Dec 30: After a year of gloom due to the Pandemic, with 2020 hit particularly bad, the challenged Indian wine industry is poised for an annual growth in double digits for the next 5 years including 20% in 2021, according to Rajeev Samant, the Founder CEO of the 1 million case- strong, biggest Indian winery Sula Vineyards, who delivered the Keynote Address on ‘Indian Wine Industry- The Current State and Future Prospects’ on the opening day of Vinexpo India on 9 December. Subhash Arora reports
After experiencing continued growth from 2009-2019, Post the 26/11 (2008) recession, the Indian wine industry went into slumber in 2020, facing testing times due to Covid but it is back on track now and is expected to grow annually in double digits for the next 5 years (subject, of course to Covid not turning active) including 2021. This is what Rajeev Samant saw in the crystal ball during his Keynote Address on 9 November, the opening day of the 3-day international Wine Show, Vinexpo India organised by Inter Ad Exhibitions in collaboration with the French company Vinexposium.
As an Advisor for Vinexpo India and Conference Chairman, Subhash Arora had invited Rajeev Samant, Founder CEO of the largest wine company Sula Vineyards in India, to deliver a keynote address about 4 months ago. But due to his unpredictable visits abroad after staying in Nashik for almost a year, he was not certain about his presence in India on 9 December and so politely declined, offering a virtual Keynote Address which was not feasible since ours was going to be a physical Show after a 2-year hiatus. As luck would have it, he contacted me a couple of days before the Show that he could after all be present at the Show. With a bit of tweaking and jugglery, I was able to have him for the Super Masterclass. And what a lucid and inspiring Presentation it was-full of introspection and optimism for the fledgling wine industry!
Total shut down
The industry had to bear 6 months of total shut down in the whole country, very challenging time for wine players who are nowhere near as financially strong as the rest of the spirits industry. They are smaller and much more financially constrained. Covid had been a big hit to small producers who had to survive with zero cash flow. They had to infuse funds from their own pockets. Some of the smaller producers and importers had to shut shop during these 2 years, in which everyone tried to consolidate their market share.
Whammy for importers
Importers had in fact to face a triple whammy. Due to the closure of restaurants, they had a very tough two years. In Delhi they had to face total decimation due to the retrograde excise policy of the government where label registration charges had been increased from Rs. 10,000 to Rs. 100,000 a label, resulting in a crash in the number of labels from their massive portfolio selection earlier, making the business unviable. Even Sula had to slash its labels by 75%!
But everyone is struggling with logistics now with a massive increase in shipping costs globally. Not only has the increase spiraled into higher CIF prices, the customs duties levied on the freight too, have gone up higher. Then, the Retailers have been asking for more pound of flesh, making the business conditions extremely tough- one might add to volumes but profitability is badly squeezed.
Haryana has been a bright spark for them due to Gurgaon with porous borders. While Delhi Sales have plummeted, Gurgaon Retailers have seen a massive increase in their fortunes.
Sula was fortunate to gain market share but went through tough time too with payments delayed and no money coming from distribution. Growers could not be paid for a year and now there was added pressure packaging materials like corks, labels and bottles experiencing a double digit escalation- a perfect storm!
He based his projection of a solid double-digit increase based on the sales in Mumbai where the increase has been as high as 15%, Delhi NCR and Bangalore. What happens in Mumbai is reflected in the sales in Maharashtra and the West, with Delhi Gurgaon indicative of the sales in the North India and Bangalore reflective of the sales in South.
Covid has been a boon in some cases with the government allowing home delivery. In Mumbai this had resulted in increase in Retail sales from 65% to 85%. True, this won’t last as restaurants open, but it is not expected to come down below 75%. Good news is that it is official and home delivery is a thing of the present now.
He clarified that eCommerce and home delivery are 2 different concepts. In the east, West Bengal and Orissa have allowed eCommerce and home delivery, conceding the eCommerce may be some time away in other parts. Sula has been working with Swiggy in some of these markets with good results.
Drinking in the home has made people spend more on better quality wines. When you drink at home you drink better. If you drink wine at home for Rs. 1500 a bottle, in restaurants it will be at least Rs.3000. So at home one is willing to spend even Rs. 2000, thus drinking better wines. This will hold true even in future and this is good for retail. Institutions will suffer and may not like it but that would be the reality. For the next 5 years this trend of home delivery will continue.
Wine consumption has been growing with higher visibility. It is common now to see actors drink wine in movies etc. He gave examples when Munna Bhaiya has wine for the first time in the web series ‘Mirzapur’ in a funny scene or when actress Kareena Kapoor talks of drinking wine curled up in pajamas. More and more traditional homes are drinking wine in bedrooms.
Though Rajeev was not too enthused about the Delhi excise, he was appreciative of UP policy where sales have doubled this year due to the liberal policy. People are asking for wines there! He talked of Maharashtra and Karnataka-the two States that are doing well. New policy for 10 years is about to come out in Maharashtra where rules of retail are going to be relaxed now. Wine Bars are going to come up in a big way in Maharashtra which is a progressive State. There has been zero excise duty policy for 20 years! Citing it could not have continued for ever, Rs. 10 a liter is being added from 1 January 2022 in concurrence with producers, to be used to improve the growers’ lot.
Home delivery will help increase consumption in Delhi when it starts being functional. But eCommerce is not likely in the near future. Despite the humongous amounts of Rs. 230-300 Cr paid by bidders for license for each zone, Rajeev said he did not understand the crazy math behind these bids but agreed the retail prices might not increase much thanks to its proximity to Gurgaon. One would get better choices. Many good brands were not available earlier. Hopefully, the customers will be able to go back to the situation where brands of choice will be available.
Rajeev also predicted that collaborations will take place now. Partnerships will happen. Strong double digit compound growth for next 5 years is on the cards. Nationwide, there will be slow but steady progress; something here in one year, next year another state etc. There will be more and more support from public as people start dining more wine at home.
Reacting to a question by a participant, he said Tamil Nadu was in a sorry state of affairs so far as wine was concerned. Sula worked hard for 10 years there but duties have killed the market. It is very sad when a wine bottle costs Rs. 800 in rest of the country but Tamil Nadu has the same wine selling for Rs. 1400. Duties are killing the wine business there.
Government is taking small, progressive steps and that holds a big hope for the future of the Indian wine industry.
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