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Delhi Wine Club

Posted: Wednesday, March 05 2008. 15:40

Booming Wine Market of India

Spurt in wine consumption

Modern Winery in Nashik

In 2003, total consumption stood at about 450,000 nine litre cases, which included 60,000 cases of imported wines. Such factors as media, travel, higher income, a loosening of import restrictions and the elimination of customs duties for hotels resulted in accelerating growth from 20% annually five years ago to about 35% currently. The market in 2007 almost tripled to 1.2m cases, of which imports accounted for 200,000 cases. The domestic wine industry has been the primary beneficiary, due to its price advantage. The sales price of the Indian wines has traditionally been kept at around Rs350-Rs550. With red grapes still costing about Rs35 a kilo ($0.89/€0.60), but up from only Rs25 three years ago, profitability remains high despite taxes. To encourage sales of entry level wines, cheaper wines at around Rs280-300 are being introduced. Indage sells its cheapest table wine in plastic bottles for Rs100 ($2.50/ €1.73); last month Sula introduced its new label Dia at Rs180, targeting urban women. Imported wines remain more costly due to higher ex-cellar prices and the subsequent duties loaded on them.

Another growth constraint has been the complex and stringent laws which have limited the number of importers. This has changed over the last couple of years. There were around 30 importers a couple of years ago, with ten controlling most of the market, but that number has already doubled and should reach 100 this year. Brindco and Sonarys continue to be the top importers, followed by Global Tax Free, Mohan Bros, and Pernod Ricard with Jacob’s Creek. There has been a visible change in market share among the producing countries. France at 30% still holds the top spot, but its share has dropped from around 80% ten years ago, being inched out by the New World: the estimated figures today are Australia (20%), Italy (15%), Chile (10%), USA (8%), Spain (6%) and others (11%).

Protectionist policies

Although there is a clear market for imported wines, the policies of the federal and state governments are protectionist. The government did buckle under European and American complaints to the World Trade Organisation (WTO) and discontinued the Additional Customs Duty (ACD), which was adding over 150% to the original customs duty – but then promptly increased the latter duty from 100% to 150%, the outer limit agreed with the WTO. Imported wines are now slightly more expensive than before. Hans Raj Ahuja, managing director of Wine Legend India, an importer of Californian wines, is one of India’s most experienced wine marketers. He feels “the Indian consumer is very resilient. If you suddenly double the cost of a consumer product, there will be resistance, but all gradually adjust to a new regime. I am sure our premium offerings will be absorbed by five star hotels, whose customers expect to get premium wines. ”

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