Indian Wine Industry Analysis - Final
Indian Wine Industry Analysis - Final
Indian Wine Industry Analysis - Final
Actual Situation:
Wine is one of the highest taxed products in India as it is considered a luxury, not a necessity. The use of wine is discouraged by Indian Constitution. The central government normally declares the federal customs duties applicable to imports during the union budget held on the last week of February. Customs duties for most products have declined since the year 2000; however, taxation on alcohol has been an exception to this decline, and, as it is considered a negative product, the duty has actually increased to its current rate of 150% ad valorem.
Consumption:
There has been much debate about the precise number of potential consumers in Indias wine market. Major factors that hinder wine consumption are poverty, age restrictions and specific state alcohol prohibition. About half of the Indian population meets the minimum drinking age of 25 years; however, that number is greatly increasing as the Indian population matures. This maturity creates an opportunity for younger generations to acquire a taste for wine, breaking from a tradition of hard liquor. Although many Indian religions encourage abstinence from alcohol, few have formally banned its use2. Three Indian states maintain prohibition laws and others have set strict regulatory measures on alcohol sales. The summation of wine consumers without these limitations is demonstrated in the chart below.
Production
The main wine producing companies in India are Chateau Indage, Sula Vineyards & Grovers Vineyards. Some of the latest entrants to in the wine market are major liquor companies like Diageo (Nilaya), Pernod-Ricard (Seagrams Nine Hills) and the UB group (Zinzi and Four Seasons). The main varietals that are planted in India are the Cabernet Sauvignon, Shiraz, Merlot, Pinot Noir, Chenin Blanc, Sauvignon Blanc, Chardonnay and the Ugni Blanc. There are about 80 importers operating in the Indian wine market. Of these Brindco (New Delhi) and Sonarys (Mumbai) are the biggest. Wine Consumption (Per Capita): The wine consumption per capita stands at 9ml per head.
SWOT Analysis:
Strengths Indian wine consumption has grown 25-30% annually over a 5 year period. Good climate for grape growing Urban population is increasing Youth are craving an alternative to hard liquors and developing a more refined taste. Wine is becoming more acceptable to women and youth
Weakness Wine remains an elite taste Wine is difficult to store in India due to lack of cellars and refrigeration. Less than 50 percent of the population is legally old enough to drink (25 yrs. old). 400 million persons are 18 years old or younger. Poor awareness of wine and infrastructure.
Opportunities 100 million persons will be legally allowed to drink alcohol (25 yrs. old) in the next 5 years. Supermarkets are emerging to support wine distribution infrastructure. Domestic market with increasing disposable income. Growing tourism industry
Threats The Indian constitution discourages alcohol consumption. Wine viewed as a sin by some Indians still prefer whisky Advertising for alcoholic beverages is banned. Domestic wine production is Coddled by state governments
produce, costs and Varietal selection. However they also have signed long term contract with the local farmers for primarily common varieties. Contractual farming is a win-win situation for both farmers and wine producers but still it has long way to go. As wine grape cultivation yield is very low compared to the table grape varieties farmers are skeptical about the returns and hence contractual agreement with the wine producers provide assured income. The farmers are planting common varieties like Sauvignon Blanc. A few large and medium farmers have planted Zinfandel and Chardonnay and have higher bargaining power for these Varietals. The industry has also seen forward integration with large farmers starting new wineries however are unable to sell their product due to lack of expertise and understanding of the consumer market. As the wine industry will move from its current expansion phase to consolidation phase and increased volumes the suppliers will be able to see increased profits. The other suppliers of bottles and corks (read importers) have good bargaining power due to non-availability of corks in India and better glass quality than Indian bottle manufacturers.
possibility that the market consolidation will lead to few large players along with some small players creating product differentiation and co-existing with sustainable market shares. The need of the market is everybody working together to increase the market by creating awareness and educating the customers about the wine drinking benefits. Big players along with the government should come together to create a regulatory body for controlling the quality and creating awareness programs across the country. Foreign players entering India will pose threat to Indian wineries due to two main weaknesses of Indian players viz, poor quality of wine and low investment.
Resources:
Multiple aspects of Indian Wine Industry Karnika Seth Present Scenario of wine industry in India G.S.Karibasappa, P.G.Adsule, S.D.Sawant and K.Banerjee N.R.C. for grapes, Manjri Farm, Pune 412 307. Wine project APICTO Winery Project TIDCO Maharashtras grape policy 2001 Karnataka Grape Processing and Wine Policy 2007 DEssenceconsulting WineReport Wine Industry in Maharashtra Sudipto Mitra