Scratching the surface

India's budding wine scene is the fastest-growing alcohol sector in the country. So is it ready to play on the world stage? James Durston reports
27 August, 2008
Page 42 
Looking at the numbers, there is every reason to get excited about the Indian winemaking scene. Sales are growing at a steady 25 per cent year on year and are now worth around £50 million (4 billion rupees) at retail. From four wineries producing 2 million litres of wine in 2001, India now has 54 wineries producing 13 million litres.

Driving this is India's middle class, which is forecast to double to 450 million people by 2015, according to India's National Council of Applied Economic Research. That's a lot of extra income, that India's young professionals are keen to spend on aspirational products such as wine.

"The market is currently about 1 million cases a year," says Alok Chandra, an independent wine consultant based in Bangalore. "My estimate is that this will increase ten fold to 10 million cases in 10 years."

But take a glance at the wine list of the five-star Imperial Hotel in Delhi and you won't find any Indian labels. Many of the more up market liquor stores also overlook local producers in favour of the better-established French, Italian or Australian brands. This is in part due to the better margins on offer from imported bottles. While most Indian wines sell for around the equivalent of £5 a bottle, foreign wines are often three or four times as much, partly due to heavy taxes on imports but also due to higher mark-ups.

There is, however, another factor at play here too - quality. "Grape growing, especially by table grape growers, is unsophisticated," says leading wine writer Robert Joseph, who has taken an interest in India's wine industry. "I was calmly told that Shiraz was failing to ripen in a vineyard that ripened Cabernet," he says. "That kind of statement would raise eyebrows among half-knowledgeable winemakers elsewhere.

"Winemaking is also less sophisticated than it ought to be. A winery with high ambitions, and contracts with top French experts, ruined its first attempt at premium wine by overdosing it with oak chips. It then tried to claim that time in bottle would sort this out."
== Indage's rapid rise ==

These would appear to be inconsequential details to the three major players in Indian wine at present. Chateau Indage, the market leader, reports growth of 80 per cent year on year with revenues topping £15.5 million. Grover Vineyards reports growth of 60 per cent, while Sula Vineyards reports growth of 45-50 per cent, with retail sales of around £8 million.

To date Sula has received the most acclaim from tasters in general, especially with its award-winning Sauvignon Blanc . "At the moment, Sula is the only producer with a clear view of where it is going," says Joseph. "It is already selling international-quality Sauvignon Blanc with a screwcap and a newly launched light, semi-sweet, low-alcohol frizzante wine for the local market."

Many think Sula is the label most likely to get India's beer and whisky drinkers to convert to wine. The country boasts the world's biggest whisky market, with sales of 60 million cases a year. Beer is the next most popular drink, with sales of 140 million cases each year - and growing. Compared with these quantities, the teaspoonful of wine per year that Indians each drink on average is paltry.

But Sula's chief executive, Rajeev Samant, thinks his product has what it takes to drive consumption up. "If I can just get people to taste my wine, I know I'll have a customer for life," he says. "But we have to put our product in front of consumers and make them understand what it's all about. In India that is very important because no one actually knows what wine is about yet."

There are several obstacles to overcome before that can happen. India's laws ban alcohol advertising, so that is out of the question. Instead, the major labels have focused on below-the-line incentives such as product sampling. Samant has also started experiential marketing via tours of the Sula winery in Nashik, near Mumbai.

Price is also a limiting factor. Locally made whisky (Indian Made Foreign Liquor) costs around £1 for a half bottle, and beer around 75p for a 50cl bottle, so the £5 for a bottle of wine appears extravagant to most Indians. Sula's latest launch, an 8 per cent abv bottle of light white wine, targeted at women, costs £2.50.

This is also an attempt to attract female consumers, who until now have not been able to enjoy alcohol to the same extent as men. You rarely see a woman in a drinks retail outlet and one woman interviewed for this article asked to remain anonymous, wary of the consequences of being quoted on her drinking habits. Measures such as these will go some way to growing short-term sales, but there are far bigger issues that need to be resolved if Indian wine is to come close to the quality on offer from foreign labels. Imports are growing at 30 per cent, faster than local sales, suggesting the higher quality outweighs the exorbitant tax rates they attract.
== Scant research ==

One of the problems is the lack of research into suitable vine-growing areas. Of the 54 wineries operating in India at present, 51 are based in Maharashtra state, including Sula and Chateau Indage, accounting for 94 per cent of all the nation's wine production. "This is table grape country, "says Joseph, and one well-respected local Indian wine industry consultant backs this up, revealing: "Wine grapes can substitute wherever table grapes are grown."

There is also a slavish devotion to France and French experts, which means Chenin Blanc is by far the favoured variety grown, whether it is suited to the local conditions or not.

A fierce anti-alcohol lobby has also curtailed distribution. Wine is only just starting to appear on supermarket shelves - and only in some states. It is no coincidence that Maharashtra state has been one of the first to totally deregulate the market and, as yet, there are no specialist wine retail chains. Compare this to China, where wine is already widely available in western-style outlets and consumption is far higher.

Then, there are all the problems associated with India's hot and humid climate. Transport and storage are often inappropriate for wine, and most producers are sticking to bottles with cork closures, which do not fare well in these extreme conditions.

To make matters worse, quality control is almost non-existent. One small producer who has received good reviews from tasters is Indus Vineyards. Violet D'Souza, the company's director, thinks the government should take some responsibility. "There is no governing body to check the quality of wine the manufacturers are producing," she says. "To increase the awareness and sale of domestic wine, the government must actively participate in promoting it through a set of rules and guidelines to monitor quality so that the credibility of Indian wines as a product and brand is established. That, in turn, would enable exports."

Other winemakers are more focused on getting taxes reduced. "Current government policies make wine less profitable," says a spokesman for Chateau Indage. "If considered even at state levels, although duties on wine have dropped in recent months, local taxes in Maharashtra, which accounts for 40 per cent of wine consumption, are still at 200 per cent, causing a huge downslide in sales."
== Deregulation offers potential ==

Samant, meanwhile, is trying to encourage other states, particularly those containing high-population cities such as Delhi, to deregulate along the lines of Maharas hra. "I've been one of the main lobbyists for liberalisation," he says. "Organised retail in India, particularly supermarkets, is going to be huge. It offers a very interesting new route to market and it is important for women who have always been intimidated by the traditional liquor shops."

He believes there are social issues at stake. "The government says rural development and employment is its number-one priority. By not promoting wine they are missing a trick. It's no coincidence that the world's wine regions are also the world's richest rural regions."

So there is much to be done, but there is much to look forward to as well. Joseph adds: "I'd like to say that  India's on track to compete with the rest of the world and there is certainly a will to do so as well as plenty of cash. In the medium-to-long term, India will certainly be an interesting player. "



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