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Delhi Wine Club

Posted: Friday, January 02 2009. 11:46

Rise and Fall of Wine in India 2008

The year 2008 for the wine industry has ended in as dismal a note as it was promising at the beginning, with the market for Indian and imported wines going for a toss and a tough year of  less consumption and excess supply awaiting, reports Subhash Arora

The year had started with promise. The import duties had been lowered and though Maharashtra had been a party pooper after imposing additional 200% excise duties, the local producers were not complaining- they were enjoying a full excise exemption that would last till 2011.

The gravy train in motion

The importers were upbeat. Hundreds of new hotel projects were coming up. Organised Retail was booming. More people were drinking wine. India was still under pressure from WTO and sooner or later the extra excise duty issue would be resolved for the better, they hoped. Wine retail in Maharashtra and several other states would boom with big boys like Reliance and Big Bazar girdling up to provide the extra boost along with an exposure the wines would get in the absence of any advertisements allowed to the alcoholic beverage industry.

There was a general consensus on 30-40% increase in the market for domestic wines which had notched about 1.2 million cases, having achieved an average annual growth of over 25% continuously during the last 5 years. Biggies with muscle power like Diageo, UB and Pernod Ricard had charted ambitious plans for the year and after. New players like Chateau d'Ori, Big Banyan, Mercury Winery and Vallée de Vin were hoping to start getting closer to the ranks of existing big, permanent players like Indage, Sula and Grover.

Importers were happy too

The importers were equally upbeat, though rightfully jealous of the un-level playing field set by the Maharashtra government for the select band of less than 50. The number had been going up with many new hopeful importers in the fray, raising hopes for producers from Italy, France, Spain, Australia, New Zealand, South Africa, USA and other wine producing & exporting nations, who had been lustfully eyeing the lucrative market of 30 million potential middle class Indian wine drinkers.

Things started going awry in late summer when the Maharashtra excise department went dormant and stopped issuing transfer permits (TPs) for imported wines due to some flimsy inexplicable reasons. Practically no business was transacted for around 10 weeks, making importers look for other markets. Sansula, Mumbai's leading importer added a food division on the premise that one may stop drinking wine but he would still eat imported cheese and stuff.

Recessionary Bells

Suddenly the world economy started crashing in early October. Bells of recession could be heard ringing. While many importers and producers hoped that positive thinking would wish away lower sales, Sula smelled something wrong as the sales started going south and immediately took steps to face the music with the different tune. Rajeev Samant informed delWine that next year's crush would be reduced. Indage still maintained the aggressive rhetoric stance while Grover stayed content in focussing on quality issues.

Importers started focussing on cheaper wines and exploring newer markets  including a new look at the Karnataka market but were soon hit in the head instead with a new policy of Rs. 300 per bulk liter on imported as well as out-of-state wines announced by the Karnataka government. The usual bureaucratic delays and holding back of excise permits further increased the pain for importers, producers and consumers alike with a Bangalore based British wine trainer, Maureen Kerleau predicting a dry Christmas for wine lovers for the first time in the absence of any quaffable wines.

Importers' dilemma

Importers are obviously bearing the big brunt of the drop and don't know what and how much to import. Says Dharti Desai, the dynamic owner of Mumbai based Finewinesnmore "Before the terror attacks, we were looking at doubling our sales figures for this year, and were well on our way, but very obviously we will be affected like everyone else. I see a setback of at least 20%. December has proved to be the worst month for this year versus the best month last year!"  

She had already added fruit juices in her range of products, much before Sansula started the food division to hedge against the impending drop of wine sales. Her diversification plans had her sign a contract for nationally distributing domestic wines produced by Chateau d'Ori in Dindori.

Owned by the IT entrepreneur Ranjit Dhuru, d'Ori has been importing quaffable Bordeaux wines that sold for as low as an affordable Rs. 650 a bottle last year before the excise tsunami hit. 'A product can be a great value for money at 650. But selling it at 950 due to high excise duty is a total different ball game. After reaching an annual sale of over 4000 cases a couple of years ago, the off-take has come down drastically,' he says. Domestic sales are also down and despite the new areas opened up by Dharti's team, and one of his reds awarded as the Best Indian Red Wine at the India Wine Challenge, he expects sales to be flat this year.

Vikash Gupta, partner in another new import venture, Opera wines is shaken but not stirred. Promoting Opera brand in collaboration with an Italian company, the Vinner Wines celebrated its first Anniversary in October 2008 in great style when it announced the launch of 4 new Italian labels to its existing exclusively Italian portfolio. The company has been also working on setting up a wine tourism project in Nashik. Suddenly with the demand drying up Vikash is visibly shaken though has not stirred into action yet. 'People could not have stopped drinking wine suddenly!' he exclaims 'We are watching the situation during the next couple of months. We shall continue with our aggressive approach but may delay bringing in the new labels when the demand gets better again,' he adds.

Restaurants' business has also gone down due to the reduced footfalls, resulting  consequently in lower wine consumption. AD Singh, owner of Olive Restaurants in Mumbai, Delhi and Bangalore and the new contemporary Japanese restaurant 'ai' in Delhi comments, 'We have seen an overall downturn in the expat market, in the sale of expensive wines, in a decrease in corporate tables and in brunch bookings. However the domestic market has held firm and with the boost from the winter season holiday makers sales have only dropped about ten to fifteen percent.'

The hotels and restaurants like the Olive have turned extremely cautious in inventory control. Apart from the decreased consumption in the rooms and restaurants  with hotel occupancy hitting the 50% danger mark, the parties thrown by corporates and individuals are at their nadir causing a spiralling negative effect.

The irony of the year

2008 was a year most people would wish never existed- including the Maharashtra producers and even their insensitive excise department. Enjoying the excise benefits officially and legally doled out by the department, producers are now being asked to payback the waived duties since 2001! The department, which apparently did not handle a court case filed in the Aurangabad Bench of the Mumbai High Court was chided for allowing pecuniary benefits to the producers and has been directed to collect back the same . This was despite a gazetted notification by the department giving a rebate in excise duties of 25-100% from 2001-2011.

The department has issued show-cause notices to all the producers and a demand note to a select few including Chateau d'Ori. Reportedly, Rajeev Samant of Sula has been requested by producers to represent them and approach the concerned minister to see if the legal process can be handled better, and the draconian step is reversible. Meanwhile, the year closed with the Sword of Damocles hanging on the head of all Maharashtra producers.  

Dismal Forecast for 2009

The overall picture for 2008-09 sales (ending March 31, 2009) appears rather gloomy. '75% of our sales takes place in Sept-March period. A crash in sales during this period would mean a drastic drop in our sales for the year,' says Debjit Dasgupta, Director of Ace Beveragez.

Importers and the consumers also blame the government policies and controls as much as the recession for the drop. Ranjit Gupta, owner of Delhi based Amfora Wines laments, 'the Indian state must disinvolve itself from controlling and permitising simple pleasures of life such as wine and concentrate on the serious business of the quality of governance and National Security of its citizens .' He is so passionate about wine, a part of the condiments at his dinner table daily, that he decided to get into the wine business a couple of years ago so he could get a variety of wines for like minded people.

With the recession and the Mumbai mishap hitting the wine drinking season that lasts till March, the total sales are not expected to go beyond last year's level of about 1.2 million cases of domestic wines and 220,000 cases of imported stuff. A drop of 10-15% from last year cannot be ruled out.   

Hopefully, when the next year's season begins, the economic fundamentals will be stronger and the industry would be back on track. Till then sustenance will be the single most important factor for producers as well as importers.

Subhash Arora



Posted By : M K Vidyaranya

January 07, 2008 10:09

Sir Why you are not writing anything about Hampiheritage Winery at Bijapur which is brewing excellent wine. Without showing you the bottle if you gulp it, you feel it is from France and not Bijapur. Will you write a story about India's best wine which is sold under the brand of 'Kinvah' Regards M K Vidyaranya



January 04, 2008 14:04

Dear Mr Arora, I am interested in importing wine from france,I am based at Bangalore.I am with a back ground of Pharma marketing in India and middle east.I visited a few vine yards in southern france in the month of Aug 2008.You know In bangalore they have recently levied rs300 per lit for any imported wine, this is apart from 160% excise duty, and other also know we have to sell it through Karnataka breweries board.If you can guide me in this matter,I will be very grateful.I want your advise,guidance and opinion.


Posted By : Ashish K Tiwari

January 03, 2008 16:30

I take this opportunity to Wish YOu and Everyone at the Academy a Happy & Prosperous New Year 2009. It was a pleasure reading through your piece on The Rise and Fall of the WIne Industry in India.I would be happy to be in touch for any insights on the wine industry. Thanx and Warm Regards


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