India’s Emerging Wine Industry

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December 21: While India doesn’t have the most ideal climate for growing wine grapes, its local industry which is still at a nascent stage, is growing at a rate that more established countries can only envy, writes Subhash Arora looking at what’s driving the growth and how the industry is responding.

After a gap of about three years when the global meltdown and the Mumbai terrorist attack in November 2008 brought the Indian wine industry to its knees, things are looking up once again, with the annual growth of about 25% though not every producer is out of woods. The industry which was barely 150,000-200,000 case strong at the turn of the millennium was growing at the rate of 25-30% for the previous 5 years when the downfall occurred in 2008 after it had reached a peak of 1.5 million cases including about 250,000 cases of imported wines. 2008-2011 saw a slide in the domestic wine production and consumption. It flirted with the peak in 2011-12 (Apr-Mar) and a growth of 20-25% is expected to continue during the next 5 years. Indian market at a glance A population of 1.13 billion with over half under 35 years, offers a huge opportunity for wine producers.  About 300 million belong to the middle class with 30 million as potential wine drinkers; currently there are less than 2 million. India has been traditionally a liquor guzzling country with over 400 million cases consumed annually. Even the relatively new beverage beer has created 160 million-case market because of lower prices and the penchant of youth. But as the younger population achieves adulthood, it is expected to also add wine as a choice. Indian Constitution discourages consumption of alcohol and authorizes States to formulate their own policies of production, distribution, procedures and pricing, making it complicated for the users, marketers and producers. State of Maharashtra (Mumbai is the Capital) announced in 2001 a progressive policy for wine production with special incentives and single-window clearances to help farmers as they were already growing eating grapes,. This resulted in a spate of new wineries; today Maharashtra boasts 90% of the national total of 90. With the policy extended to 2021, the thrust continues for new wineries. The balances are situated mostly in Karnataka which announced a similar policy in 2008 encouraging new wineries to be set up in the State. Singed with recession, the response was initially lukewarm with overall reduction of consumption by over one- third but a dozen wineries are now coming up. Recently an MOU was signed by 10 wineries and the Karnataka Wine Board which administers the State Policy. Included in these is Alpine which has Stéphane Derenoncourt as their consultant and has recently unveiled the maiden vintage of red wines that show promise. Wine Grapes of India India has had an ancient wine-making tradition. After the Portuguese conquest of Goa in 1510, they planted vines to make wine. The British followed later and greatly contributed towards the growth of Indian wine consumption. Winemaking went off the radar with the onslaught of phylloxera in the late 19th century. After India became independent in 1947, there was a wave of prohibition that did not allow for new vines. The industry started from scratch in the 1980s with Champagne Indage producing sparkling wine primarily from Thomson seedless and Ugni Blanc grapes that grew well in Maharashtra. As it started adding table wine with mostly indigenous grapes like Bangalore Purple and Anarkali, Grover Vineyards was established in Bangalore, Karnataka in 1992 with Michel Rolland as the consultant winemaker. Shiraz, Cabernet and Clairette were grown to produce Grover wines. Sula introduced Sauvignon Blanc, Chenin Blanc and Zinfandel as it entered the arena in 1999.  Merlot and Chardonnay were added with varying success in some parts of Maharashtra; Viognier, Riesling and Marsanne have been since added. Sangiovese, Nero d’Avola and Grillo have seen success. Varieties like Grenache, Tempranillo are finding good potential in the blends. Red wine continues to be the most popular category with over 60% of the share due to health benefits. Rosé continues to be a laggard at 4% share. The premium wine producers continue to strive to improve the quality and make wines that are age-worthy. Sparkling wine has about 6% share. Consistency in Quality One of the challenges faced by the Indian industry has been consistency.  One of the oft- heard complaints is that one bottle may be delicious but the next one of the same label may be totally different. Rajeev Samant of Sula attributes his success to this as a factor, saying ’we may not necessarily make the best quality wines, but certainly the most consistent wines.’ His global brand ambassador Cecilia Oldne endorses his view. ‘If we can keep up the consistency, India can become one of the world's leading wine producers. China has been trying for years, but India has come far ahead," she says. No Wine Laws Unfortunately, there are still no winemaking laws and the quality is left to the producers. Indian Grape Wine Board (IGPB) was formed in 2009 by the government and one of its objectives, besides promoting Indian wines is to introduce laws that will help improve quality. India joined OIV last year as the 45th member and it expects to benefit from the membership in framing laws, to start with. Protection from Foreign Wines Although the government does not subsidize the Indian producers like the European Union, they encourage the production and protect the domestic producers by imposing heavy customs duties and excise duties on foreign wines in different states. VAT refund of 16% is given to Maharashtra producers for sale within the State. Expanding Exports Initially there was not enough emphasis on exports due to lack of infrastructure and the inability to supply coupled with the need to capture the domestic market. APEDA, the government agency to promote food exports did not see any excitement from the producers but during the last 3-5 years the scenario has changed substantially. Producers like Sula, Grover, Four Seasons, Good Earth, Nine Hills, Fratelli, Vintage, Mercury and York have been making concentrated efforts to increase exports. Sula has expanded its exports from 10 countries five years ago to 20 with new markets like Canada, Belgium, the Middle East, Nepal and Bhutan, besides consolidating in the traditional countries like Japan, UK and the US. Grover started exporting to France and UK over a decade ago and 20% of its wines are exported. Four Seasons and Fratelli are extremely bullish about exports. A relatively new entrant Nirvana Biosys, a Haryana-based wine manufacturer also produces lychee and mango wines which have seen a huge interest from countries like Japan, Canada and Middle East, despite their relatively high cost of Rs. 800 (€12). Vintage, Mercury, York, Zampa have been exporting smaller quantities. India Grape Processing Board has participated in wine shows in Hong Kong, London and Germany (Pro-Wein) and several other similar tastings in countries like Canada and Russia to help promote ‘Brand India’, successfully creating awareness about Indian wines. Optimistic estimates put exports as high as the rather difficult target  of $20 million by 2015. Wineries of significance 1. Sula  Sula has not looked back since starting the business in 1999. Even during the recession they maintained growth even if at lower rate. Finishing 2011-12 at about 460,000 cases (9-liters) they control over 35% of the total market and continue to lead with a national presence, covering a wide range of the price spectrum. Their top-level Shiraz- the barrique aged Rasaintroduced in 2010, sells for Rs.1150 (€18). Barely 1500 case production, it is made from grapes selected from their best parcels. They also produce the low end wine from indigenous grape fermentation, calling it Port 1000 that costs only Rs. 126 ($2.30). Over the years, Sula has pioneered many classic grape varietals in India like Sauvignon and Chenin Blanc in 2000, Zinfandel in 2001 and Riesling in 2008. In 2005, it launched its first reserve wine, the Dindori Reserve Shiraz, as well as India's first dessert wine, the Late Harvest Chenin Blanc-all with the help of Kerry Damskey from Sonoma, who has been Sula’s consultant winemaker since beginning. Sula is targeting  630,000 cases of domestic wines in 2012-13, besides foreign wines and spirits. 2. Grover Vineyards Grover established its brand during infancy-thanks to La Reserve, a blend of Cabernet and Shiraz from the oldest vines. Unfortunately, it got caught in some quality and management issues that took a heavy toll. Once the second largest producer with the record sale of 90,000 cases in 2008, it came down to 50-55,000 cases last year. There was a merger and infusion of capital last year it’s now become Grover- Zampa Wines. Kapil Grover, Director of the new entity is optimistic of achieving the sale of 90,000 that would take it back to the old glory and possibly the runner-up rank. 3. Four Seasons Owned by the beleaguered Kingfisher Airlines promoter Vijay Mallya’s UB group, this winery in Baramati, Maharashtra has been gaining ground steadily during the last 5 years, reaching the number two spot in the premium wine segment with sales of 60-65,000 cases last year. Targeting the annual growth of 30%, the company is working constantly to improve the quality, Brand and also garner the export market by participating in Shows and tastings. Abhay Kewadkar, the business head and chief winemaker and one of the oldest hats in the industry, does not mince words in saying they plan to grow systematically and take Sula head-on within this decade. 4. Indage Vintners  Kewadkar started his winemaking career with Indage Vintners in the early nineties (then Champagne Indage). The company had captured 70% of the total share of the market, including the low-ended Port and table wines. Due to the maverick style of the owners, it got caught in the quagmire of recession and financial distress, ending up in near bankruptcy, leaving a gap for the likes of Sula and Four Seasons to fill. Entrenched in bankruptcy proceedings, it has little hope of revival. 5. Nine Hills   Owned by Pernod Ricard, the Nashik-based winery started with poor quality wines but within a couple of years the rudder was handed over to their viticulturists in  Australia and it was back on tracks, reaching a level of around 35000 cases last year, clocking a steady growth of 25-30%  which it is likely to maintain. Very secretive about the sales figures, the company benefits from the support from its foreign cousins Jacobs Creek and Chivas Regal but is a contender for the second spot. 6. Other Wineries Some of the established wineries like Vinsura, Big Banyan-Goa (the parent has successful distillery operations there), York, Mercury, are working hard to increase their market share but are stable. Fratelli is the new kid on the block-pumping lot of investment and technology resulting in some very good quality wines thanks to their Tuscan hands-on winemaker Piero Masi and if they can establish their Brand like Sula, may give it run for the money. They also produce currently the most expensive Indian wine at Rs. 1650 (€25). Sette, a blend of Cabernet and Sangiovese and aged in French barriques for 14 months, is a good example of the direction that the quality, age-worthy wines are heading for. New wineries coming up with a long term potential are Alpine in Karnataka with Stéphane Derenoncourt as the consultant winemaker and Charosa Winery in Maharashtra. Their size and commitment to produce good wine with a financial backing to match would be a feel good factor for any Indian wine lover.  Feel Good Factor The industry is still an infant but growing steadily, aided not only by passion-driven producers but also the favourable consumer trends, higher disposable income, increase in population of the middle class. Despite complex tax structure and no government subsidies like in EU, the producers are optimistic about the future and more are entering the arena with collaboration in technology, equipment, viticulture and even equity. Around 90 wineries are registered as compared with less than 10 barely a decade ago. Although wine education is crucial- proper storage for distributors and customers is still a challenge; the situation is changing for the better. The government is becoming more progressive in allowing retail sales and licensing concessions for sale of wines on trade and off-trade. The response from the tier-2 and tier-3 cities is very encouraging, with wine clubs opening in smaller cities like Ludhiana, Nagpur and Pune too. Port- and Goan Port Indage is credited with pioneering the modern day winemaking with Marquis de Pompadour (exported as Omar Khayyam) bubbly. Around the same time, a company by the name of Vinícola was started in Goa by Dr. Costa with a Portuguese connection in more ways than one-he started making Goan Port; a fortified wine which has over the years become a symbol of inexpensive Goan wine. Made from indigenous grapes and fortified with neutral alcohol and unspecified additives, it sells for Rs. 65-150 (€1-2.30). Over the years, this market has grown to around 400,000 cases (9-liters) and services the low ended price sensitive segment. Increasing popularity of these low-ended wines caught the fancy of the ‘mainline’ producers like Indage, Big Banyan, Nirvana, Vinsura and even Sula that brought out similar wines without the ‘Goan’ pedigree.  An estimated 500,000 cases of these ‘Port’ wines form a part of the total wine market.  The improper nomenclature notwithstanding, this price-sensitive low-end segment is growing at the fastest rate, indicative of the potential of wine consumption in India. Brand building is becoming the key factor for growth and even sustenance. A shake out of industry is expected with several smaller wineries unable to market their products, forced to shut down but the next decade will see India as a wine producing country to reckon with. Subhash Arora The Article was written in October for the German magazine, Meininger’s Wine Business International for whom the writer has been the India Correspondent since inception. To keep the provenance, no changes have been made in the original article and there might have been minor changes since then. The article represents the unedited version, as it was submitted –editor