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Delhi Wine Club

Posted: Monday, 05 April 2010 18:05

Feature: Maharashtra Ready for Next Tranche of Dole

After waiting for more than a year, Maharashtra vintners and farmers can look for some financial respite with a revival package of around Rs. 900 million likely to be announced as early as Friday for the industry wilting from recession and the 26/11 attack in Mumbai in 2008, but would it be the end of their woes, wonders Subhash Arora.

Whether or not the crisis is due to the terrorist attacks resulting in the reduced foreign tourist inflow on which they claim the retail wine business is heavily dependent, a senior state government official has reportedly  stated that the package could be considered at the forthcoming meeting of the state Cabinet and the package announced as early as Friday,  according to a report in

The wineries in the state have been demanding current unsalable and undrinkable wine stocks to be distilled into grape brandy and a revival package in terms of soft loans and subsidy. The industry has also been plagued by excess inventory built up during the boom period of 2003-07 and the rather permissive, though pro-active policy of the State announced in 2001. At present, there are over 60 wineries in Maharashtra, mostly in Nashik followed by Baramati, Sangli and Pune etc. Due to lower sales, many wineries are facing storage problems in the tanks too as it is customary to store the excess stocks at cold temperatures in the stainless steel storage tanks and bottle according to the market demand. 

"Almost 70% of the current problems are due to the economic slowdown and 20% due to the terror attack. The rest is due to the rise in price of grapes," reportedly said Prashant Sankpal, Managing Director of Sangli based Ritza wines, who is also the vice president of the Sangli Region Wine Producers' Association.

Also, exports to the United States and the United Kingdom have been blamed on the recession. Rise in tax rates, including VAT, excise duty, license fees and registration fees charged by various states also added to the woes of the industry, Sankpal said.

One must support the endeavours of the vintners and the farmers to stay afloat and help them at the time of the crisis. But a bailout, if it becomes a regular practice, would become counterproductive. The recession may have accentuated the problem which the whole wine world is suffering due to excess, but to blame everything on recession and the 26/11 attacks would be too myopic.

Has anyone stopped to think how Sula is expanding continuously and was smiling even during the recession and when the others are talking about converting their unsold stocks into branding? Sula is quietly (not whisper-quiet, if you please!) planning a 30% increase on the enormous base of around 200,000 cases sold last year, thus maintaining its leadership position. Has anyone wondered why Grover fell with a crashing thud, not because of recession but a freak quality problem which it was luckily able to identity and had enough funds to invest in technological improvements to  protect its long term position. Can Indage blame the government or the recession for its woes?

The answers are known to a few who know that wine is a business and not only farming- passion helps to suffer the pangs better. Today, when a winery in Niphad (near Nashik) is selling wine at Rs. 400 a bottle, its next door neighbour is willing to sell the similar liquid in bulk for Rs.45 a liter! Marketing and management including the financial planning are even more essential than the ability to till the land that has become 10 times more expensive since the Maharashtra policy was announced when people got into the business more for a real estate killing than from  wine. Quality is the largest single factor which depends upon the hygiene, the grape quality and viticulture techniques and is fundamental to the business sustainability.

The news report maintains a studded silence on these important factors. Every farmer will tell you he gets a yield of 3-4 tons an acre only while every vintner will tell you in private that no matter how much pressure you exert, the yield is never less than 6-7 tones an acre. The farmers refuse to believe like the fathers and grandfathers in the rest of the world, that the quality of wine depends on the grape quality of which yield tis an important aspect. Maximize yield and thou shalt maximize profits-does not somehow always adds up in the wine industry anywhere in the world, but still does in India

The report is also silent about the 16% refund already announced against the earlier VAT of 20%. The VAT, even when it was increased for a few days last year to 25% had to be collected from the customer and deposited with the government. The 16% refund goes to the pockets of the poor vintners who are keeping quiet-at least in the report.

The most hilarious part of the report is that the exports to the US and UK have suffered due to recession. Many new vintners already claim their wines compete with the best in the world. Have they started believing that wine is like an IT industry where India is already supreme? Ask any wine producer-including the ones who export in hundreds of thousands of cases to these markets including big chains like Tesco, Sainsbury and Costco and they will tell you these are the toughest markets to crack. Yes, there is niche market which is being exploited by a few marketing savvy producers but they also have to compete against importers of Indian origin who import wines at less than a pound from countries like Argentina and pitch them as curry-friendly wines. The quality wines surely have suffered a setback and they are struggling but to think that one starts producing wines from a 1-2 year old vines and export it only because it is ‘Made in Incredible India’  may not cut the ice with most patriotic souls too.

Retail wine sales will suffer due to lack of tourist inflow? Scares the tannins out of me to think that we are building an industry which is expected to take a leadership position (or at least a dominating position from where we can call occasional shots) during the next 20-50 years is being built on the inflow of foreign tourist traffic only. No doubt, foreigners are important consumers and also help the tourist industry move forward, but to base our markets on their arrivals would be nothing less than foolish.

The logic may hold water for the imported wines which have logically suffered as a majority of foreign tourists still prefer to have the imported wines, until they start drinking Indian wines in their own country and become familiar with them.

As Rajeev Samant, owner director of Sula has reportedly said, the November rains resulting in eventual loss of 40% of crops (though our heart goes out to the poor farmers whose survival depended upon these crops)  may be a blessing in disguise. As with the ecological and environmental balance, there has to be a proper balance in the industry. When the grapes were in short supply in the boom, one heard a story-a-day of how the farmers would sell out their crops to the higher bidder despite the contracts. There were  instances when the viticulturist or the winemaker visited the contracted farmer and asked him to wait for a day or two for them to ripe, only to find the vines naked as some passerby had offered a higher amount and made away with the ‘loot’.

The proper supply and balance is impossible to find in any agricultural crop as the farmers and winemakers would soon realize. But if they depend upon the government for dole outs at bad times and be myopically selfish in good times, the industry will not grow to the level the various global studies are predicting. The consumption has to increase at the domestic level at the national level. Marketing and quality are the key issues that can never be undermined- the price of wines has to be at lower level to jump start the consumption. The farmers and vintners should get together pressurize the governments to treat wine as truly an agricultural product and reduce the burden of registration charges and excise or even VAT.

Let us hope the Maharashtra government takes a magnanimous approach and offers the package that the report talks about. Let us also hope it reduces the duties on out-of-state wines. Lest Maharashtra forgets, its myopic policy of charging extra duties for the out-of-state wines made Karnataka react and not only are their wines finding it hard to sell in Karnataka-even for the sons of soil like Vijay Mallya who owns Four  Seasons Winery, but another couple of dozen new wineries are going to come up during the next 3 years or so.

Exploratory work is going on in Andhra, Uttaranchal and Himachal (they should all feel happy that Kashmir wont allow the vines-or else it would perhaps be producing the best Indian wines on its wonderful soil and climate). Even the states of Madhya Pradesh and Punjab are salivating. These will soon be the new competitors on the horizon- and in a few years time, hiding behind the skirts of recession or terrorist attacks (one fervently hopes one has seen the last of both for a long time)  will be of no respite and the State government of Maharashtra may well wash its hands off.

Subhash Arora



Rahul Ghadge Says:

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Posted @ April 06, 2010 17:45


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