“An eye for an eye leaves everyone blind” — the aphorism seems to have been forgotten by policymakers in Karnataka when increasing taxes on wines from outside the state by nearly Rs 300 a bottle (“Let There Be No Barriers”, BS Weekend, July 26). Once current stocks in wine shops are exhausted, consumers will have to either pay (a lot) more for their current brands or switch to Grover.
In the US, 90 per cent of all wines are priced under $5 per bottle at retail, whereas in India most halfway decent wines are
Rs 400-500 per bottle (which in Bangalore will soon become Rs 700-800). So not only are most wines in the US at half the absolute cost in India, but the cost of such wines overseas as a proportion of the disposable income of the target consumers is also about one-fourth that here.
Why is it that even ordinary wines are so costly in India? This is due to a combination of low competition, stupid policies, venal local authorities, high taxes and the still higher cost of marketing and distributing wines.
Low competition: Despite the seeming explosion of new wines in the market in the last few years, by international standards the competition in India is still quite low — there are few local wines of any standard, few international players have set up shop here, and only a fraction of the wines available internationally are in India as yet.
Stupid policies: Wines are subject to most of the same controls as spirits, with no distinction being made for the fact that they are low on alcohol and good for health. This impacts the cost of production as well as distribution of wine: winery licences in all states (except Maharashtra and, now, Karnataka) are costly and not worth getting, and there’s no question of being able to supply the stuff directly to consumers (like elsewhere in the world).
Wine labels need to be registered with excise departments of each state every year, the official fees being about Rs 10,000 per brand per year — which imposes a heavy entry cost on any new player.
Venal local authorities: It is a well-known but little discussed fact that every transaction through state excise authorities has a cost, both official and unofficial. The amount extracted tends to impact wines more since wine sales, relative to either spirits or beer, are minuscule. It remains to be seen whether liberalisation in state policies will relax the grip excise has on the industry.
High taxes: Customs duties are 151 per cent of the CIF value of imported wines, and most states have imposed additional duties ranging from 200 per cent to
Rs 300 per litre. Domestic wines are lightly taxed only in the state where they are produced — in others, the taxes tend to push prices up to ridiculous levels.
Marketing and distribution costs: Trade margins on wines of 20-30 per cent have of late been supplemented by listing fees being charged by modern retail chains and on-premise establishments — in addition to regular discounts linked to volumes or charges for shelf space. Good sales personnel for wine are costlier because wine volumes are much lower than that of either spirits or beer. On top of all this are the unofficial “incentives” paid to employees and purchase personnel to push a particular brand.
What can be done to reduce wine costs and improve quality? I’ll tackle that subject next time.
Wines I’ve been drinking:
A Masterclass tasting organised by Devesh Agarwal last week produced some outstanding wines, even if few of them are as yet available in Bangalore. Of the seven wines drunk (a bit over the top there) I have space here for only two.
The Kim Crawford Small Parcel Marlborough Sauvignon Blanc 2005 from the Waihopai Valley of New Zealand (90 points, $35 at duty-free) had a classic aroma of guava and passion fruit. A crisp and clean wine with a fruity, even herbaceous flavour and a long finish — one of the best whites I’ve tasted of late. Lovely!
The last wine was a Vinedos Organicos Emiliana Coyam 2002 from the Colchaga Valley, Chile (88 points, $30 in duty-free), which had been decanted three hours earlier and was then deemed ready to drink. The nose is very intense and aromatic, with notes of leather, berries and spice that carried through to the palate, with an additional taste of chocolate and wood. A full-bodied and heavy wine that one almost chews, with velvety tannins and a very long finish. Yum!
