Out Look of Indian Wine industry
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Summary-
The Indian Wine Industry is currently on a high. Compared to the global scenario, it fares low in cost competitiveness as it is in the early stage of growth. Production & consumption are expected to rise by 25% – 30% in the next few years. As the industry has just begun to flourish, it is less tilted towards the export market as compared to the domestic market.
Currently the wine industry is driven by favorable conditions resulting in growth in disposable incomes. Wine is being made available, to the consumers, in the market due to urbanization & rise in various modern markets. Exemption in excise duty & the development of wine parks & wine institutes has provided the required stimulus for the establishment of new wineries.
There have been new entries in this industry which is leading to an expansion in the Indian Wine Industry, but few continue to dominate the industry. The new entries include grape growers & winery owners as well as many international breweries. Selling wine is much more different than selling beer or spirits. The industry is expected to unfold & intensify in competition resulting in high investments in distribution, promotion & advertising thus expansion. Due to increased competition & pressure on price, there’s increase in competition.
Indian Wine companies cannot compromise on the quality of wine they produce as it may ultimately impact their sales as the consumers are increasingly becoming well versed about the quality, also these companies need to compete with the excellent quality of wine produced worldwide. This is easier said than done as all competitors are aiming to increase quality. Quality starts at the basic level of ‘terroir’ (the expression of soil & micro climate), consistent quality of grapes harvested & finally the wine processing. All these processes should be directed towards quality. The industries should aim at brand building, bottling & strategic alliances for selling imported ‘bottled in origin’ wines. Larger players are expected to enter into contract manufacturing with smaller wineries. There’s one possible way of entry for foreign wine companies, aiming to target the Indian wine market, that is to enter into alliances with the Indian companies.
The Indian government has been the major reason behind the current scenario of the Indian wine industry. Due to the high import duties imposed on foreign wines the import has reduced considerably giving Indian wines an opportunity to get a hold in the domestic market. Though in the long term, a decrease in import duties will give way to international brands trying to enter the Indian market, which will result in a head to head competition.
Introduction-
Although the Indian wine industry is in its early stage of development, it holds a promising & impressive growth of the consuming class. The sale of wine is relatively negligible as compared to the alcoholic beverages, consisting whisky, vodka, beer, rum, country liquor etc. though this condition, wine has interested a great deal of the country’s population in the past few years. There has been an average growth of 25% in the last 5-6 yrs.
Our (Winenxt) main objective is to provide a clear understanding of the current scenario and the challenges in the Indian wine industry, so that there can be better exploitation of any potential growth opportunities. The survey has been done by carefully studying the trends in consumption, retail, production, processing, distribution & trade.
Growth-
The Indian wine market is expected to grow by 20%-30% in the next 3-4 yrs. The annual/ capita consumption of wine in India is only 0.006lt which is very low as compared to the consumption of 50lt in France & 10lt in USA.
Consumption Trends-
Almost 80% of the wine consumed is in the metropolitan cities such as Mumbai, Pune, New Delhi, Kolkata & Bangalore. The major areas in the west are Mumbai consuming 35%, Goa consuming 10%. Other major wine consuming cities are New Delhi 25% & Bangalore 12%
Increasing Demand-
Major of the Indian population consists of youngsters. 54% of the population is below 25yrs of age & 80% of the population is below 45 which is 522million people who can be the potential market. The new India is largely exposed to the western lifestyle at the same time urbanization & overseas travel all together have accounted for a steady increase in growth, which will continue.
Also the average economy of India has increased by 6.6% annually which has thus increased the spending capacity of the Indians. India is one of the fastest growing economies in the world. Due to the Gross Domestic Product (GDP) growth, the disposable income is increasing leading to reduction in poverty, also increasing the consumption & purchasing power.
Out-of-home-food consumption is on the rise as seen in the expanding food & beverage chains such as Pizza Hut, Mc Donald’s etc. For the wine industry to emerge there should be development of lounge bars & gourmet restaurants. With increase in Wine tourism & wine tasting, there are chances of tremendous growth in the wine industry.
To promote tourism the government of India allows hotels to purchase imported goods including alcoholic beverages up to a limit of 5% – 10%, which maybe higher in case of five-star hotels.
Also due to the various health benefits of wine, wine is gaining popularity in the Indian market as people in India are becoming more inclined towards health foods and health beneficial beverages. Also there have been various events where different wine varieties are matched with spicy Indian food. Some wines have shown great compatibility with Indian food. Also most of the Indian opt for wines priced at INR 200-600.
In India red wines clearly dominate the market, while rose and sparkling wines make up a very small percentage. Wine is now also being made available in retail outlets & grocery shops.
Government support to the wine industry-
The state government & the central government have shown a great deal of interest in the wine industry as it is labour intensive & is an attractive source for taxes & duties. Maharashtra is provocative in its policy towards the development of the Indian wine industry. Maharashtra is the leading state in consumption as well as production of wine.
There is establishment of the Grape Processing & Research Institute & also the establishment of wine parks has provided grape farmers access to common infrastructure, which they otherwise cannot afford due to high capital requirements. There are various financial assistance schemes offered by the government, which provide funds for new wine entrants to invest in various raw materials & technologies.
Recently the government removed the Additional Customs Duty (ACD) on imported wines & spirits from an exuberant 177% – 265% to an affordable 20% – 75%. Also the Special Additional Custom Duty (SAD) on imported wines has been removed, proving to be a boon for international wine brands awaiting to make a mark in the Indian wine market. Due to the removal of these duties the price range has come down incredibly, thus making it easy for them to compete with the domestic wines. Though there has been a reduction in various duties, the Maharashtra state government has increased import duties to 200% or INR 200 (USD 5) per liter, whichever is higher. An import duty of 40% also exists on technical equipments, machinery & other accessories for wine production, thus making winery set up expensive.
Marketing & Promotion-
The Indian government has banned any kind of direct promotion or advertisement of wine however allowing in-shop advertising. Lifestyle or brand advertisements featuring vineyards & culture surrounding wine are allowed. Due to these limitations in wine promotion, wine advertising is taking different routes, such as public relations, wine tasting events, wine bars & wine clubs are coming up in major cities. Wine tasting & sampling is being organized by various wineries. Also wine is being discussed in magazines & news papers.
Conclusion-
India is basically not a wine drinking country & thus the per capita consumption is very low. However there is a large segment of potential consumers in India that could take up wine drinking. Beer & other alcoholic beverages have been ruling the Indian market, making it difficult for wine to form a mark in the market. India has one of the largest alcohol markets in the world. It is necessary to create awareness about the wine culture in India in order to improve the wine market & wine consumption amongst the Indian consumers.
Written by kunal chug
