strict rules like the AOC classification in France or the DOC/DOCG classification in Italy to have better control on the quality at all the stages of wine production. If we can work on the quality, packaging of wine and international marketing, we can certainly have great growth in India. Currently, the known ratio between domestic and imported wines is approximately 6,50,000 cases versus 1,50,000 cases of nine litres in 2006-07," he says.

Quality is not the only thing that needs to be improved; India also needs to look at growing different grape varieties and producing more varieties of wine than the current six basic types. Vintage Wines is already growing the Italian variety of grapes. This is keeping in mind that consumers never stick to one variety but like to experiment depending on the occasion and the cuisine.

There have also been plans to organise a wine board for sometime now. To add to that, the Planning Commission has recently proposed a uniform duty structure. This includes excise and countervailing duty, sales tax, license fee and label registration fee. The MRP must be mentioned on the bottle and the sales tax is to be charged on the MRP mentioned. Yatin Patil, director of Vintage Wines, says, "If the proposal is accepted, it will be a great help. Consumers are more comfortable with the fact that they are buying the same product in different places at the same price." Not only will it affect the prices, the product will also become consistent and it will increase the overall perception of wine. These are mostly soft issues but they make a major impact. The uniform duty structure will also stabilise the differential pricing in various states due to the tax structure.

"What is required right now is that a few states should go ahead with the proposal and enforce them. When they realise that the state revenue will not be affected, perhaps then other states will follow suit," says Samant. One other crucial element would be to bring it under agro-based food and processing industry. Equally favourable for both producers and distributors would be to see wine become a national subject, but that would be wishful thinking.

Growing in India

A step in the right direction is increasing the number of wineries. Maharashtra alone has 51 wineries but other states like Karnataka, Andhra Pradesh and Tamil Nadu are not far behind. Vineyards are predominantly located in the Western Ghats where the terroir and the climate are best suited for grape production. Wineries by default then are located close-by. Offering incentives for starting wineries would increase the per cent of total grape produced channelled towards producing wine, which at the moment is estimated to be less than one per cent, says Mandla.

Wine production is mostly based on European technology with destemmer, crusher and presses. Europe has the monopoly over the production of these machineries and India is mostly involved in providing stainless steel containers and pumps. Moving into the production of basic technology is not an option, at least not in the current situation since it would not make good business sense. Patil says, "There are 50 wineries in the country today, and they have 50 pieces of machinery which will last them for the next 50 years. So until input increases, it is not a good business decision to manufacture machinery in India." But things like packaging and bottling can be localised. It will decrease time constraints and save import costs.

Yatin Patil

Subhash Arora

Sumedh Singh Mandla

Indian wines abroad

While foreign produce is considered high grade in India, domestic wines aren't exactly unpopular abroad. Stories have floated around of how the swish class in Britain, US and elsewhere have hosted wine parties with 'exotic' Indian wines. Three of the major wine companies in India export wine to countries like UK, US and Australia that are some of the biggest markets for Indian wine. Grover Wines is already exporting about 25 per cent of its produce to UK and France while Vintage Wines' Reveilo has tied up with a distributor in the US. Indian restaurants are the biggest consumers of wine abroad.

Of course, it all needs work. Apart from the need to improve quality, there is also an oversupply of premium global wines in the world market. London alone has more than 25,000 varieties of wine available. Arora dispels a myth regarding Indian wines. He says, "It is considered that Indian wines go well with Indian food. This is not true because the wine produced here is the same classical type produced elsewhere. Hence the basic characteristic of wine may not go with Indian cuisine, which is known to be hot and spicy." In any case, produce here is much better than a few developing wine-growing nations. Dhuru talks about China for instance. "China is the sixth-largest producer of wine in the world but its quality leaves much to be desired. Indian wines fare much better."

We can safely expect the coming years to see steady growth in the wine market, particularly with the growth of modern retail and an increase in land under grape cultivation by approximately 4,000 to 5,000 acres. Grape farmers need to work hard and progress parallelly. This, along with good and focused marketing, can make India a big player in the international wine market, much like the wine it hopes to make.