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Delhi Wine Club

Posted: Friday, July 17 2009. 17:50

Diageo Quits Indian Wine Business

Barely two years into the Indian wine business, Diageo, the No.1 spirit company in the world has called its quits, indicating the changing tunes of the economy and also flashing a  warning to the spirit industry that producing and marketing wines  may not be as simple as wine business.

It has taken Nilaya, the only wine label it introduced in November 2007 with much bandbajas, off the retail shelves and told dealers the staple reason that it wants to stabilise the domestic operations with locally bottled brands and the scotch whisky business with iconic brands like Johnnie Walker in many colours.

The reason given by the company to exit the wine business is said to be the recession and reduction of wine business and has been apparently taken after a change in the management. Asif Adil, the then managing director had introduced it with a lot of optimism, but he left the company in a huff a few months ago under mysterious circumstances and Roland Abella took over.

"The company does not want to focus on slow moving brands, and instead intends to pump in resources to develop Shark Tooth, Smirnoff and Haig," says Abella, according to a report in ET. But the wine market pundits did not give this Indian label much of a chance of success. The blue label on the bottle was quite off-putting. The name of the label was authentically India but sounded too medicinal. The quality of wine was mediocre with flavours that did not offer much, although one expected the company to work on the feedback and improve the quality in the following vintages. With the marketing and the financial clout, it was expected to challenge the existing established players like Indage, Sula and Grover.

Though the price of wine was a reasonable Rs. 400-500 a bottle, it was not produced by the company but at Mountain View and Renaissance wineries in Nashik, with bought out grapes. It did manage to sell the initial 15,000 cases last year, but repeat orders were scanty due to the wine quality and poor market positioning. It would not have been easy for the Diageo name to compete against the likes of Sula, Grover, Raveilo what with UB, and Nine Hills waiting in the wings. 

The fire and passion needed to produce and market wines was totally lacking. With brands like Hague and Johnnie Walker that sell like cold Coke and Pepsi in the Indian summer heat, it would be difficult for the company to penetrate the market with a proper perspective. A recent study done at the IGI airport, Delhi revealed that with over 900 items selling at the duty free shop, 40% of the revenue was provided by just one label- Johnnie Walker Black Label.

Undoubtedly the Indian market is going through a rough phase with even the leading producer, Indage Vintner crumbling but not only due to the recession. Sula, Grover and other quality producers are hoping for a better performance this year and with the irrational state government excise policies on the imported wines, their optimism is well placed.

One thing is getting clearer. The prices of Indian wines are on a downward price pressure despite the increase in import duties and the customer has started demanding better quality. The pedigree of the company or their marketing clout may not be the sufficient fuel to power the engine of growth. A Diageo, UB or Pernod Ricard or Constellation or Gallo if they chose to come to India may not mean an assured success. UB and Pernod Ricard have recognised this and are moving ahead with properly planned strategies.

Unfortunately, Diageo did not -and paid a price for it. 


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