Wine producers enjoy spurt in sales, as drinkers shift from hard liquor that has become costlier
Alekh Angre 17 June 2011

The big increase in prices of hard liquor and beer has given a fillip to wine sales in Maharashtra. After struggling for over two years, wine producers are seeing a 30% jump in demand, mainly from the younger generation

Hard liquor's loss is the wine industry's gain. A couple of months after liquor producers increased prices on beer and other liquors, it seems that several people, particularly youngsters, have shifted to wines, pushing up wine sales significantly.

For over two years now, the wine industry has been struggling with sluggish sales and excess supply. That seems to be changing with wine producers reporting an estimated 30%-35% jump in sales over the past three months.

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 cutting costs by nearly 30-35% to attract new customers.

Maharashtra has emerged as the country's leading wine producing state, with most of the processing in and around Nashik. However, the past two years have been difficult for the industry. Sales were flagging and with over-capacity globally, wine producers were stuck with excess supplies. The financial slowdown and the debacle at Indage Wines due to reckless expansion also took a toll. But since the state excise hike, things have cheered up.

Interestingly, the biggest growth has been in the cheap wines segment. Jagdish Holkar, president of the All India Wine Producers' Association told Moneylife, "Since April, wine sales have gone up by at least 30%-35%, although it is the off-season for wine consumption. This is mainly due to the hike in prices of beer and hard liquor. Wineries have also cut down their cost by around 30%-35% so they can cater to a lower segment, where consumption is as high as 60%-65%. As per the current trend, wine is preferred by people across the segments."
 
"Accordingly, wines with reasonable price points such as Sula's Samara Red, Vinsura's Valentino, Migo from Renaissance and Figuera by Indage, are among the leading ones which are seeing sales growth," he said.

Rajeev Samant, founder and CEO, Sula Vineyards, said, "There is definitely growth in sales. Demand has accelerated as many from the younger generation are preferring wines. Increase in the prices of beer and liquors due to the state budget has also pushed up wine sales.  Our wines, such as Samara Red, Madera Red and even wines in the premium segment, are witnessing sales growth. We are targeting 20%-plus growth for the current year over that in the previous year. And we also expect demand to increase, going beyond."

Mr Holkar also agreed that there is a lot of demand for wines from the younger generation. He explained, "The younger crowd does not prefer hard liquor for various reasons, health being the important one. This is the main reason for the sales growth in beer and that is now the case for wines."

A manager at Peekay Wines, Mumbai's oldest wine store, told Moneylife, "There is continuous improvement in the sale of wines. Lot of people are buying wines these days. Wines by Sula are the most preferred by consumers."

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