The wine business in India is peculiar: only the domestic market leader (Sula) and the top importers make any money, and yet people continue to set up new wineries and launch new brands.
First, the domestic wine business.
Growers of wine grapes just about break even if they get Rs 25/kg - and have to wait for anything up to a year to get paid. If they produce more than 4 tonnes/acre, the quality of the crop falls -and so does the price. Consequently most farmers do multi-cropping, and few have a long-term commitment to growing wine grapes.
Wine producers in India are an endangered species: far too many poor-quality wines chasing too few consumers led to a glut in wines some years back, which in turn led to some wineries offering discounts of up to 50 per cent to the trade. But as the rate of consumption did not match production, this led to a crisis in the industry: today nearly half the 70-odd wineries in Maharashtra are closed or shuttered, including the erstwhile market leader Indage (Marquise de Pompadour, Chantilli, Riviera), and hoping for redemption.
Of course, as I have written earlier, "third wave" wineries will do well: these are companies with adequate capital and the ability to market their wines pan-India, and include UB's Four Seasons, Big Banyan, Fratelli, Reveilo, Pernod-Ricard's Nine Hills, and York.
Part of the problem is with Indian consumers as most continue to think that even entry-level imported wines are better than the best-quality Indian wines, and are not willing to shell out comparative prices. When was the last time that you bought a Big Banyan Limited Shiraz (Rs 1,250) or a Fratelli Sette (Rs 1,650)?
Next: Imported wines
Sales of imported wines are growing apace despite the crushing 162 per cent customs duty and multifarious state imposts principally as both trade and consumer resistance to this category is lower than for 'cheap' Indian wines - which is not to say that all importers make money, and quite a few (notably Sonarys and Sovereign Impex) have virtually contracted to their home bases. Most importers deal with a mix of wines, spirits, and beer, and cater both duty free to hotels (who can buy the stuff against their forex earnings) and duty paid to the rest, and traverse a tightrope between margins and working capital requirements.
Why do people continue to enter the wine business here? For one, it is far more interesting than making widgets or even software: wine is glamorous and upmarket, and wine consumers reflect that positioning. Then there is the promise of a growth market as volumes are forecast to continue to grow at over 20 per cent annually for the predictable future. So those making losses today write this off as an investment, and hope for a pot of gold at the end of that oh-so-near (and yet so far away) rainbow!
Wines I've been drinking: The Bad Boy Bordeaux (88 points, Rs 3,600) from Thunevin, the original garagiste, who defied French winemaking a decade ago by making superlative but low-priced wines in a garage, thereby debunking all conventional wisdom about terroir and value - for which Robert Parker called him the "Black Sheep" of Bordeaux. This is cheekily reflected in his label - the wine itself is succulent and full-bodied and a terrific buy.
Sante'!
First, the domestic wine business.
Growers of wine grapes just about break even if they get Rs 25/kg - and have to wait for anything up to a year to get paid. If they produce more than 4 tonnes/acre, the quality of the crop falls -and so does the price. Consequently most farmers do multi-cropping, and few have a long-term commitment to growing wine grapes.
Wine producers in India are an endangered species: far too many poor-quality wines chasing too few consumers led to a glut in wines some years back, which in turn led to some wineries offering discounts of up to 50 per cent to the trade. But as the rate of consumption did not match production, this led to a crisis in the industry: today nearly half the 70-odd wineries in Maharashtra are closed or shuttered, including the erstwhile market leader Indage (Marquise de Pompadour, Chantilli, Riviera), and hoping for redemption.
Of course, as I have written earlier, "third wave" wineries will do well: these are companies with adequate capital and the ability to market their wines pan-India, and include UB's Four Seasons, Big Banyan, Fratelli, Reveilo, Pernod-Ricard's Nine Hills, and York.
Part of the problem is with Indian consumers as most continue to think that even entry-level imported wines are better than the best-quality Indian wines, and are not willing to shell out comparative prices. When was the last time that you bought a Big Banyan Limited Shiraz (Rs 1,250) or a Fratelli Sette (Rs 1,650)?
Next: Imported wines
Sales of imported wines are growing apace despite the crushing 162 per cent customs duty and multifarious state imposts principally as both trade and consumer resistance to this category is lower than for 'cheap' Indian wines - which is not to say that all importers make money, and quite a few (notably Sonarys and Sovereign Impex) have virtually contracted to their home bases. Most importers deal with a mix of wines, spirits, and beer, and cater both duty free to hotels (who can buy the stuff against their forex earnings) and duty paid to the rest, and traverse a tightrope between margins and working capital requirements.
Why do people continue to enter the wine business here? For one, it is far more interesting than making widgets or even software: wine is glamorous and upmarket, and wine consumers reflect that positioning. Then there is the promise of a growth market as volumes are forecast to continue to grow at over 20 per cent annually for the predictable future. So those making losses today write this off as an investment, and hope for a pot of gold at the end of that oh-so-near (and yet so far away) rainbow!
Wines I've been drinking: The Bad Boy Bordeaux (88 points, Rs 3,600) from Thunevin, the original garagiste, who defied French winemaking a decade ago by making superlative but low-priced wines in a garage, thereby debunking all conventional wisdom about terroir and value - for which Robert Parker called him the "Black Sheep" of Bordeaux. This is cheekily reflected in his label - the wine itself is succulent and full-bodied and a terrific buy.
Sante'!
Alok Chandra is a Bangalore-based wine consultant