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Wine Society of India Shuts Shop

Posted: Thursday, 04 February 2016 11:00

 

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Wine Society of India Shuts Shop

Feb 04: In what would have been its tenth year of seemingly successful operations, the Mumbai- based Retail and wine education oriented Wine Society of India, owned by Direct Wines and Diageo-owned United Spirits Ltd., has announced downing its shutters from February 1, writes a surprised Subhash Arora who feels the company might have been a victim of the archaic and regressive policies and procedures of the government

Click For Large ViewA recent mail to the members from Douglas Lasrado, Asst Manager-Wine Sales of Wine Society of India (WSI) said, ‘We thank you for your patronage of The Wine Society of India..! We want to inform you that The Wine Society of India will suspend trading from the 1st February 2016. From that date, our offices will be closed.'

The message might have left some ambiguity as to whether the business was being suspended temporarily. On enquiring from London-based Steven Spurrier-one of the founding members who continued to be the Chairman even when the company changed hands in the later years, confirmed the news to delWine.

‘The WSI is indeed being wound up. The main investors - USL and Direct Wines - are writing off their investment and the original shareholders will have to do the same.’ United Spirits had been roped in with 49% stake through Vijay Mallya when the company started the business ten years ago in 2006, by the India-born David Banford who spent his growing years in UK and did business in the US before coming to India in 2006, looking for greener pastures. Even Sanjay Menon of Sonarys was a part of the WSI in the early stages as an importer.

When it was launched in Delhi in around 2008-9 at the Imperial Hotel, David had told me that they already had over 1000 members and were fast approaching the target number of 3,000 that was required to break-even; this number was raised to 5,000 later as the latent costs kept on increasing. David decided to retire from the business and sold off his shares to Direct Wines in UK, as did Steven. United Spirits maintained the status quo with the reported original investment of Rs. 10 million and Direct Wines had the controlling shares.

The company had crossed the 10,000 mark according to a recent report and was looking for funds to expand. ‘The last figure I saw was 12,000 members which was nearing break even, but neither USL/Diageo nor Direct Wines were prepared to put up any more funds,’ says Steven who has been regularly invited to India as the Chairman and for giving advice, besides organising tastings and dinners with the WSI members, despite not being a shareholder.

Understandably the costs were going up because of various government regulations and restrictions, including perhaps FSSAI which would have made the direct import of small quantities they selected from across the globe, a nightmare. Says Steven, ‘if you ask David Thatcher, I think he will paint you a fairly bleak picture of trying to sell imported wine by mail order in India. It is all a great pity, not just the money, but the collapse of a very good idea.’

When I asked David Thatcher, Group Chief Executive, Direct Wines, wondering if the strangulating and complicated procedures could be the reasons for their shutting a seemingly successful operation, he said, ‘You are right, part of the problem with WSI has been the archaic, and constantly changing regulations around selling wine in India, particularly with direct to home delivery channels.’

Selling wine through mail order or online is not allowed in India. There have been cases of prosecution, arrests and harassment in Mumbai, Bangalore and Delhi where the law does not permit you even to send your office peon to deliver to the house. There have been quasi-legal means adopted by many sellers but apparently the running has not been smooth.

David Banford who went to South Africa after selling his stake, had worked around the same model with The Wine Society of America he set up in 1984. He sold the business after running it and roped in Steven Spurrier, along with the importers Sanjay Menon and Four Seasons, then owned by Vijay Mallya. It was based on the model of wine clubs in UK and US where the club run by a wine producer or an entrepreneur collects members, organises tastings and educational events and sells wine on regular intervals-usually monthly or quarterly.

In case of WSI a member had to agree to buy a package of 6 bottles, 4 times a year. The prices seemed competitive as a package but usually had one bottle of Indian wine which was of much lesser cost-initially, the portfolio appeared heavy on wines from Four Seasons but later it became more balanced. It was a good option for novices who did not have to go through the headache of selecting wines about which they did not have much knowledge.

But why would they not sell the business instead of simply closing it? And what about the staff salaries (one still has bitter memories of the now-defunct Indage Vintners  not paying the dues of their employees or Vijay Mallya’s Kingfisher Airlines not paying salary of several months)?

‘We have ensured that all of the staff were fully paid and also paid all of the bills, so at least nobody outside the shareholders has been disadvantaged by this outcome,’ says David, adding, ‘even though the loss was split with USL, it was still enough to be painful. We did try to sell the business and had a number of expressions of interest, but none of them turned into a concrete offer I am afraid.’

Incidentally Wine Society of India had no connection, business-wise or otherwise and had nothing to do with the Indian Wine Academy or Delhi Wine Club. There were occasions people used to be confused and  believed we had an affiliation, and occasionally called our office with some issue or a problem. Besides, Delhi Wine Club merely organises wine dinners for which the costs are split amongst members.

With the closure of WSI, an authentic source of Retail sales has been lost. But WSI was not just Retail. They did organise several programmes, ostensibly to attract new members but imparting wine knowledge through even tastings. They were as law-abiding as anyone in the business and selling fully tax-paid wines. It is a pity they were bogged down by the procedures. By closing down they have also sent a small signal to the government, if it is interested to listen, that for foreign investors to come to India to do an honest business it must streamline procedures.

‘We are all, including Steven, convinced that somebody will, in the end, make a good business from selling wine there, but I think it will take a lot of patience and deeper pockets than USL and we have I am afraid,’ says a frustrated David Thatcher, about their failed experiment in India. Direct Wines, which he heads in the UK, is a highly respected, well-established wine distribution company in UK and one can be reasonably sure he would not be singing praises about doing business in Incredible India.

For a related Article of 2009, click:

Editorial : On Wine Clubs and Societies

Subhash Arora

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Tags: Wine Society of India, Direct Wines, Diageo, United Spirits Ltd., Douglas Lasrado, WSI, Steven Spurrier, USL, Vijay Mallya, David Banford, Sanjay Menon, Sonarys, FSSAI, David Thatcher, The Wine Society of America, Four Seasons

Comments:

 
 

Steven Spurrier Says:

Dear Subhash, This is a good article. The one thing incorrect is that David and I did not sell our shares to Direct Wines, but we retained a diluted shareholding than when invested. Best regards, Steven.

Posted @ February 11, 2016 17:45

 

Chintamani Rao Says:

I'm sure strangulating regulations had a lot to do with its closure -- as you say, a law-abiding liquor business is very hard to run in this country -- but from a member's perspective it lost its raison d'être a long time ago. In the last three or four years of its eight or so it had become nothing but a pushy retailer. This was a long time coming. Chintamani

Posted @ February 05, 2016 10:40

 
       

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