June 22: Indian wine industry has suffered a serious jolt with practically no sales due to the overall ban on alcohol products in April followed by limited sales with generally higher taxes, putting the fragile industry on an even more precarious condition but the rumoured price increase at this point would be really suicidal, feels Subhash Arora who finds a strong support from producers for maintaining the price line despite media reports that price increase is imminent, a suicidal step at this point
A recent Media report indicating the possibility of the Indian wine industry raising prices of wines to partially make up for the loss due to practically no sales during the months of April-June really perturbed me. Had the industry decided to do hara-kiri after all!!
Therefore, rather than going to the source of the Article I went to the source of information, Yatin Patil, President of All India Wine Producers Association (AIWPA). He had reportedly said the industry had lost Rs. 1.5 billion due to negligible sales due to lockdown period and it had to recover some of the losses by increasing prices.
Yatin is a fine man who brought stability and inclusiveness in the AIWPA when he was voted the President of the Association 5 years ago. Founder of Reveilo Wines, he has a head on his shoulder. Without beating about the bush, I asked him if it was true that the Association had taken a stand to increase the prices.
Not denying it, he said he felt the price increase was overdue since during the last 3 years the costs had gone up but could not be passed on to the customer. In any case, he said the industry was looking for a price increase of 4-5%. This was hardly the time to think of a price increase, I suggested.
I contacted Rajeev Samant, Founder CEO of Sula Vineyards, the industry leader with over 65% of the market share. Rajeev has been obliged to stay at the Nashik winery where he has an ancestral farm house. He had gone for the harvest in March but was stuck because of Lockdown. This has happily given him an opportunity to be directly and regularly in touch with the staff and the market. He was categorical about their pricing policy with a firm ‘No’ and said, ‘I can make a categorical statement that we will NOT increase any prices this year and instead support our consumers who have suffered a lot already due to the pandemic. If at all, we might consider only next year but this year our goal is to get our wines to as many consumers as possible at the same price.’
Fratelli does not seem to have any plans to raise prices either. A query to Ravi Viswanathan, Chairman and Vivek Chandramohan, CEO of Grover did not elicit any response. In any case, with the seemingly sliding market share, it is unlikely that they would take that risk and rather increase the market share. Other players are too small to take a bold and suicidal step on their own. Even Pradip Pachpatil of Soma Vineyards says they don’t have any such plans this year. With few takers for the Resort from where they make reasonable sales, he is clear that the prices are less important than the customers right now. York would like the price increase (who wouldn’t!) but would not dare to bell the cat.
The producers have had an unexpected windfall in terms of abundant availability of cheap table grapes sold as low as Rs. 5 a kg due to lack of transportation and the lockdown. Poor farmers suffered huge losses and were obliged to sell them at such ridiculously low prices. Apparently, 5-6000 tons changed hands; another 4000 tons or so were left on the vines. These grapes are used for the cheap ‘Port’ wine and would significantly reduce costs for the producers. It is an open secret that some of these grapes find their way into the regular varietal wines though no one admits it openly. While quality is somewhat affected, costs come down too.
The producers have suffered a loss of 60-100% of sales in most markets during these months. One factor which is beyond their control, is the possibility of bureaucrats taking a myopic view and increasing excise duties. Delhi had taken the lead with an increase of 70% on MRP when huge lines were seen on May 4 and 5 this year when the shops were allowed to re-open. However, after a couple of days, the sales nose-dived due to higher prices and the government had to beat a hasty retreat and withdraw the increase. Not known to look at the interest of the consumers, they could still be masochist enough to raise taxes which would be a sure sign of killing the goose that lays the proverbial golden eggs. ‘We have no control over the government and hope that they would be sensible enough at this time of national calamity, and won’t rock the boat; we certainly won’t like to,’ says Rajeev.
Online Sales to break the cartels
It is also time to allow online sales which will allow producers to sell directly, even if through a licensed distributor. Cartels in Mumbai and Nashik have become notorious for their greed for profits and the BOGO schemes have almost destroyed the wine industry already, with the consumer forced to pay high MRP with retailers making a killing- usually more profit per bottle than the producer. Imagine a buy-one-get-one-free offer where the retailer gets the bottle free but sells it at full price (in Delhi) and perhaps at a nominal discount in cities like Mumbai. This step could help fill the gap to quite an extent.
These are tough times for customers as well as producers whose very survival is at stake. A shakedown of the wine industry is imminent and only the fittest will survive. Raising prices at this critical juncture is not the safest option for survival.
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