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Blog: Case for 6-bottle Case of DF Wine at Arrival

Posted: Thursday, 08 September 2011 11:04

Blog: Jeannie's Got a Gun

Sep 08: As a principle, I refrain from commenting on statements made by any wine person in the print or online media, even if they criticize me personally no matter how wrong they are, but an article yesterday reported in the Press, with statements purportedly made by Jeannie Cho Lee MW about the Indian wine market appeared so incorrect and potentially misleading that I had to make an exception, with due apology to the wine queen of Hong Kong for whom I have a lot of respect**.

Dum dum, it's the sound of my gun
Dum dum dum, honey what have you done?
Dum dum dum, honey what have you done?
Janie's got a gun, Janie's got a gun!.

The article reminded me of the above lines in the 20-year old popular song by Aerosmith: Janie’s got a gun. I can hear the sound of her gun but when I meet her in Hong Kong, I want to tell Jeannie, ‘honey what have you done?’ because with a Master of Wine under her belt, Jeannie sure has a gun!.

"So that means, inevitably, wine (interest) is growing." The main hindrance to a potential boom in India's wine market, given the rapid growth of a freer-spending middle class, is prohibitively high alcohol taxes in key cities such as Delhi and Mumbai, though taxes are lower in Delhi,’ reads the article from Reuter picked up by ET.

Whoa, whoa, whoa! Taxes are lower in Delhi!  Which Delhi are you talking about, honey? ‘Cause the Delhi we live in, is choking and wine growth is dying a slow death because the excise duties are so ridiculously high. I hate to admit this about my home-town but the excise duty is a lot lower in Mumbai-and I mean a lot! No sense in going through the details-my readers are already bored with my continuous reporting and cribbing about it all the time. But all the facts are there on the website; customs duty is the same everywhere in India, being a central (federal) tax.

"Mumbai being the sort of business hub of India, even though there's close to 300% duty, people still drink. People still enjoy wine," Lee said according to the report. Who told you that, honey? After going berserk in 2007 for a year or so, Maharashtra proved that they are more with-it and reduced the duties substantially, especially on the super-premium wines (read expensive!). This year they made hard liquor and beer more expensive slightly but , may they live longer by drinking more wine, did not touch wine, so it continues to enjoy the same taxes, though Delhi increased the duties even more, especially on the medium and higher priced wines.

"So at the fine wine end of the spectrum, a lot of the Bordeaux chateau owners are telling me they're doing quite well in India, " she says. I would love to know which chateaux have told her- I am longing to hear those sweet words from the Bordelaise for many years now.

"From an economic perspective, because (of) the sheer number of people in India who are getting wealthier and who have traveled, and who are not strictly practicing a certain religion and are much more international, that proportion of the population in India is growing,"

Lee said , according to the article. I am always foxed for a moment when asked this question overseas about religion by producers and journalist alike when I meet them. It makes me wonder who is drinking away the 500 million cases of hard liquor and beer sold every year-against a total of 1.5 million cases of wine! There are people cutting across the political, religious and social lines everywhere and adding to the list of drinkers- some openly, others behind the curtain or a metallic container.

‘Given its status as a market with a huge population rivaling that of China, India's potential as a wine market looks just as exciting’, said Lee.  This is a statement I cannot find any fault with. But only potentially!!  In 20-50 years, we are surely capable of not only being a huge market because of increasing population, abundance of youth and the capacity of Indians to adapt to new aspirational products-be it mobile phones, cars or TVs but unfortunately our (federal and state) governments have lumped alcohol with wine and until the delineation happens ( happen it will-someday not so soon though) we are a handicapped lot-almost straitjacketed.

‘As soon the regulations are, if they are ever, relaxed, then there really will be a boom.’ Her operative word, I believe is, ‘if they are ever’. No denying that there will be a slower boom even with the existing duties, if regulations are relaxed. But until the government can delineate wine from alcohol, that is not going to happen.

‘Cash-rich emerging Asian markets, especially India, could see an explosion in wine consumption in the future - if their government scraps import taxes altogether, the way Hong Kong did in 2008, maintains wine expert Jeannie Cho Lee.’

 I agree and was one of the first ones to have reported it on March 3 in delWine.’ But this would be a mere fantasy even though I share with her whole heartedly. We are not Hong Kong where they don’t produce wine. India has a growing domestic industry which will compete with China one day but if the taxes were waived totally today, the whole of the Indian wine industry would be wiped out overnight. We certainly don’t want that to happen.

It is only with WTO intervention and the EU threatening to sue the Indian government that customs duties were brought down but many states which have supreme powers according to Sec 47 of the Constitution of India in terms of taxation and the sales policy, immediately increased the excise duties including Maharashtra, Delhi and Karnataka, which had over 75% of the total wine market at that time in 2007.

There are talks of FTA going on between EU and India. Duties are expected to come down to 50% on more expensive wines from the present 150% if and when the treaty is signed. But how the excise duty issue would be handled by the states would still be an irritant X-factor.

I don’t want to sound like ringing the death knells for the Indian wine industry.  On the other hand I maintain that the arrow has left the bow and the government cannot stop the process of growing wine culture. There has been progressiveness shown by the government and things have been moving ahead even though painfully slowly.

Unfortunately, the supply-chain pipe through which the wine flows from the producer to the consumer is narrow and fragile. It would be dangerous for a foreign producer to read into her lines and catch the next flight to India hoping to reap immediate benefits– many of them already come with high hopes, especially when their brands have certain clout in their domestic market or overseas but go back frustrated.

Marketing in India needs time and patience. There will be many stories of success in the coming decades. But the failures might well outnumber them. We need to tread cautiously and be much more realistic than the article suggests-even to an optimist like me.

Subhash Arora

** With apologies also to Debra Meiburg MW who is a Master of Wine of the same vintage as Jeannie, I believe. She is a US citizen though living in Hong Kong for a couple of decades.



Subhash Arora Says:

Thanks Dan. Minor correction. 7 years ago, the customs duty was 100%. But there was ACD-Additional Customs Duty which made the effective taxes to around 420%. With pressure from the US and EU and the imminent legal case in WTO, the customs duty was increased to 150% (within WTO limit) and later 4% (refundable) special duty was added on the total landed cost, making it 160%, but the ACD was scrapped. So far so good. But the states went ballistic and increased excise duties-Maharashtra, Karnataka, Delhi, Goa, Chennai-you name it! (Haryana, HP and Punjab are sane exceptions). Maharashtra came down the high horse after a couple of years but Delhi did not relent. I totally agree with you that wine and spirits have to be delinked. In fact, I publicly challenged a minister when he said at a national seminar that the goernemtn had done it. But I do not have any doubts whatsover that things will change for the better eventually. They already have improved significantly. My only disappointment is that the pace is too slow and there is a lot of confusion in the minds of lawmakers. Subhash

Posted @ September 13, 2011 17:10


Subhash Arora Says:

Thanks Tony. You are slightly wrong- Excise Duty actually went up this year in Delhi!! Especially on more expensive wines, though it should have been the other way around. And the new policy was delayed on a wekly basis for 3 months!! The market could still develop more steadily if procedures were streamlined. THAT would not be in the interest of the bureacrats so they keep on interpretting the policies frequently. There is no clarity or sense of direction, at times. My Americal journalist friends and importers tell me theat the procedures are very complicated there too-perhaps even more than India (think Prohibition!). But they are well known and documented. So the intersted people know what they have to deal with and can plan accordingly. I agree totally that wine education is extremely important and in my own humble way and style, I have been doing just that for 10 years now. But this is a time consuming process and will go way beyond my lifetime. Subhash

Posted @ September 13, 2011 16:56


Subhash Arora Says:

Thanks Harshal. I had to restrain myself from giving statistics and figures because that would drown away the basic flavour and purpose of the Blog. If you read delwine regularly, the exact duties are mentioned along with the office order regularly in hordes of articles and they are perhaps still on the website. If there is anything I have mentioned in the Blog which is not correct, you are welcome to address. Subhash

Posted @ September 13, 2011 16:40


Subhash Arora Says:

Very simple, my dear Watson. I picked up ‘honey’ from the song where the lyricist tells the girl after she has shot,’ honey, what have you done?’ My implied stress is on ‘what have you done’. To me Debra Meiburg is also the Hong Kong Wine Queen. I mentioned her only so our Indian readers know they are two MWs in HK of the same vintage-not that the year of entry to the Institute of Masters of Wine is really that important. And remember, Jeannie is the protagonist in my Blog. I didn’t want to take the highlight away from her. Cheers, Subhash

Posted @ September 13, 2011 10:46


David Furer Says:

Valid arguments, useful info, but I'm perplexed as to why you saw fit to refer to Ms. Lee with the diminutive "honey" and refer to Ms. Meiburg in postscript, as she wasn't mentioned previously.

Posted @ September 13, 2011 10:42


Tony Devitt Says:

Dear Subhash, It was maybe a year or so ago I blogged that taxes in India were greatly impeding development of the wine market and obviously little has changed. It doesn't matter whose are highest, they are impeding market development. China is not the panacea everybody thinks it is. Sure some premium wine is bought on image, but generally it is still a very opportunistic market where price (cheap) is still a major driver as many "importers" still see opportunity to ramp up prices, make quick money and hang any interest in educating the consumer or developing long term relationships with exporters. There are of course exceptions to this, but at the moment very much in the minority. So what is the solution. Firstly wine education of trade and consumers is number one by miles and then as occurs in most democracies Government needs to get out of the way of market development. It is great that India is a democracy but the bureaucracy must be stifling. Best wishes, Tony.

Posted @ September 13, 2011 10:41


Dan Traucki Says:

Subhash- I agree with you that the progress to a much more open wine market in India will be very slow and I think it will be rather painfull for may in the Wine Industry, both domestic producers and overseas suppliers. When I was in India 7 years ago, all the talk at the time was the possibility of the government lowering the 150% duty on imported wines- today, it is still talk! The other BIG issue for overseas wine producers is finding a licenced importer who has any empathy with wine, most of the limited number of businesses who have an alcohol import licence are almost totally focused on Spirits and hardly give wine a thought. The real crux of the matter is the fact that the Indian Government treats wine in the same way it treats spirits rather than treating it seperately. It is sad that the government does not see that a susbtantial shift from hard liquor to wine would have significant benefits for India in improving health and reducing alcohol related issues. Hopefully one day they will see the light, reduce taxes and duties to a reasonable level and then one won't have to go to international hotels in order to enjoy a good glass of wine in India.We live in hope cheers Dan Traucki MWCC

Posted @ September 13, 2011 10:38


Harshal Shah Says:

Subhash, perhaps you can clarify exactly what the state Excise rates are in the major wine-consuming states in India. There seems to be a lot of huffing and puffing of opinion above (granted, it is a blog), but there is very little hard data with which you could have backed your views. If Jeannie's informatoin is incorrect, perhaps you could provide us with the correct data. HS

Posted @ September 13, 2011 10:31


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