2011 turns out to be cheerful year for Indian wines
During the year Indian wine received its long due recognition at the international level. While there was excess production in 2011, wine producers were not complaining as sales remain on higher side
After three years of sluggish growth 2011 was in the favour of Indian wines. Over the past three years sales were flagging and with over-capacity, globally, wine producers were stuck with excess supplies. The financial slowdown also took a toll. But things remained cheerful this time around.
Sales surpassed the earlier records, international stores displayed Indian wines and India become a formal member of Paris-based International Organization of Vine and Wine (OIV), an elite wine-producers’ club.
In June, this year, according to All India Wine Producers Association, there was an estimated 30%-35% jump in sales over the past three months. Wines such as Sula's Samara Red, Vinsura's Valentino, Migo from Renaissance and Figuera by Indage, are among the leading ones which led the growth chart.
Liquor companies increased prices in April, after the Maharashtra government announced a steep hike in excise duty on liquor products, including country liquor, Indian Made Foreign Liquor (IMFL) of 50% and an astonishing 100% duty hike on beer. On the other hand, wine enjoys a 100% excise duty exemption in Maharashtra. Naturally, state wineries have decided to make full use of the government largesse and reduced costs by nearly 30%-35% to attract new customers.
Soon after, UK's leading supermarket chain Waitrose Ltd showcased two Indian wine brands, Zampa syrah 2008 (a red wine) and Ritu viognier 2010 (white wine), as part of its collection of unusual wines from across the world. The report stated that these two brands were popular among wine lovers and were sold at a discounted price of £8.49 for the red wine and the white wine at £6.99. Expert cited it to be positive news for the sector.
In October, India became the formal member of Paris-based International Organization of Vine and Wine (OIV), an elite wine-producers’ club. Experts have welcomed this move as it is expected to improve the ‘quality standard’ of Indian wines a step further. OIV is an internationally-known intergovernmental scientific and technical body in the field of vine and wine, with 44 countries as its formal members. Even leading players in the sector such as Sula, having market monopoly and new entrant, Fratelli Wines managed good sales.
Ealier in November, Rajeev Samant, founder and chief executive of Sula Vineyards, country's leading wine producers told Moneylife that, “The future is really bright for the overall (winery) sector. Our sales jumped by 42% compared to previous year. So the production, obviously, has been in pace. We have also expanded our operations at Karnataka apart from Maharashtra.”
Fratelli Wines, a new entrant in the industry managed to break-even with three different varietals of wines during 2010-11, its first year of operation. It is adding six new wines to their portfolio, targeting different price segments and expecting an increase in sales of around 20% - 25% in FY12.
Subhash Arora, a veteran wine expert and founder of Indian Wine Academy, believes that since the past five years things are in positive direction, but the growth has been very slow. “Government needs to be educated about wine and its business. That is very crucial for the growth of the sector,” he says.
Mr Arora, on his blog says that imported wines are still suffering from high taxes and higher costs of distribution. Distributors, retailers, hoteliers, restaurateurs, the government paper and procedure chain continuously demands a higher share, making it very frustrating for the importers who are being crushed with higher investment requirements, pressure from foreign producers to sell more, higher interest costs and the demand that is growing slower than expected. The hotels are either unaware of the quality of several fine wines or their clientele is price conscious but they prefer low quality with even lower prices making it a catch -22 situation. Despite the cap of 250% margin allowed on the cost of wine, hardly any hotel follows the guidelines strictly. They in turn feel pressured by the high license fees and their finance departments who insist on the multipliers to be like coca-cola.
“In general both the domestic producers and importers are quite upbeat as the year comes to a close, each expecting a growth of 20-50% over last year,” Mr Arora says.
Hope 2012 would be even more positive for Indian wine.
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