Feb 07: Buoyed by the expanding sales, especially in the premium segment, Sula Vineyards has bought land in Vinchur Park, near Nashik and plans to set up a new winery which will not only augment its production capacity but will be a boon for the languishing area that was carved out with much fanfare over a decade ago but has not made much headway, writes Subhash Arora who had an exclusive interview on Saturday with Rajeev Samant, Founder and CEO of the group, on the sidelines of just concluded SulaFest and found him very upbeat about the business growth
While the work on the refurbishing of Heritage Winery purchased early last year is in progress, Sula has already plans to expand within Maharashtra with a new winery. Land has been bought in Vinchur Park and the construction will start soon. Although Samant did not disclose how the funds are being arranged but indicated that a Capex of Rs. 50 crore (Rs. 500 million) would be required to complete the winery where all the low ended wines including Port and those using Thompson Seedless grapes will be processed.
Good for Sula, Good for Vinchur Park
It may correctly be assumed that what’s good for Sula, will be good for Vinchur Park which become functional about 15 years ago with Vinsura and Flamingo wineries but has not fulfilled the vision of the government in making it a flourishing wine park where wineries could use common facilities. Vinsura has had its economic and management problems while Flamingo is already considered a satellite winery of Sula, with the total production being for the biggest Indian wine producer.
Look at the stretch around Sula winery. It took us over an hour to locate the winery in 2004-5 after reaching Nashik and with constant guidance on phone by Rajeev Samant in Mumbai-there were no landmarks. Today, it could be named an important wine road, with two more wineries York and Soma within the 3 kms. Stretch and the road leading to Beyond-a resort run by Sula around 5 kms. from the winery. There is habitation, villages, restaurants, adventure parks, shacks, banquet halls and dozens of people building residences around-with several big properties under construction, including a hotel. It is reasonably certain that the same will be repeated in Vinchur Park. Even the Maharashtra government would be happy about Sula setting up shop... what is good for Sula will certainly be good for Vinchur Park.
Current Year Scenario
Wine industry has been going through a rough patch in 2017-18. Sula has been in the same boat- the market was very bad till July; it did not seem feasible to reach last year’s numbers but the things have suddenly took for the better, says Rajeev who has not been so upbeat in the last few years. ‘Our sales are booming in the West India doing very well in Bangalore and Karnataka. We should show a growth in revenues of 15-20 % in the Mumbai market alone!’ ‘But what about the elusive number of reaching the one-million cases that has been within range for 3rd year in a row? And what about North and Delhi sales in particular,’ I ask?
“First-off I must say that Bangalore sales might be flat or even less in the end. Reason is that we have now started selling 4 labels of Kadu brand –made in Karnataka and sold in Karnataka. All Sula wines would be shipped from Nashik. Due to the import taxes, these wines will have extra price tag of Rs. 225- 250 due to this tax. Many people might not want to buy Sula at higher price point for the same wines. We will lose some sales in short term till Kadu takes over and compensates for the short term loss. In the long term, we shall recover and be back on track. Delhi is another story. Besides, the policy being strange and too brazen, I believe the super-rich in Delhi have caused a drop in the wine consumption. I suspect due to pollution they have stopped throwing farm parties where wine was consumed in a big way and we are the leading suppliers.’
‘Surprisingly, our red wine sales have gone up tremendously and we have caught up with the national average. We have been predominantly a white wine producing company in the past but now 60% of the wine we produce are reds while only 30% are whites!’
Regarding our not crossing a million-case mark but staying close to it, I must say that we have never been after numbers but more for quality and consistency. Our Rieslings have hit the roof with a fantastic demand. I am very happy with the recent addition of The Source Rose Grenache 2017. In fact, we have started the new label-that has the picture of our Resort ‘The Source’ on top of the label. (It looks in fact, like a chateau in a French label). This will be a slightly premium label where we can afford to price the wines higher as they are of better quality..
The Source Rose 2017
In fact, the Rosé is an excellent wine-certainly one of the Top Roses in India. Provence onion colour has a very fruity and juicy strawberries floating in your mouth. The juicy wine has vibrant acidity and a light body that has the fruit exploding in your mouth with an excellent mouth-feel. Reasonably long end makes the wine better than an entry level wine. Though advised to open it within 3 years, the wine is very addictive and easy to drink, keeping you salivating for the next sip. I spent most of my coupons drinking this wine for the rest of the period at SulaFest. Sold only at the winery at Rs. 875 a bottle with no discounts (I advise you buying a case at a time), there is not much wine left out of the 500-600 cases produced this year.
Imported Wines
There is not too much growth expected in the imported wine sales, though Trapiche from Argentina and Le Grand Noir from South of France are doing very well, he says. Hardys has been supportive for the last couple of years but the various sales incentives and schemes have been withdrawn, putting a wrench in the growth of Accolade Wines, the company that owns Hardys label and sells in India through Sula. It is not feasible to speculate at this point on the competitiveness with Jacobs Creek wines as their MRP might be increased, due to the Rs. 600 crore Demand raised against them by the Excise department citing lower transfer pricing for wine and spirits and Jacobs Creek being a big chunk of their wine portfolio.
Being one of the delWine Top Ten Importers in India Sula is not going to lose sight of the import market, in any case and will continue to push them.
L-o-n-d-o-n London Abode
It’s now open secret that Samant has become an NRI and operates from his house in London for half the time. ‘I have a fixed routine that I follow in London-from 730 am to 11 am I operate from the home and running the office diligently since India is 4.5/5.5 hours ahead. With internet being easily available, I stay in touch with great ease.’
Rajeev laughs when I tell him that the grapevine still has it that he will soon sell of his shares in the company and move abroad permanently. ‘No doubt, I have taken the decision to stay in London for 6 months in a year but the major reason has been my pregnant wife who does not want to raise the baby girl due to arrive in mid-March in the pollution-ridden Mumbai and I support her decision. But I have no intention of moving out of the company in any case. I am passionately involved with its running, which is at a point where it needs more professional help to grow. I have 25 years of my life invested in the business. I have not sold a paisa worth of my shares till today-, So why would I want to sell off now? I assure you, I will remain in the driver’s seat for a very long time.’
The Million- case riddle
It is unlikely that the company will reach the million-case mark even in 2017-18; it is expected to be more or less between 900,000-950,000 cases. But the product mix has changed significantly. The Port wine which had reached a level of over 325,000 cases annually is now down to around 200,000 whereas the premium wines have taken higher shares, resulting in growth on value-basis. The company could cross Rs. 500 crore sales-an increase of around 12% over last year.
The company has also consistently done better in spirits business, making it 10% of the volume and 20% in value of the total sales. It looks like the time has come to now look at the company’s revenue along with the volume which has been the way delWine has been calculating wine consumption in India- whether it’s a bottle of Port, Dia, Secco or Chardonnay Brut, the ratio in terms of value is around 1:8 between Port and Brut though volume is 1:1.
The 30-minute interview has extended to 50 and there is someone else waiting so I say bye to him, promising to meet him at some Tasting at the ongoing SulaFest.
Subhash Arora
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