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Spurt in wine consumption
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| 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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