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Indian wine industry 2007


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Indian wine industry 2007

  1. 1. Rajni Ranjan
  2. 2.  Both the Indian wine market and the indigenous wine industry are in their nascent stages, but growing by leaps and bounds  Domestic wine market is currently estimated at Rs 450 crore  More than 38 wineries are presently operating in the country with a total production of 6.2 million liters annually ◦ Expected to touch around nine million litres by 2010 ◦ Maharashtra is leading among the states with 35 wineries and 5.4 million liter production ◦ Further, over 1,500 acres of grapes are under cultivation for wine production in India (1000 hectares in Maharastra alone- mostly in Nasik, which is increasingly being referred to as the Napa valley of India)  7.62 lacs wine cases were sold in 2007 including 46,000 cases of sparkling wines ◦ The country also imports 72,000 wine cases in a year (mainly by ITDC, Sansula, Brindco, E & J Gallo and other private companies) where 32,000 cases are bottled in origin and remaining 0.36 m litres are imported in bulk flexi bags and subsequently bottled by Indian wineries. ◦ Besides this, about 12,000 –15,000 wine cases are sold through gray market ◦ Estimated to reach 2.8 million cases in the next five years  The wine industry has witnessed a 30% annual growth rate mainly fuelled by the strong growth in the domestic wine consumption  Its further projected to grow at more than 25 % annually in the next decade, making it the fastest growing Indian industry - Rajni Ranjan 2
  3. 3.  The per capita consumption in India is only 9 ml per year as against 60-70 litres in France and Italy, 25 litres in US and 20 litres in Australia and even China has 0.4 litre ◦ Eighty percent of wine consumption in the country is confined in major cities such as Mumbai (39%), Delhi (23%), Bangalore (9%) and Goa (9%)  The most popular red varieties in cultivation are Shiraz, Cabernet Sauvignon, Pinot Noir and Merlot  The most popular white wine grapes are Chenin Blanc, Sauvignon Blanc, Ugni Blanc, Viognier, Chardonnay  There are about 25 Indian wine companies besides the big ones, producing and supplying wines in small and medium levels, from 5,000 cases to 10,000 cases  The industry is dominated by three players viz. Indage, Sula wines and Grover wines and enjoys more than 90% of the total market share  Key Growth Drivers are: ◦ Government support in the shape of reduced taxes, Easing of tariff barriers and liberalized licensing requirements for the wines  Maharashtra has exempted wine manufacturers from excise duty to promote the industry ◦ Changing drinking habits of Indians and Changing lifestyles ◦ Higher disposable incomes ◦ Growth in the foreign tourists -- 3Rajni Ranjan
  4. 4.  There is a strong growth in the imported wine market with Indian importers importing hundreds of brands from countries like Australia, US to Bulgaria. ◦ Some of the well-known brands available in India are Moet and Hennessey, E&J Gallo and HWWG  Grape growing is a highly capital intensive project, concerted efforts are required to reduce the rate of interest to 6 or 7% from the present 10-13%  The key raw materials such as grapes, bottles, and corks account for approximately 20% of the total costs and are higher than the international norms  Industry is under pressure for profits due to high marketing costs and low volumes  Poor storage and transport facilities inspite of tropical climate are the main problems of wine marketing in the country. ◦ Other constraints are the lack of promotional activities for wine consumption in the country and unfavorable rules for domestic marketing of wines except in few states like Maharashtra, Goa and Karnataka ◦ Some of the states like, Delhi, Rajasthan, Goa, and Chennai etc. do not allow sale of imported wine  Exports currently make up about 10-15 per cent of total output. Wine is exported to France, Italy, Germany, USA, New York, U.K. and Singapore -- 4Rajni Ranjan
  5. 5.  Table Wines, Sparkling Wine, Dessert Wines, Fortified Wines (port, Sherry, Marsala, Madeira, etc or aromatic wines like Vermouth, Dubonnet, Lillet, Cynar, etc.) are the major types of Indian wine ◦ Table wines account for 85 % of the market and expensive varieties of vintage wines account for the remaining 15 per cent  West India accounts for over 41 per cent of total volume sales of wine in India, followed by North India, which accounts for 29 per cent of volume sales  Around 63 % of the volume sales of wine are through off-trade channel in five-star hotels, pubs and bar-restaurants -- 5Rajni Ranjan
  6. 6.  Nasik Region (Maharashtra State) ◦ Location: Western India, Nasik Valley is 2000 ft. above sea level between 19-33’ to 20-53’ North latitude and 73-16’ to 75-6’ East longitude. ◦ Sangli Region (Maharashtra State)  Location: South West Maharashtra; Latitude 16-52’ North, and Longitude 74-36’ east  Both of these regions are extremely good for growing grapes due to their monsoon rains, rich fertile soil and cool climate. Most of the Indian Wineries are located in these two regions including the largest Indage and Sula Vineyards.  Bangalore region (Karnataka State) ◦ Location: South West, Latitude: 12- 8' North. Longitude: 77-37' East ◦ Apart from being nation‟s IT capital Bangalore because of its cool climate is suitable for grapes. Grover, the third largest wine producer of India, has its winery situated in Dodballapur, 2000 ft above sea level, 45 km North of Bangalore  Himachal region (Himachal Pradesh) ◦ Location: 30-22’ to 33-12’ North Latitude and 75-47’ to 79-04’ East Longitude ◦ This region lies in the northern India and is at the same latitude as of the South Californian, Texas and north Florida wine grape growing region ◦ Though this region is well known for apples and cider some good wine is produced here ◦ Temperature varies from 39° C in plains during summer - 20° C in the Alpine Zone during winters. Rainfall varies from 152 cms to 178 cms in outer Himalayas -- 6Rajni Ranjan
  7. 7.  D'Ori Winery with investments of approx. Rs 50 crore is all set for production by the end of this year. The company is setting up a 600-tonne winery producing 6.5 lakh bottles in the first year  Sula, which claims a value market share of 20 per cent, is in expansion mode with its new one million-litre winery set to commence production in March. This would take the company's total capacity to 1.8 million litres  Private equity interest in the wine industry is sky-high at present. Singapore-based Arisaig Partners' private equity fund recently picked up close to 10 per cent stake in Champagne Indage, the country's largest wine maker.  Grover Vineyards too is reported to be in talks to offload about 35 per cent stake to a foreign equity fund  Vinsura Vineyards is expanding capacity at its winery by 3 lakh litres this year to 4.5 lakh litres.  Liquor major Seagram has decided to hit the wine market. Seagram will initially start with a capacity of 1 lakh litres and may emerge as the largest player in the domestic market -- 7Rajni Ranjan
  8. 8.  The alcoholic beverages sector being a State subject States/ UTs frame their own policies and taxation regime  Wines can be imported into a Customs Bonded Warehouse as no licence is required  Thereafter, goods can move either duty free (against a licence from hotels) or duty paid to licence holders after paying the relevant customs duties.  All additional custom duties (ACD) on wine have been withdrawn  The basic duty on the other hand has been increased from 100 to 150% (upper limit allowed by WTO)  As expected, the increase in basic duties proved a boon to the Indian wine producers who derived a tremendous price advantage.  India under immense pressure from EU and US wine manufacturing lobby after being dragged in front of WTO for levying ACDs and state excise duties has waived off the additional duties  Recently supermarkets have been freed to sell wine ◦ Government has allowed supermarkets and convenience stores to stock “milder” forms of alcoholic drinks such as wine and beer ◦ But the store would need to obtain a separate license fee for beer and wine and be subject to regular inspections by the excise department ◦ Moreover, the beer and wine section will have to be separate with a different access as the regular customers (many of whom are housewives) may not like to go near the alcoholic beverages outlet -- 8Rajni Ranjan
  9. 9.  Importing of wine in India ◦ There is a strong growth in the imported wine market with Indian importers importing hundreds of brands from countries like Australia, Italy, France, UK, US, Chile to Bulgaria ◦ ITDC, Sansula, Brindco & E&J Gallo predominate the imported wine section ◦ International companies in India:  Veuve Cliquot has tie-up with Grover Vineyards / Country Rep  Miguel Torres (Spain) have JV with Thapar Group  E & J Gallo (USA) tied-up with Radico Khaitan  BRL Hardy (Aust) - JV for BIO distribution with Indage -- 9Rajni Ranjan
  10. 10. -- 10 Commodity: 2204 WINE OF FRSH GRAPES INCLDG FORTIFIED WINESGRAPE MUST OTHR THN THAT OF HDNG NO 2009 S.No. HS Code Commodity 2005- 2006 %Sha re 2006- 2007 %Sha re %Gro wth HS Cod e digit level optio n 1 220410 SPARKLING WINE 0.27 0.000 2 0.47 0.000 3 73 8 2 220421 WINE OF FRSH GRAPES(OTHR THN SPRKLNG WINE)GRAPE MUST WTH FRMNTATN ARSTD BY THE ADDTNOF ALCOHL IN CONTNRS HOLDNG 2 LTRS/LESS 1.79 0.001 2 1.31 0.000 7 -26.81 8 3 220429 WINE OF FRESH GRAPES(EXCL SPARKLING WINE);GRAPE MUST WTH FRMNTATN ARSTD BY THE ADDTNOF ALCOHL IN CONTNRS HOLDNG EXCS 2 LTRS 7.33 0.004 9 8.7 0.004 7 18.79 8 4 220430 OTHER GRAPE MUST 0.08 0.000 1 0.13 0.000 1 72.75 8 Total 2204 WINE OF FRSH GRAPES INCLDG FORTIFIED WINESGRAPE MUST OTHR THN THAT OF HDNG NO 2009 9.46 0.006 3 10.61 0.005 7 12.17 India's Total Import 149,16 5.73 185,7 49.30 24.53 Exchange rate: 2005-2006: 1US$ = Rs. 44.2735 2006-2007 : 1US$ = Rs. 45.2495 Value in US $ Million Rajni Ranjan
  11. 11. Country Values in US$ Million 2005 - 06 France 4.41 Australia 1.38 Italy 1.15 USA 0.51 Germany 0.32 UK 0.28 Chile 0.26 South Africa 0.19 Spain 0.18 UAE 0.18 Country Values in US$ Million 2006 - 07 France 3.95 Italy 1.45 Australia 1.19 USA 0.79 UK 0.73 Belgium 0.69 Argentina 0.3 Chile 0.28 Germany 0.24 UAE 0.18 -- 11
  12. 12.  Indage is importing in bulk , bottling & marketing wines from the following producers/countries ◦ Group Tallian- France ◦ Peter Mertes- Germany ◦ Cranswick Wines- Australia ◦ Zulu- South Africa ◦ Morande- Chile  Sula is importing Chilean red wine and bottling it as „Sartori Merlot‟ with a label designed by Jaideep Mehrotra (Rs. 420/btl)  Brindco, has a portfolio of nearly 1,000 wine labels from across the world ◦ Among the most notable are Benzinger, Caymus, Sequoia Grove and Kendall Jackson from California; Bollinger, Albert Bichot, Delas and Louis Jadot from France; Leeuwin, Cinkara and Wolf Blass from Australia; Allegrini, Gaja, Frescobaldi and Ornellaia from Italy; and Baron Phillippe de Rothschild (Chile), Rupert & Rothschild (South Africa), Codorniu (Spain), Montana (New Zealand)  Sonarys (Mumbai), imports Grand Crus from Bordeaux, Georges Deboeuf and Faiveley (France); Antinori , Gaja, Pighin and Tenuta San Guido of Italy (including the famous Sassicaia); Montes from Chile; and Robert Mondavi's wines from California  Other big independent importers include Global Tax Free Traders Inc and Mohan Brothers (both in Delhi), RR International (Delhi and Mumbai) and Fairmacs (Chennai) -- 12Rajni Ranjan
  13. 13.  Basic Custom duties has been increased to 150% from earlier 100% (under WTO ceiling of 150%)  Additional 4% Extra Additional Duty has been removed  Since aggregate duty levels exceed the bound level of duty of 150% set forth in the WTO tariff, ACD and EAD on wine has been waived off from 2007 ◦ Individual states may impose a special levy, equivalent to the cumulative burden of excise and other taxes they impose on domestically manufactured liquor ◦ By scrapping the additional duty of customs, India would now be in compliance with its WTO obligation  An additional, Education Cess of 2%+ 1% is also applicable  No excise duty on wine  Sales Tax, as applicable state wise -- 13Rajni Ranjan
  14. 14.  Distillery/Brewery License Fee  Bottling fee  Litterage fee  Assessment Fee  Franchise Fee  Permit Fee  Gallon age Fee  Raw Material Excise  Availability Fee  Brand/Label Fee  Permit Fee  Transportation Fee  Import Pass Fee  Export Pass Fee  License Fee  Toll Tax -- 14Rajni Ranjan
  15. 15. -- 15 Strengths Weakness  Nascent stage, few existing players  High growth rate (25-30% pa)  Increase in urban population  Good climate for growing wines Poor quality of wines Poor awareness amongst people High customs and levies Different taxation amongst various states Opportunities Threats Large domestic market with increasing disposable income Lifestyle changes Growing tourism New players entering at fast pace Entry of foreign players with tie ups with Indian players Rajni Ranjan
  16. 16.  CHATEAU INDAGE (CI) ◦ Established in 1984, with the technical collaboration of Champagne's Piper Heidsieck ◦ Based in Narayangaon, Western Maharashtra ◦ Pioneer of French style wines in India ◦ Company owns vineyards spread over 600 acres, located 230 km from Mumbai ◦ Capacity of producing over 3 million bottles annually ◦ Manufactures 18 types of wine and the main varieties used by the winery are Chardonnay, Cabernet Sauvignon, Ugni Blanc, Pinot Noir, Gamay, Riesling, Muscat of Alexandria, Semillon, Sauvignon Blanc, Chenin Blanc, Zinfandel, Viognier, Shiraz, Malbec and Grenache ◦ Also sells a range of still wines on the domestic market under the names Riviera, Figueira, Ivy and Chantilli ◦ Indage holds 75 % share of the premium still wine category and the virtual monopoly in Sparkling wines ◦ Export to U.K, Sweden, Switzerland, Germany, Canada, Bhutan, Nepal, Srilanka, Mauritius, New Zealand, Japan and U.S.A -- 16Rajni Ranjan
  17. 17.  GROVER'S VINEYARDS ◦ Established in 1988 ◦ Jointly owned by Kanwal Grover and Veuve Cliquot ◦ Located in in Dodballapur (40 km north of Bangalore), southern Karnataka ◦ Has 200 hectares of vineyards under wine grapes of 35 varieties ◦ Only company to exclusively use French wine grapes ◦ Grover‟s, with a production of 6 lakh bottles of wine a year estimates a projected growth of 20 – 25% every year ◦ Exports 25% of its production, worth $ 4,35,000 every year ◦ Exports are mainly to France, US and UK ◦ Received the Agriculture and Processed Food Products Export Award (APEDA) for excellent performance -- 17Rajni Ranjan
  18. 18.  SULA VINEYARDS ◦ Most recent entrant into the Indian wine market ◦ Established in 1998 ◦ Nashik based, 200 km north-east of Mumbai ◦ Annual capacity of 1.5 million litres ◦ Famous brands are Sula Brut, Sula Seco and Sauvignon Blanc ◦ India‟s No. 1 premium wine company, with sales of over 2 million bottles in 2007-08. ◦ Sula wines have been exported to US, UK, France, Italy, Canada and Ireland -- 18Rajni Ranjan
  19. 19. The data produced here are not the view of the author but has been collated through a systematic secondary research process. Any harm due to the data to a person or to any research due the data in the report will not be the responsibility of the author. The user will use it at it‟s sole discretion. Rajni Ranjan