Bangalore: The Indian wine market is warming up to international labels but issues like rigid legislations, high label and brand registration costs, lack of wine conservation methods and awareness about wine and international brands were making it difficult to uncork this market to its fullest, reports PTI.
Though the young domestic wine market is still to take off compared to international mature wine markets, the consumers slowly and gradually had begun displaying interest in international brands and are ready to experiment, according to Arun Kumar, Aspiri Spirits, leading importers and distributors of premium wines and spirits in India.
"Earlier wine just meant choosing between red and white wine. The association was limited to very few brands. A bottle of wine was just an option during a party, in case anyone felt like having it. But now the scenario has changed and consumers have a portfolio to choose from. There is an educated choice," he said.
"International brand awareness has made its way into the Indian consumer market, going by increased brand recall.
Consumers now walk into a store and demand for wine by its label," he said.
"Today India is one of the fastest growing market and we are keen in establishing our presence here," said Jake Jacob, regional director-Asia-Pacific and UAE, Gerard Bertrand Wine, renowned wine group from Languedoc Rousseau region of France.
"We get around four queries per day by international brands wanting to get into Indian market," says Mr Arun, whose company has 150 international brands in its portfolio.
The work done by domestic wine market players had helped in expanding the market. Entry of new consumer segment - women and youth - had provided additional impetus.
Wine consumption was also picking up in cities not earlier associated with the drink. "We now are seeing sales in places like Chandigarh and Uttaranchal", said Mr Arun. There is also momentum in places like Rajasthan where renowned international chain of hotels and heritage properties had a presence.
Delhi, Bangalore, Mumbai were the markets that were taking up to wines and international brands as well. While in Mumbai retail and on-premise sales were 50%-50%, in Delhi, on-premise leaned to 70%-80%. In Bangalore, it was 60% retail sale, said Mr Arun.
However, despite the quite and steady momentum taken up by wine market, international players were still straddled by issues like prohibitive excise and custom duties and state-levied taxes that varied from place to place, he said.
Registration of label cost in some states was prohibitive and was thwarting growth of the market. In Meghalaya, it was whopping Rs 50,000 annually, Mr Arun said. In Mumbai and Bangalore it was around Rs 10,000 while in Pondicherry it was Rs 15,000 and in Delhi it was Rs 5,000 plus, he said.
The high excise and custom duty was one of the biggest challenge faced by international brands keen in entering in the Indian market. The varying state taxes did not help in easing the situation, said Mr Jake.
Another greatest challenge is transportation and storage of wine. "Wines that were transported or stored well could not only destroy its taste but also do away the image of the international brand," Mr Arun said.
The common flaw was to treat wine as any other spirit or beer, he said. A certain temperature level and storage requirement were must for it to retain its original taste
However, in India, the lack of storage facility was a huge issue. "Many of those dealing with sale of wine did not have wine chillers". Investment in wine preservation was a low key priority area in India.
Wine players have begun organising events connected with disseminating knowledge about wine, food that pair with wine and by holding wine tasting sessions or short courses in wine making and processing to expand the market, said Mr Jake.
"Training restaurant and hotel staff about wines was also imperative. A trained staff, well-versed with the origin and history of a brand and one who could add some inputs when asked about their opinion on a wine could help in getting a customer to try a brand," said Mr Jake.
Some of the states had also begun getting proactive which was definitely going to add cheer to the wine market, opined Mr Arun. Punjab had done away with wine label registration cost while Chandigarh had put in place a policy that lets retailers avail of low concession fee if they provide air-conditioned rooms, tasting area among other amenities.
"These initiatives are bound to be conducive to retail and for a walk through experience. They encourage retail players," he said.
Karnataka was another state, which had done much to boost the wine market including announcing wine taverns to promote wine consumption and brand awareness. "Karnataka has in a way set the bench mark which others were modelling on," he said, referring to its policies and transparency Bangalore has one of the best retail experience for wine and the state boasts of an effective distribution system, he said.
However, some of the states with an eye at protecting domestic grape growers and wine companies had made the entry of international brands whoppingly expensive, he said.
But the international brand players were optimistic. "We think many of them would rationalise the costs seeking the revenues it brings to the state government", he said.
While currently, it was the old wine growing markets like Spain, Italy, France and Portugal that had their presence with French leading, slowly there has been a growing interest of wine from new wine growing countries like Chile, Argentina, Australia, said Mr Arun.
Traditional players like France continue to dominate the market. Italy has become very aggressive with its embassies and trade groups promoting wine growers. Australia has also turned marketing aggressive.
The interest in new wine growing countries was because these wines were more easy to taste and palatable. With Indian consumers just experimenting, these wines were easy, however, as the consumers mature they would opt for more full bodied wines of the old wine growing countries. The new wines were also ready to have rather than the old ones which needed cellar storage facilities for months or years.
With the market warming up, it might soon be time for international brands to toast to some good times.
Boston: India will see its number of internet users triple to 237 million from the current 81 million by 2015, reports PTI.
In a study titled 'Internet's New Billion', the Boston Consulting Group (BCG) said Brazil, Russia, India, China and Indonesia (BRICI) will have more than 1.2 billion internet users by 2015 - well over three times the number of internet users in Japan and the US combined.
In 2009, the BRICI countries had some 610 million Internet users.
"Internet penetration rates in the BRICI countries will experience compound annual growth of 9% to 20% from 2009-2015, driven predominantly by young users who will form the digital-market eco-systems that will be in place for generations to come," the management consulting firm said.
With BRICI countries constituting many of the world's most populous nations, "It may come as little surprise that their digital-consumer ranks will swell so quickly," the report added.
Describing India as a "low-maturity and high growth market", BCG said Internet penetration rate in India is expected to reach 19% by 2015, up from the current 7%.
"There are currently about 81 million Internet users in India - a number that will nearly triple by around 2015 to 237 million," the report said.
India's Internet use is concentrated mainly in the larger cities, where many users are migrants from smaller towns. This group tends to have had limited exposure to the internet and therefore typically has a narrower range of online needs than more experienced users.
"Offsetting this situation is the prevalence of younger Indian users," the report said. Indian Internet users spend only half an hour online each day, on average - the lowest rate among all the BRICI countries.
This average will increase to only 0.7 hour per day by 2015, leaving India still bringing up the rear among BRICI users in terms of daily time spent online.
"However, this is a conservative projection and that there could be some major surprises depending on how quickly pricing comes down and availability increases," it added.
Among the most prominent trends is that BRICI digital consumers are far more likely to be meeting their digital needs through mobile phones than through personal computers.
With PC penetration still quite low, mobile phones are cheaper and more convenient tools for both communicating and seeking out entertainment.
For India, the next big growth opportunity should emerge from the rural market where penetration of mobile phones is far less than in urban markets, which have already begun to show signs of saturation.
"The biggest gap in rural areas has been network coverage and distribution channels - a divide that most companies are currently trying to bridge.
There is an untapped opportunity for improving data usage in all of India's consumer segments," it added.
Indians' mobile-phone activity is limited almost exclusively to phone calls and SMS, although only about half of India's 507 million mobile-phone owners use the latter. Just 5% use mobile video.
"This could change when third generation (3G) and other forms of wireless broadband are launched in earnest."
The BRICI countries currently have about 1.8 billion mobile-phone SIM card subscriptions, compared with a combined total of 394 million in the United States and Japan.
China, India and Indonesia have SIM penetration rates ranging between 41% and 66%.
By comparison, the United States and Japan are both at around 90%.
By 2015, SIM penetration in China and India is expected to reach 84% and 75%, respectively owing, among other factors, to users taking advantage of prepaid plans from different operators.
Currently 60% of BRICI Internet users are under the age of 35.
As they earn even higher incomes and develop more complex online needs, there will be a colossal opportunity for digital companies to monetise services and products.
Given how rapidly the BRICI markets are developing, companies planning entry strategies will have to act quickly - or risk missing the opportunity to connect with consumers now and grow with them throughout the coming decades, BCG said.
"The Internet is already having a fundamental impact on consumption patterns, and the patterns we're seeing are significantly different from those in the United States and Japan," says report co-author David Michael, who heads BCG's Global Advantage practice.
"Companies relying solely on traditional means for reaching consumers in the emerging markets need to understand the impact that the shift to digital media is going to have," the report added.
Inadequate supply chain infrastructure, complex taxation laws, high levels of intermediaries, product proliferation and lack of supply chain visibility are a few supply chain challenges faced by the retail industry in India
Though retail in India is making progress and is expected to grow more than $879 billion by 2018, the country loses $65 billion every year due to inefficient supply chain systems, says a study report.
According to the report published by industry body Confederation of Indian Industry (CII) and Amarthi Consulting, India is ranked 47th on logistics and is behind countries such as Japan, US, Germany and China. The report titled, 'Global competitiveness of retail supply chain-Challenges, Strategies and Recommendations', mentions that supply chain costs in India, which deal with the procurement, manufacture and distribution of products and services, and drive the success of the retail sector, are about 12% to 13% of the gross domestic product (GDP) compared with 7% to 8% of GDP in developed countries.
Currently, the retail industry in India is a $410 billion market and is expected to grow to more than $879 billion by 2018. Food and groceries account for 70% of the retailed items followed by textile and apparel at 7%. However, 95% of the retail sector is unorganised and fragmented. The textiles & apparel segment represents about 40% of the organised sector.
According to the study report, inadequate supply chain infrastructure, complex taxation laws, high levels of intermediaries, product proliferation and lack of supply chain visibility are a few supply chain challenges faced by the retail industry in India.
"Post Independence, there has been only 20% capacity addition to the Indian rail network, while traffic has grown tenfold. Besides, due to the complex taxation laws prevalent in the country, a product is taxed twice, once by the Central government and then by the respective state governments," the report said.
Improving supply chain infrastructure, implementation of goods and services tax (GST), reducing intermediaries, and adopting green supply chain practices are some of the recommendations of the report. (Green supply chains involve integrating environmental thinking into the core operations of a company, starting from material sourcing to delivery to end-of-life recycling. It is expected that implementing green initiatives along a company's supply chain can raise productivity, enhance customer and supplier relations, support innovations, and enable growth).
The retail industry is facing challenges in the form of inadequate supply chain infrastructure and the complex taxation laws prevalent in the country. Investments in road infrastructure have not kept pace with the growth in road traffic, the report states. Only 20% of the roads are in good condition. The rail network is congested as freight moves on the same line as the passenger line.
At the company level, retail in India is facing challenges like product proliferation, high levels of intermediaries, fragmented and large number of retail outlets, suboptimal supply chains and lack of supply chain visibility. The report recommends - among other things - that companies should optimise the supply chain network, reduce intermediaries, improve supply chain visibilities and adopt green supply chain practises.
However, despite these challenges faced by the retail industry in the supply chain system, India has the potential to build the best supply chain across the world, feel some industry players.
Anshuman Singh, managing director and chief executive officer, Future Supply Chain Solutions Ltd, a unit of Future Group, said, "We can be flexible, change with the times and as we have no baggage of the past, we can build the best supply chain."
Besides, he also called for priority to be given to the basic supply chain over green supply chains. "(The) green supply chain has (a) great market, no doubt about it. But, let's first get the basic supply chain right," he said.