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Posted: Friday, 14 February 2020 21:47

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Blog: If wishes were horses, wine would ride as King Beverage in India

Feb 14: India is a market more complex than the First Growths of Bordeaux and the opinions and level of optimism vary from individual to individual, State to State but when it is a question of putting money where the pen is, I like to advise a slightly cautious and longer term approach because money and efforts are invested, and so I would like to caution the readers who might have read a rather over-optimistic Article about wine scene in India, writes Subhash Arora

‘French wine maker Vignobles Arbeau recently launched its own label in collaboration with Tetrad Global Beverages, founded by career wine maker Abhay Kewadkar’, starts the report by Economic Times. Fair enough to anchor the report about Tetrad Global Beverages in Bangalore which talks about Vignobles Arbeau recently launching its own label in India. But the fact is that Tetrad partnered by Abhay with an experience of 30 years in the wine industry started the imports a  year and a half ago and currently has all French labels-barring a couple of labels called Clovely Estate from Queensland. Only 4 labels are from Arbeau and the 6 private labels-Early Dark, are wines from their stable. During my tasting last year I found the wines well priced and good quaffs.

Phenomenal Growth last year or was it

But what made me jump from my seat was that the report which also said that ‘According to Wine Australia, for the year ended December 2018, Australian wine exports to India grew in volume and value by 50% and 52% respectively, albeit from a fairly low base’. This would indicate that the wine industry in India is on fire and people can just fly in with a few samples and fly back with orders.

Now, Wine Australia has a very efficient data collection system. However, data can be nebulous; to start with it is apparent that the value/volume growth being similar, the price of these wines is rather low (Thank Jacobs and Yellow Tail/Hardy’s-the entry level wines thatcome to India  in big numbers). HOWEVER, to imaging an implied growth of 50% on their volume in one year is at best, a matter of conjecture. (I would love to be proven wrong on this). The other explanation could be that there has been import of bulk wine which is not reported separately as such. During the peak days of Indage, it used to be a norm, even though Sula and Grover did it –but at least the import duty was negligible then.

Indian market a fool’s paradise

Suffice it to say that to my way of thinking, the rush of orders is not going to happen-at least for a few years, if not decades. People are going to book their flights to India, especially because of a gloom in the Chinese wine space and even more so due to Coronavirus in China creating an unprecedented gloom and chaos. And they will go back frustrated and disappointed; I have seen it happen to many times.

‘Wine makers from Australia, Europe and the United States are looking at entering the Indian .market through tie-ups with a handful of experienced wine importers- we are told’. A report by the Australian Trade and Investment Commission data shows how the traditional wine making countries look at the Indian market. “In a country with a population of 1.3 billion and where around 700 million people are above the legal drinking age – a number growing by 19 million a year – India is a market with many opportunities for Australia’s winemakers,” said the Commission.

Anyone can see the glaring fallacy in the two statements, ‘the writers have been told by a handful of experienced wine importers!! The fact is that the experienced ones have practically shut the doors on even some of the existing ones. The current slow-down and government’s ever-changing policies have been a nightmare for importers and even restaurants who face the irate consumers. The number game is fine for future but for a producer who puts his money now, will soon burn his fingers and will be the proverbial scapegoat.

New importers like Abhay Kewadkar who know many foreign producers very well and the market may navigate their way through the muddy waters and if they can sustain, there is certainly rainbow at the end. But how many are in that position? Many producers and analysts got attracted with the ‘300 million middle class consumers’-all their potential customers but it never happened. An estimated 4-5 million only drink wine and that too not regularly.

The MRP for most popular imported wines, used to be around Rs.1200; it was pushed up to Rs. 1500 and most importers believe they were successful in raising the bar to make Rs. 2,000 a bottle MRP as a threshold for a significant segment. That has dropped back to Rs. 1200 or even Rs. 1000 and even 900. Where can these plane loads of producers sell, and where are these seasoned importers, I fail to understand?    

Duty Free licenses hit rock bottom

Another fallacy in the Article is, ‘the Indian government has allowed five-star hotels to import wines duty-free while other importers have to pay a duty of 150%. Therefore, sale of imported wines mostly takes place at five-star hotels. The nascent domestic wine industry has raised objections, saying the duty-free import licences given to five-star hotels should be done away with. Yatin Patil, president of the All India Wine Producers’ Association, said: “The hospitality sector was given duty-free licences in the 1990s when there was scarcity of foreign currency. Now, as forex situation is satisfactory, there is no rationale for continuation of the scheme. Secondly, five-star hotels are not willing to sell Indian wines as the imported wines are cheaper.”

The fact is that the hotel industry had lobbied hard in the early 2000’s with the government that the tourism was being affected negatively as the expats found imported wines very expensive. The government allowed the licenses against export earnings with a stipulation that the hotels would pass the benefits on to the consumers. Thanks to the financial jugglery, most hotels did not follow the directive in spirit. Licenses have become very scarce now anyway-from the original 10% down to 3% and that too, no more for foreign-owned chains like Hyatt and Marriott. (No one has been able to show me the government order on this seemingly discriminatory action despite my efforts). This has also taken up the prices automatically to higher levels with reduced sales and even 5-star hotel are looking for cheaper alternatives in their portfolio. Naturally, Indian wines have been the beneficiaries and one finds more and more of better quality wines in the wine lists.

Conclusion

I am glad to see optimism and enthusiasm as evinced in the Article. But I suggest a word of caution to the producers in EU, US and Australia referred to. India is not China-in fact quite the opposite-thanks to the vision of their government which actively encourages wine industry and foreign producers to even start production facilities by giving several incentives. India remains a long term market- lambi race ka ghorha’ as they say. With government being more supportive, the taxes being aligned, the improved wine education about the health benefits of wine, and undoubtedly the demographics so described in the Article, India has a great future- but there are minefields on the way to the pots of gold on the other side that make everyone salivate.

So please tread carefully. Cheers and JAI HO for a bright future of wine industry where high quality Indian wines will nevertheless find a better acceptance, due to price advantages against the imports.

For a few related Articles, please visit

Australia sets Record for average bottle price for Export

Abhay Kewadkar: Tetrad the Importer is Born in Bangalore

Ex-Four Seasons’ Abhay Kewadkar turns Wine Importer

Subhash Arora

 

 

 

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